SANJAY KUMAR AGARWAL,HYDERABAD vs. ACIT., CIRCLE-1(1), HYDERABAD

The grounds raised by the assessee read as under :

The learned CIT(A) who has passed the order on the grounds that no response was received by the assessee, has yet passed the order u/s 143(3) and not u/s 144 of the 1.T.Act, 1961. 5. The learned CIT(A) has not given an opportunity of being heard to the assessee hence the order suffers on the grounds of natural justice

None of the notices issued by the income tax department were served on the assessee, hence the assessment order is void-ab-initio. Also, none of the replies given by the assessee has been considered by the assessing officer as can be clearly derived by the e-proceeding website.”

The brief facts of the case are that the assessee is an individual who filed his income tax return for A.Y. 2017-18 on 01- 08-2017, declaring a total income of Rs. 72,41,240/-. The case was selected for scrutiny, and notices were issued under sections 143(2) and 142(1) of the Act. The assessee provided some information, including confirmation letters from 20 out of 25 loan creditors for interest payments, but failed to submit the remaining confirmations despite multiple notices. Furthermore, the assessee was asked to substantiate the identity, creditworthiness, and 3 ITA 485/Hyd/2024

Aggrieved with the order of LD.CIT(A), the assessee is now in appeal before us.

Before us, ld.AR has submitted that during the appellate proceedings, the Ld.CIT(A) has called for a remand report from the Assessing Officer on the documents filed by the assessee. In the remand report, the Assessing Officer acknowledged that the assessee submitted various documents, including PAN, bank statements, and income tax returns (ITR). The remand report,

Per contra, the ld. DR submitted that the remand report submitted by the Assessing Officer clearly cast doubt on the creditworthiness of the creditors. The ld. DR referred to the tabular remarks provided on pages 13 and 14 of the Ld. CIT(A)'s order, which supported the view that the Ld. CIT(A) was justified in confirming the additions. The ld. Ld.DR further submitted that that the findings of the Assessing Officer in the remand report, when considered as a whole, supported the decision made by the Ld. CIT(A).

In rebuttal, the ld.AR has submitted that there was no requirement of verifying about the source of the source with respect to the loan creditors. Once the assessee was able to show identity, genuineness and creditworthiness of the person, no addition could be made in the hands of the assessee.

We have heard the rival submissions and perused the material on record. The core issue in the present case revolves around the loans taken by the assessee, which were treated as unexplained cash credits under section 68 of the Income Tax Act. At the assessment stage, the assessee failed to provide satisfactory explanations and supporting documents regarding the loans, leading to the Assessing Officer making an addition of Rs. 1,13,17,466/- to the assessee's income. During the appellate proceedings, the Ld. CIT(A) called for a remand report from the Assessing Officer, who acknowledged the submission of several documents, such as PAN, bank statements, and ITRs, but still raised concerns about the creditworthiness of the creditors. Before us, the ld.AR contended that although the assessee had provided adequate evidence to establish the identity, genuineness, and creditworthiness of the creditors, the LD.CIT(A) upheld the addition made by the Assessing Officer. In light of the arguments and the fact that the Assessing Officer’s remand report at Page 13 of the order of ld.CIT(A), wherein Assessing Officer had made the following comments / observations :

From perusal of the above table, it is clear that the Assessing Officer had confirmed the creditworthiness in respect of loan creditors at Sl.Nos.1, 2, 4, 5 and 6 namely, Chandra Mohan Ahuja, Nisha Golcha, Raj Kumar Tater, Seema Ahuja and Shermic Golcha, respectively, for Rs.10,00,000/-, Rs.15,00,000/-, Rs.15,00,000/-, Rs.15,00,000/- and Rs.15,00,000/-, totaling to Rs.70,00,000/-. However, for the remaining loan creditors i.e., Om Prakash Baheti and Yashoda Industries, the Assessing Officer has not made any comments about their creditworthiness. Thus, the report of the Assessing Officer was specific, as he has confirmed the creditworthiness in respect of 5 individuals and with respect to the other two loan creditors, the Assessing Officer had not confirmed the creditworthiness.

In our considered opinion, the comments made by the Assessing Officer, as noted at the bottom of the tabulation at page 14 of the order of ld.CIT(A), are required to be interpreted in line with the specific comments provided for each individual loan creditor. In view of the above, it is clear that the assessee was able to prove the creditworthiness of loan creditors for an amount of Rs.70,00,000/- only. The ld.CIT(A) has not brought any evidence or arguments to dispute the creditworthiness of these five individuals. However, the ld.CIT(A) has made a general

In the result, the appeal of the assessee is partly allowed.