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Facts
The assessee, a Credit Cooperative Society, filed a return of income of Rs.Nil for AY 2020-21. The case was selected for scrutiny, and due to non-compliance by the assessee, an ex-parte assessment was made. The AO made additions of Rs. 29,55,34,049/- on account of unexplained cash credits u/s 68 and disallowed deduction u/s 80P(2)(a)(i).
Held
The CIT(A) allowed the deduction u/s 80P(2)(a)(i) and deleted the addition of Rs. 27,00,50,766/-, holding it pertained to the preceding year and could not be added u/s 68. The Tribunal restored the issue of Rs. 27,00,50,766/- addition back to the AO for fresh adjudication, citing violation of Rule 46A by the CIT(A) in accepting additional evidence without giving the AO an opportunity to examine it.
Key Issues
Whether the CIT(A) erred in admitting additional evidence without providing an opportunity to the AO to examine it, and whether carried forward amounts from previous years can be added as unexplained cash credits in the current year.
Sections Cited
68, 143(1)(a), 143(2), 142(1), 144, 115BBE, 80P(2)(a)(i), 46A
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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आदेश / ORDER
PER ASTHA CHANDRA, JM :
1. The appeal filed by the Revenue is directed against the order dated 12.02.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2020-21.
The Revenue has raised the following grounds of appeal :-
1. The assessee has not made any compliance during assessment proceedings, however, the assessee has submitted documentary evidences during the appellate proceedings, the Ld CIT(A) has adjudicated the appeal in favour of the assessee accepting the claim of the assessee that the amounts totaling to Rs.27,00,50,766/- were not received during the FY 2019-20, and thus these amounts could not be added u/s 68 of the Act for the instant AY 2020-21. Even no remand report has been called by the Ld CIT(A) before completion of appellate proceedings. Thus, on the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (A), NFAC has erred in passing an order accepting the claim of the assessee without allowing reasonable opportunity to the AD to examine the evidence or document.
2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT (A) (NFAC) has erred in passing the order as the Rule 46A (1) of the Income Tax Rule 1962, clearly mentions that the assessee shall not entitle to produce before the CIT(A) any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the A.O. subject to conditions mentioned therein. In the instant case, no evidence has been produced by the assessee during the course of proceedings before the A.O. and thus technically the assessee is not entitle to produce before the CIT(A) any evidences.
3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT (A) (NFAC) has erred in passing the order as the Rule 46A (3) of the Income Tax Rule 1962, clearly mentions that the Commissioner (Appeal) shall not take into account any evidence produced by the assessee unless the Assessing Officer has been allowed a reasonable opportunity to examine the evidence or document or to cross-examine the witness produced by the assessee.”
3. Briefly stated, the facts of the case are that the assessee is a Credit Cooperative Society engaged in providing credit facilities to its members. For AY 2020-21, the assessee filed its return of income on 03.02.2021 declaring income at Rs.Nil. The return was processed u/s 143(1)(a) of the Income Tax Act, 1961 (the “Act”) on 28.03.2021 accepting the returned income. Thereafter, the case of the assessee was selected for complete scrutiny under CASS. Statutory notice(s) u/s 143(2)/142(1) of the Act were issued and served upon the assessee calling for the details with regard to its activities and the issues for which the case was selected for scrutiny. None of the notices were complied by the assessee. Due to consistent non-compliance from the side of the assessee, the Ld. Assessing Officer (“AO”) completed the assessment ex-parte u/s 144 of the Act on 26.09.2022 determining the total income at Rs.30,36,14,249/- by making an addition of Rs.29,55,34,049/- on account of unexplained cash credits u/s 68 r.w.s. 115BBE of the Act and disallowing the claim of deduction u/s 80P(2)(a)(i) of the Act of Rs.80,80,200/-, to the Nil income returned by the assessee.
4. On appeal, the Ld. CIT(A) allowed the deduction claimed u/s 80P(2)(a)(i) of the Act amounting to Rs.80,80,200/-. As regards the addition of Rs.29,55,34,049/- u/s 68 of the Act, the Ld. CIT(A) recorded the written submissions uploaded on the ITBA portal by the assessee on 28.09.2023 in para 6.1 of the appellate order and deleted the said addition made by the Ld. AO u/s 68 of the Act. The Ld. CIT(A) observed that out of total addition of Rs.29,55,34,049/-, Rs.27,00,50,766/- pertain to preceding year and were not received during the FY 2019-20 and therefore Rs.27,00,50,766/- cannot be added u/s 68 of the Act for the relevant AY 2020-21. With respect to balance amount of Rs.2,54,83,283/-, the Ld. CIT(A) after considering the additional evidence filed by the assessee observed that the assessee has satisfactorily explained the identity, creditworthiness of the creditors and genuineness of the transactions and hence the Ld. AO is not justified in applying the provisions of section 68 of the Act. The relevant observations and findings of the Ld. CIT(A) recorded in para 6.2 and 6.3 of the appellate order is reproduced below : “6.2. I have considered the facts of the case, assessment order and appellant’s submissions. The AO made the addition of Rs. 29,55,34,049/- after observing that the assessee failed to explain liabilities appearing in its books of accounts during the year under consideration. In its written submissions dated 28-09-2023 made in response to notice u/s. 250 of the Act, the appellant has furnished a table showing details of liabilities appearing in its audited balance sheet under various heads which is reproduced as under:- Particulars Amount Deposits in the form of contribution from 231938390 members Time deposits from members 43038994 Anamat of members 1077701 Other liabilities and provisions 19478964 Total 295534049 The appellant has also clarified that out of total addition made at Rs. 29,55,34,049/-, Rs. 27,00,50,766/- pertained to preceding year and the same cannot be added u/s. 68, details of opening and closing credit entries are as under:- Particulars Amt. as on Amt. as on Additional 31/03/20 (Rs) 31/03/19 (Rs) credit in F.Y. 2019-20 (Rs.) Members 231938390 213954584 17983806 mandatory monthly contribution to society deducted out of salary paid by Zilha Parishad Fixed deposits 43038994 36435661 6603333 from members Anamat i.e. 1077701 926402 151299 Other liability and 19478964 18734119 744845 provisions Total 295534049 270050766 25483283
Considering the above details from which it is evident that these amounts totaling to Rs. 27,00,50,766/- were not received during the FY 2019- 20, I find force in the appellant’s argument that these amounts could not be added u/s. 68 of the Act for the instant AY 2020-21. In this regard, we may refer to the following judicial precedents:- The Hon'ble Rajasthan High Court in the case of CIT vs. Prameshwar Bohra (2008) 301 ITR 0404 considered an identical question and concluded that amount which was credited in books of account of the assessee in the preceding year cannot be treated as unexplained cash credit or unexplained investment under s. 68/69 in the relevant assessment year. The relevant part of the High Court’s order is reproduced as under:- “Held : There is a clear finding and about which there is no dispute that the amount added in the income of the assessee as unexplained investment or cash credit in the asst. yr. 1993-94 was the same amount which was credited in the books of account of the assessee for previous year ending on 31st March, 1992. The Tribunal has categorically come to a finding, and that finding is not under challenge, that this is not a case of cash credit entered in the books of account of the assessee during the year but it is a case in which the assessee has invested the capital in the business and this amount was shown as a closing capital as on 31st March, 1992 and on 1st April, 1992 it was an opening balance. It does not require any elaborate argument that a carried forward amount of the previous year does not become an investment or cash credit generated during the relevant year 1993-94. This alone is sufficient to sustain the order of the Tribunal in deleting the amount from the assessment for asst. yr. 1993-94. (Paras 5 & 6)” The Hon'ble Delhi High Court in the case of CIT vs. Usha Stud Agricultural Farms Ltd. [2009] 183 Taxman 277 (DELHI) held that the Incometax Appellate Tribunal was right in deleting addition of Rs. 15 lakhs made under section 68 of the Income-tax Act, 1961 by the Assessing Officer. The facts of this case were that the assessee filed return of income for the assessment year 1999-2000 on 27-12-1999, the assessment order was passed on 22-3-2002 under section 143(3)/147 of the Act and it was noticed by the Assessing Officer that the assessee had shown an advance of Rs. 15 lakhs from one Bhai Manjeet Singh. The assessee was asked to furnish the details of this advance. It was explained by the assessee that this was received towards advance breeding charges. Thereafter the assessee was asked to file confirmation from Bhai Manjeet Singh, which he failed to do and accordingly the Assessing Officer made this addition of Rs. 15 lakhs under section 68 of the Act. Aggrieved against the order passed by the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) and the appeal of the assessee was allowed. Against the order of CIT(A), the revenue filed an appeal before the Tribunal, the same was dismissed by the Tribunal, Delhi Bench ‘E’. On further appeal to the High Court, the Hon'ble Court held as below:- “7. Here, the CIT(A) has deleted the addition of Rs. 15 lakhs mainly on the ground that this credit balance of Rs. 15 lakhs is being reflected in the accounts of the assessee over the past four to five years or so and hence this was not a fresh credit entry of the previous year under consideration and these credit entries were already made and accounted for in the assessment years 1995-96 and 1997-98 which were introduced in the form of advance against breeding stallions owned by the assessee and thus these credit entries did not relate to the year under consideration for being considered under section 68 of the Act.
Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessee, does not pertain to the year under consideration, under these circumstances, the Assessing Officer was not justified in making the impugned addition under section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A).
9. The above being the position, no fault can be found with the view taken by the Tribunal.
Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of section 260A of the Act, which is confined to entertaining only such appeals against the order which involves a substantial question of law.
Accordingly, the present appeal filed by the revenue is, hereby, dismissed.” The ratio laid down in above cited decisions is that credits in account books which pertained to earlier years, cannot be added simply on the ground that their genuineness was not examined in those years. If their genuineness is under doubt, the same can be examined only in the assessment year wherein the amount was received originally as cash credit / loan/advance/share capital /share application money etc. but surely not in a later year where amount is carried forward as opening balance. Hence, the addition of Rs. 27,00,50,766/- made u/s. 68 of the Act being opening amount is directed to be deleted. 6.3. As regards balance sum of Rs. 2,54,83,283/-, the appellant has furnishedfollowing documentary evidences which are duly placed on record:-
1.
Copy of tabular list of contribution received from members appearing in the audited balance sheet as at 31/03/2020 at Rs. 23,19,38,302/-, showing name of member and amount of contribution of each member - Annexure-2 2. Copy of tabular list of time deposits from members appearing in the audited balance sheet as at 31/03/2020 at Rs. 4,30,38,994/-,showing name of member and amount of contribution of each member - Annexure-3 3. Copy of tabular list of Anamat of members appearing in the audited balance sheet as at 31/03/2020 at Rs. 10,77,701/-, showing name of member and amount of contribution of each member -Annexure-4. Annexure- 4.
4. Copies of letters with enclosures received from Head of ZP Department for the month of April-2019 and copy of first few pages of register wherein the impugned amounts received from head of ZP Department -Annexure-5.
5. Copy of tabular chart showing name of member and interest payable on contribution - Annexure-6.
6. Copy of balance sheet as at 31/03/2020 and 31/03/2019-Annexure-7. Copy of audited P&L A/c and balance sheet along with tax audit reportAnnexure-8. Considering facts of the case and the nature of addition these aforesaid additional evidences are admitted. Upon perusal ofdocumentary evidences, it is established that either these deposits /credit entries pertain to Deposits in the form of contribution from members, Time deposits from members, Anamat of members and Other liabilities and provisions. Thus, the appellant has satisfactorily explained the identity, creditworthiness of creditors and genuineness of the transactions as required in sec. 68 of the Act. Hence, the addition of Rs. 2,54,83,283/- is directed to be deleted. Considering the facts and circumstances of the case and various judicial pronouncements as discussed in para nos. 6.2 & 6.3 (supra), it is held that the appellant has fully discharged the onus of establishing the identity, creditworthinessand genuineness of transactions in the instant case and therefore, the AO is not justified in applying the provisions of sec. 68 of the Act to the amount of Rs. 29,55,34,049/-, the addition made u/s. 68 of the Act is directed to be deleted.Ground no. 2 & 3 raised by the appellant regarding this issue are allowed.”
Aggrieved by such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal challenging the deletion of Rs.27,00,50,766/- by the Ld. CIT(A) being opening amount and hence not to be added u/s 68 of the Act.
The Ld. DR submitted that the Ld. CIT(A) was not justified in deleting the addition of Rs.27,00,50,766/- made by the Ld. AO without calling for remand report from the Ld. AO. The Ld. CIT(A) has accepted the claim of the assessee and the additional evidence filed during the appellate proceedings before him without allowing any opportunity to the Ld. AO to examine the same. Hence, there is a clear violation of Rule 46A of the Income Tax Rules, 1962 by the Ld. CIT(A). He, therefore, urged that the matter be set aside to the file of the Ld. AO for examining the claim of the assessee afresh in light of the evidence/documents produced before the Ld. CIT(A) for the first time by the assessee.
The Ld. AR fairly conceded to the above submission of the Ld. DR.
8. We have heard the Ld. Representatives of the parties and perused the material on record. The facts are not in dispute. The Ld. AO has passed the assessment order ex-parte u/s 44 due to non-compliance of notices by the assessee. It is an admitted position that the assessee did not submit any documentary evidence in support of its claim before the Ld. AO. Perusal of the Ld. CIT(A)’s order reveals that no remand report was called for by the Ld. CIT(A) before admitting the additional evidence filed by the assessee and completing the appellate proceedings by passing the impugned order on 12.02.2024. The main grievance of the Revenue is that the Ld. Commissioner has passed the impugned order taking into account the evidence/documents produced by the assessee before him without allowing the Ld. AO reasonable opportunity to examine such evidence / documents. Considering the totality of the facts and in the circumstances of the case, we deem it fit and proper in the interest of justice and fair play to restore the issue relating to addition of Rs.27,00,50,766/- u/s 68 of the Act made by the Ld. AO and confirmed by the Ld. CIT(A), to the file of the Ld. AO to decide the impugned issue afresh on merits after due verification of the evidence/documents already submitted by the assessee and such other documents/evidence that may be called upon during the fresh proceedings before the Ld. AO. The order of the Ld. CIT(A) is, therefore set aside to the limited extent of addition of Rs.27,00,50,766/- deleted by him. Needles to say, the assessee shall be granted adequate opportunity of hearing by the Ld. AO and the assessee shall provide full support to the Ld. AO as may be required to complete the assessment proceedings afresh on merits as per the facts and law. We direct and hold accordingly. Thus, ground Nos. 1 to 3 raised by the Revenue are allowed for statistical purposes.
In the result, the appeal of Revenue is allowed for statistical purposes.
Order pronounced in the open court on 28th January, 2025.