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Facts
The assessee filed her return of income, which was selected for scrutiny. The Assessing Officer (AO) completed the assessment making additions for unexplained loan credits under Section 68 and disallowing contract labour expenses due to lack of supporting documents. The CIT(A) upheld the AO's order.
Held
The Tribunal found that the additional evidence filed by the assessee was not considered by the CIT(A) due to a possible timing issue. Given the circumstances of the assessment being completed during the Covid-19 pandemic and the potential for the additional evidence to prove the genuineness, identity, and creditworthiness of the creditors, the Tribunal set aside the order and remanded the matter back to the Assessing Officer.
Key Issues
Whether the CIT(A) erred by not considering additional evidence filed by the assessee, especially given the circumstances of the assessment and the need to prove the genuineness of loan transactions.
Sections Cited
143(2), 142(1), 144, 133(6), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2018-19 Deepali Manish Shrivastava, Vs. ITO, NFAC, Delhi. 2/A, Shubhangum, Tirupatinagar, Warje Naka Pune, Pune- 411058. PAN : AHRPP3379B Appellant Respondent Assessee by : Shri Umesh Kumar M. Mali Revenue by : Ms. Shilpa N. C. Date of hearing : 22.01.2025 Date of pronouncement : 09.04.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 23.08.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2018-19.
Facts of the case, in brief, are that the assessee is an individual and has furnished her return of income on 31.10.2018 declaring total income of Rs.32,30,240/-. The case of the assessee was selected for scrutiny assessment and notices u/s 143(2) and 142(1) respectively were issued to the assessee. The assessee did not responded to the above notices. Accordingly, a show-cause notice u/s 144 was issued to the assessee. In response to the above show- cause notice, the assessee furnished details of loans/advances taken from the creditors. The assessee also submitted confirmation from the loan creditors. However, PAN Number was not found in those confirmation letters and bank statement was also not furnished by the assessee of the loan creditors. The Assessing Officer issued notice u/s 133(6) to the loan creditors but no compliance was received by the Assessing Officer. Accordingly, a fresh notice u/s 142(1) was issued to the assessee to furnish further details with regard to the loan creditors. But no reply/submission was furnished by the assessee. Accordingly, the assessment was completed by the Assessing Officer on a total income of Rs.4,64,22,703/-. The above assessed income includes addition of Rs.3,86,95,000/- u/s 68 of the Act regarding credits received by the assessee and Rs.44,97,464/- regarding disallowance made on account of expenses debited to the profit and loss account under the head “contract labour paid”.
After considering the reply of the assessee, Ld. CIT(A)/NFAC dismissed the appeal of the assessee by observing as under :- “5.1 After perusing the assessment order, the submissions filed by the assessee and the evidences available on record, I am inclined to agree with the AO that the assessee has failed to discharge the onus placed on her to prove that the credit entries and expenses shown by her were genuine. The reason for this conclusion are as under: 5.2 To prove the genuineness of any entry in the books, onus lies on the assessee to prove three things: Identity Creditworthiness Genuineness of Transaction 5.3 In the present case, by filing ledger accounts of the creditors and their confirmation, at best the assessee can claim to have proved the Identity of the person. However, nowhere has she shown whether the creditor actually had sufficient creditworthiness to extend the hefty loan that has been shown against his name. Even the proof of Identity is doubtful in the case of M/s Tirumala because the name of this entity has been struck off from the registers of MCA. As far as M/s Spectrum is concerned, assessee in her reply dated 21.5.2024 before the appeal proceedings has stated that it is the proprietorship concern of Shri Manish Nandlal Shrivastava. However, perusal of the ITR filed by Shri Manish reveals that his Gross Total Income is Rs 9,13,742/- and that he is an Employee of M/s Tirumala Facility earning salary income of Rs 3,30,500/- apart from some other income. His total Income from partnership Firm is Rs 4,00,000/- and only other business income is from Speculative Business. Hence, either Sri Manisha is not the proprietor of Spectrum Facility (in which case Identity not established) or Spectrum is a partnership firm in which he is a partner earning a profit of only Rs 4,00,000/- (in which case both the Identity as well as the Creditworthiness not established. 5.4 Further, the assessee has nowhere stated the nature of her business and reason for taking unsecured loan of almost 4 crores. Even if a part of it is operational credit, what kind of services were being taken from the creditors to justify such huge payments, has not been given. 5.5 The Auditor, in his report has pointed out that the assessee has indulged in Related party transactions. A perusal of the details filed by the assessee shows that all loans/credits/payments shown by the assessee are amongst close family members. It is suspected that the assessee is the wife/close relative of Sri Manish Nandlal Shrivatsava, who is the Proprietor of M/s Spectrum from whom loan of Rs 3,81,95,000/- has been shown to be taken. Further, as already pointed out, he is also an employee in M/s Tirumala from whom credit of 5,00,000/- and contract payment made of Rs 44,97,464/- has been shown as made. Not only that, the addresses of both are next to each other, with the assessee shown as living in Flat No 6 of Ashish Apartments, PIN 411038, Pune. and Shri Manish living in Flat No 5 of Ashish Apartments, PIN 411038, Pune.
5.6 All the above create serious doubts about the genuineness of transaction showed by the assessee. Coupled with this is the fact that neither the identity has been proved, not creditworthiness has been established by the assessee. Rather, instead of filing evidences to prove her claim, the assessee has tried to rely on ratio of certain decisions by Hon'ble Courts which will only be applicable once the basic onus cast by the Act has been discharged by the assessee. 5.7 In view of above, it can be said that the assessee has completely failed to prove the Identity, creditworthiness or genuineness of transactions shown by her. Hence I find no infirmity in the order of the AO, and accordingly, the additions made by the AO are hereby confirmed. 5.8 Hence all grounds filed by the assessee are dismissed.”
It is this order against which the assessee is in appeal before this Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR submitted before the Bench that the whole of the assessment proceedings were completed during the Covid-19 period i.e. the first date of hearing was on 06.02.2020 and the assessment was completed on 24.09.2021. Ld. AR further submitted that the assessee complied in part before the Assessing Officer and due to the Covid-19 requested to adjourn the case upto 23.09.2021. Since due to Covid-19 Pandemic, the assessee and his staff was not regularly coming to the office and therefore final compliance could not be made before the Assessing Officer which resulted in unfortunate assessment order passed by the Assessing Officer which also resulted in unnecessarily huge demands. Ld. AR submitted before the Bench that the assessee has furnished written submission before Ld. CIT(A)/NFAC and all the requisite information and supporting documents were furnished before Ld. CIT(A)/NFAC. However, some of the relevant documents/information could not be produced before the Assessing Officer and the same was produced before Ld. CIT(A)/NFAC in the shape of additional evidence for which a separate application was filed by the assessee. Ld. AR submitted before the Bench that documents/additional evidences were furnished before Ld. CIT(A)/NFAC on 23.08.2024 but it appears that Ld. CIT(A)/NFAC has not considered the additional evidences and passed the appellate order on 23.08.2024 itself. Accordingly, it was prayed before the Bench that the assessee is having sufficient documents in support of its claim that loan was obtained from identifiable person, the loan was obtained through bank accounts hence it was genuine transaction and lastly the income tax return of the creditors were also furnished along with their confirmation letters, therefore, creditworthiness was also proved. Accordingly, it was prayed before the Bench that all these documents have not been considered by Ld. CIT(A)/NFAC, therefore, if one opportunity is provided to the assessee to produce all these documents before the subordinate authorities it will meet the interest of justice and the assessee would be able to substantiate its contentions before the subordinate authorities. Ld. AR also raised legal ground wherein the assessee has stated that the Assessing Officer had not issued notice u/s 143(2) and accordingly, it was prayed to quash the assessment order passed by the Assessing Officer.
Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the assessee has obtained fresh credit of Rs.3,81,95,000/- from M/s Spectrum Facility Solutions and fresh credit of Rs.5,00,000/- from M/s Tirumala Facility Management. Both these amounts were added back to the total income of the assessee u/s 68 of the Act since the assessee failed to prove the genuineness, identity and creditworthiness of these loans creditors before the Assessing Officer. However, in this regard, we find the assessment proceedings were completed during Covid-19 Pandemic period and Assessing Officer and also could not furnish supporting documents which can prove the identity, creditworthiness and genuineness of the transactions regarding loan creditors. We further find that an amount of Rs.44,97,464/- which was debited in the profit and loss account and contract labour payment was also disallowed by the Assessing Officer in the absence of proper supporting documents regarding such expenses. It was also the contention of Ld. AR that the notice u/s 143(2) of the Act was not issued by the Assessing Officer, therefore, the assessment order is void ab initio. In this regard, we find that the Assessing Officer has categorically mentioned in the preamble of the assessment order that notice u/s 143(2) was served upon the assessee on 28.09.2019. We further find that even in the back of assessment order on page 2 of the assessment order, the Assessing Officer again mentioned the service of notice u/s 143(2) on the assessee on 28.09.2019. Accordingly, we do not find any merit in the legal ground raised
by the assessee which was never raised before the subordinate authorities.
8. With regard to the appellate order passed by Ld. CIT(A)/NFAC, we find that the assessee has stated to have furnished an application for admission of additional evidences 23.08.2024. In this regard, we find that the application for admission of additional evidences under Rule 46A is dated 23.08.2024 and the first appellate order passed by Ld. CIT(A)/NFAC is also dated 23.08.2024. Apparently, this application has not been considered by Ld. CIT(A)/NFAC. It is just possible that the application might be filed by the assessee on the same date but after passing the first appellate order, however, copy of application under Rule 46A produced by the assessee before Ld. CIT(A)/NFAC is unacknowledged copy. Along with this application which is claimed to be filed before Ld. CIT(A)/NFAC, the assessee has attached coy of bank statements of creditors, loan of the creditors, confirmation letters of the creditors, PAN of creditors. It was the sole prayer of Ld. Counsel of the assessee that if one opportunity of hearing is provided to the assessee, he will produce all these documents/evidences before the Assessing Officer, which will prove the genuineness of the transactions, identity and creditworthiness of the creditors. We find force in the arguments and request of the assessee. Accordingly, in the interest of justice, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the file of the Jurisdictional Assessing Officer to pass assessment order afresh