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Facts
The Revenue appealed the deletion of an addition made by the AO. The AO had disallowed a loan amount claimed by the assessee as unsecured loans from nine creditors for purchasing immovable property, citing lack of verification of creditworthiness and genuineness.
Held
The Tribunal held that the assessee failed to provide the source of funds at the earliest and submitted loan creditor details at the fag end of the assessment, preventing verification. The CIT(A) erred in deleting the addition solely on the AO's failure to inquire.
Key Issues
Whether the CIT(A) was justified in deleting the addition without proper verification of loan creditors' identity and genuineness, given the late submission of documents by the assessee?
Sections Cited
148, 143(3)
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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, dated 21.06.2024 for the Assessment Year (hereinafter in short "AY”) 2016-17.
The main grievance of the Revenue is against the action of the Ld.CIT(A) deleting the addition of Rs.4,08,78,128/-.
The brief facts are that the assessee is a Firm engaged in the business of real estate and filed its return of income (RoI) on 05.08.2016 for AY 2016-17 declaring total income at Rs.5,35,410/-. The AO received information that assessee has purchased immovable property of Rs.5.25 Crs. [excluding stamp duty and registration charges]. Therefore, the AO asked the assessee the source for purchase of this property by re-opening the assessment and issued notice u/s.148 of the Income Tax Act, 1961 (hereinafter in short ‘the Act’) on 30.03.2021; and in response to the notice, the assessee filed RoI on 04.08.2021 reiterating the income originally filed. Thereafter, the AO issued statutory notices on 06.09.2021 and then on 03.02.2022 and 11.02.2022 calling for the details of the purchase of land (supra) and, pursuant to which, assessee submitted copy of the Sale Deed, financial statement, bank account details, and name & the amount of loan and the parties from whom the loan was received. The assessee gave the names of ‘9’ parties from whom it received an amount of Rs.5,67,00,000/-. According to the AO, he issued show cause notice along with the draft assessment order to the assessee on 27.03.2022, and in response to which, assessee submitted its reply along with ITR, PAN and address of the loan creditors. Thereafter, the AO framed the assessment on 31.03.2022 [i.e. after three days] making an addition of Rs.4,08,78,128/- and also observed that the assessee has submitted at the fag end of assessment, the ITR of the above loan creditors for AY 2016-17 and therefore, according to him he was prevented to make independent verification from the loan creditors about the veracity of the loan given to assessee. In this regard, the AO also noted that during the Video Conference(VC) also assessee didn’t provide any satisfactory reply to the discrepancies pointed out by him. Hence, according to the AO, creditworthiness and genuineness of the loan creditors couldn’t be established on the basis of the documents submitted by the assessee. Therefore, he made an addition of Rs.4,08,78,128/-.
Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to delete the same.
Aggrieved, the Revenue is in appeal before this Tribunal.
We have heard both the parties and perused the material available on record. The aforesaid facts are not repeated for the sake of brevity.
1. The Ld.DR drew our attention to Page No.27 of the impugned order wherein the Ld.CIT(A) has deleted the addition on the ground that even though the assessee has furnished the evidences to prove the identity, creditworthiness and genuineness of the loan creditors, still the AO didn’t bother to make any enquiry and therefore, he was pleased to allow the appeal of the assessee and directed deletion of the addition. According to the Ld.DR, the Ld.CIT(A) erred in drawing such a conclusion, because, the Assessing Officer in the assessment order has clearly noted the fact that only at the fag end of the assessment, the assessee provided the ITR of the loan creditors for AY 2016-17 which prevented the AO from verifying/enquiry the creditworthiness and genuineness of creditors. In this context it is also pertinent to note from perusal of Page No.2 of the assessment order that the AO had issued show cause notice along with the draft assessment order only on 27.03.2022 and in response, the assessee submitted its reply along with ITR, PAN and address of the loan creditors and simultaneously, he gave a hearing through video conference on 30.03.2022 and thereafter, he passed the assessment order on 31.03.2022 (i.e. within three days). Thus, it is noted that only at the fag end before framing assessment order, the AO called for details and therefore, couldn’t conduct any verification/enquiry about the loan creditors and hence, made the addition. In such a scenario, according to us, since the AO didn’t verify the veracity of the nine (9) creditors, the Ld.CIT(A) ought not to have deleted the addition merely alleging failure on the part of AO to enquire about the identity, credit worthiness and genuineness of the loan transaction, despite the assessee filing all the relevant documents. As noted, the assessee had filed only a day or two the documents before the assessment was framed on 31.03.2022 viz ITR, PAN and address of the loan creditors. Therefore, the Ld.CIT(A) erred in deleting the addition merely on the ground that the AO couldn’t enquire about the loan creditors which was an impossible task.
In this context it is also noted that even though sec.148 notice was issued on 30.03.2021 and other statutory notices were issued on 06.09.2021, 03.02.2022 & 11.02.2022 the assessee failed to file the source of the purchase of immovable property which assessee claimed to be loan taken from nine (9) creditors. According to us, the assessee ought to have filed the source of amount for purchasing the property for Rs.5.25 Crs. at the earliest. But as noted, the assessee has filed copies of ITR, PAN and address of the loan creditors at the fag end, which couldn’t be verified. Therefore, we don’t countenance the action of the Ld.CIT(A) deleting the impugned addition merely because AO failed to enquire/verify the identity, credit worthiness and genuineness of the loan transaction; and therefore, we set aside the assessment back to the file of the JAO for limited purpose of verification of the identity, creditworthiness and the genuineness of the loan creditors from whom assessee has taken loan amount of Rs.5.67 Crores, out of which the AO has made an addition of Rs.4,08,78,128/-. The JAO is directed to verify the identity, creditworthiness and the genuineness of the loan creditors to the tune of Rs.4,8,78,128/- and if assessee is able to discharge the burden as required under the statute, then appropriate orders to be passed in accordance to law.