TACEL PIPES PRIVATE LTD.,VRIDHACHALAM vs. ITO WARD 1, CUDDALORE

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), Puducherry, dated 17.10.2018 relevant to the assessment year 2014-15. Besides challenging the jurisdiction of the Assessing Officer, the assessee has also agitated on merits against confirmation of addition of ₹.75,00,000/- made under section 68 of the Income Tax Act, 1961 [“Act” in short].

Brief facts of the case are that the assessee filed its return of income for the assessment year 2014-15 on 31.03.2014 admitting total income of ₹.6,06,900/-. The case was selected for limited scrutiny under “CASS” for the reason ‘Amalgamation or Demerger during the year’. Accordingly, notice under section 143(2) of the Act was served on the assessee followed by notice under section 142(1) of the Act along with questionnaire. After considering the details filed against the statutory notices, the Assessing Officer completed the assessment under section 143(3) of the Act by assessing total taxable income of the assessee at ₹.81,06,900/- after making addition of ₹.75,00,000/- under section 68 of the Act as no details about the unsecured loans were furnished. On appeal, the ld. CIT(A) dismissed the appeal of the assessee since no details were furnished towards the creditors.

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the return of income of the assessee was selected for the reason ‘Amalgamation or Demerger during the year’, but, the Assessing Officer went through the case as if complete scrutiny when the said points were not in scrutiny notice. It was further submission that the assessee has shown proof that loan was received through banking channel along with name of the person from whom it was received and also shown proof that payment was made through banking channel, but, the Assessing Officer has treated the loan amount received as unexplained cash credit and the ld. CIT(A) erroneously confirm the addition. Thus, the ld. Counsel prayed for quashing the appellate order.

Per contra, by filing copy of assessment records, the ld. DR has submitted that the Assessing Officer has not expanded the ‘limited scrutiny’ to ‘complete scrutiny’, but, by oversight, in the assessment order it was mentioned as limited scrutiny. With regard to the borrowal, the ld. DR has submitted that out of nine creditors, the assessee has furnished PAN of two creditors and the assessee may be directed to furnish PAN of all the creditors, besides furnishing confirmation of the credit along with income tax particulars of all the lenders for verification, genuineness and creditworthiness, etc.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including written submissions filed by the ld. Counsel for the assessee. With regard to the addition of ₹.75,00,000/- as unexplained cash credit under section 68 of the Act, from the audit report, the Assessing Officer found that under non-current liabilities in notes to the financial statement, ₹.75,00,000/- was shown as unsecured borrowings. Accordingly, the Assessing Officer called for details of borrowings and details of loan lenders. The AR of the assessee submitted a list of persons from whom the borrowings were received by the assessee along with copy of assessee’s bank statement. However, the assessee could not furnish addresses of the lenders with proof, their PAN and income tax assessment particulars, confirmation from the loan lenders, etc. as called for. Since the borrowings are unverifiable in the absence of details called for, the Assessing Officer treated the same as undisclosed income under section 68 of the Act and brought to tax. On appeal, the assessee has not produced any of the above details and in the absence of details for verification of the creditors, the ld. CIT(A) confirmed the addition. Before the Tribunal, the assessee furnished details of addresses of the loan lenders and their bank details as well as PAN of two lenders out of nine and submitted that the assesse has repaid all the loan amount in subsequent year. What prevented the assessee to furnish the PAN of remaining six loan lenders is best known to the assessee. In order to meet the ends of natural justice, we are of the considered opinion to afford one more opportunity to the assessee to furnish complete details including PAN of all the loan lenders, income tax assessment particulars of the loan lenders and any other details as may be required by the Assessing Officer for verification. In order to substantiate the claim of the assessee, the assessee is required to furnish complete details so as to enable to the Assessing Officer to complete the assessment after verification of the details in accordance with law. Thus, we set aside the appellate order and remit the matter back to the file of the Assessing Officer to decide the issue afresh after verification of details as may be furnished by the assessee as well as the contention of the assessee that the loan amounts were repaid in subsequent year. The assessee is also directed to furnish complete details as required by the Assessing Officer, failing which, the assessment already completed and confirmed by the ld. CIT(A) stands sustained. Thus, the ground raised by the assessee is allowed for statistical purposes.

With regard to the dispute of jurisdiction of the Assessing Officer for converting the ‘limited scrutiny’ to ‘complete scrutiny’, we have perused the assessment details of the case produced before the Tribunal by the Department and find that under Col. 8: Type of Scrutiny, it was mentioned “Complete” in the “Details of Case”. Thus, there was no conversion of limited scrutiny into complete scrutiny and it was only a typographical error crept in the assessment order and therefore, the ground raised by the assessee is dismissed.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced on the 28th October, 2021 in Chennai.