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Facts
The Revenue appealed against the order of the CIT(A) who deleted an addition of Rs. 3,60,00,000 made by the AO on account of unexplained unsecured loans received by the assessee from two parties. The AO had made the addition because the creditors' ITRs showed losses and he doubted their creditworthiness.
Held
The Tribunal held that the CIT(A) was justified in deleting the addition. The assessee had provided documentary evidence, including bank statements and 'source of source' information, which proved the identity, capacity, and genuineness of the transactions. The AO was given opportunities to respond but did not.
Key Issues
Whether the CIT(A) erred in deleting the addition on account of unsecured loans where the AO had doubts about the creditworthiness of the lenders based on their losses shown in ITRs. Whether the AO was given a reasonable opportunity to examine additional evidence.
Sections Cited
68
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Order PER KRINWANT SAHAY, A.M: This is an appeal filed by Revenue against the order of the Ld. CIT(A)-5, Ludhiana dt. 29/03/2023 pertaining to Assessment year 2017- 18. 2. In the present appeal Assessee has raised the following grounds:
1. "1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law by deleting the addition of Rs.3,60,00,000/- u/s 68 of the Income-tax Act, 1961 made on account of unexplained cash credits? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in ignoring the facts that there were no creditworthiness of the givers as the givers had shown loss in its return of income during the year under consideration? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in ignoring the facts that the assesse had not provided 2 the complete bank account statement of givers and also not provided the source of givers from where the company had received a huge amount to the give loan to the assesse.
4. Whether a reasonable opportunity should be given to the Assessing Officer to examine the documents submitted as an additional evidence under Rule 46A by the appellant before the Ld. CIT(A) or not.
The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal."
The facts, in brief, as argued by the Ld. CIT(DR) before us are that during the course of assessment proceedings, the Ld. AO noticed that the amount of certain unsecured loans from two parties, namely M/s. Bharat Food & Agro Products to the tune of Rs. 3,25,00,000/- and M/s. VIR Food Limited, to the tune of Rs. 25,00,000/-were received by the assessee, through banking channels. As per the assessment order, the assessee was asked to prove the identity, genuineness of such transaction and the creditworthiness of the parties. During the course of assessment proceedings, the assessee filed ITRs showing 'loss' in both the concerns of the creditors. Relevant bank account statement was also submitted. Further, the AO observed that just before the advancement of amount to the assessee, there are credit entries before the debit to the assessee on the same day thus, the AO concluded that the creditworthiness of giving huge unsecured loans to the assessee was not justified and also that the creditors were having ITR showing loss. Then the A.O made an addition of Rs. 3.60 lacs in respect of amount as advanced by two parties. 3.1 It was further argued by the Ld. DR that before the Ld. CIT(A), the submissions were filed by the assessee. The Ld. CIT(A) asked the assessee to submit the detailed sources of income of these entities from whom, the unsecured loans have been obtained, which was submitted by the assessee. It was also argued that the Ld. CITA) sent the email on 10.03.2023 and 23.03.2023 to the Assessing Officer to give 3 his comments, but no reply was received by the CIT(A). It was further argued by the Ld. (DR) that the assessee provided the copies of the bank account statements of the parties, from whom, the 'Bharat Food' and 'VIR Foods' had procured the funds, which were advanced to the assessee concern and such copies of the bank account statement were placed on record. Thereafter, a chart was submitted by the assessee, explaining the source of source of such amount advanced to the assessee as per the page 23 to 25 of the order of the Ld. CIT(A). Then again, at page 25, the same data was shared with the AO to give his comments, but no reply was received from the AO. Thereafter, the Ld. CIT(A) after relying on the various judgments deleted the addition as made by the AO.
The Ld. CIT DR brought it to our attention with regard to the ground that no reasonable opportunity has been given to the AO on account of additional evidences submitted under Rule 46A. He further argued that since the ITR of those parties are showing a huge loss, thus, the capacity to advance the loan by the parties was in doubt. The Ld. CIT(A) should have given reasonable opportunity to the AO and, thus, it was argued that the findings of the Ld. CIT(A) deleting the addition as made by the AO should be set-aside.
5. It was submitted by the Ld. Counsel of the assessee that no additional evidence was furnished before the Ld. CIT(A) and it was Ld. CIT(A) who had directed the assessee vide order sheet entry dated 03.01.2023 to submit the detailed sources of the parties from whom the unsecured loans have been obtained. Thereafter, the complete bank accounts of the parties of the two creditors, who had advanced the loan to the assessee and even the copies of the bank accounts of the other parties, who had advanced funds to the 'Bharat Food' and 'VIR Foods' were submitted. A chart in this respect have been reproduced at page 23 to 25 of the order of the Ld. CIT(A) and thus, the ground of 4 appeal as taken by the department with regard to the Rule 46A is misconceived. It was further argued that even the 'source of source' have been proved beyond doubt and no discrepancy have been pointed out in the documentary evidences, furnished before the Ld. CIT(A), which have been examined at length and, though, the Ld. CIT(A) on three occasions, had shared the information with the Assessing officer as mentioned in the order of the Ld. CIT(A), but the AO did not respond. Further, our attention was invited to the 'Sub-Rule 4' of Rule 46A, in which, the powers of CIT(A) are coterminous with the powers of the Ld. AO and he can make independent enquiries and decide the case on the basis of the evidences/enquiries made by him. Thus, no fresh evidence was submitted by the Counsel of the assessee and, thus, it was prayed that the order of the Ld. CIT(A) be sustained.
We have considered the rival submissions and perused the material available on the record. We will first deal with the ground of appeal no. 4 of the department, where the additional evidence under Rule 46A have been raised by the Department. It is a fact on record that as per the order of the Ld. CIT (A), para 4.1, the Ld. CIT(A) vide order sheet entry dated 30.01.2023 had asked the assessee to submit the detail of sources from whom the unsecured loans have been raised by two parties namely 'Bharat Food' and 'VIR Food'. No fresh evidence was submitted by the assessee under rule 46A. In response to the direction of the Ld. CIT(A), the assessee submitted a reply, which have been reproduced at page 15 of the order of the Ld. CIT(A). The assessee submitted the bank account statements of the parties, who had lent the amount to the 'Bharat Food' and 'VIR Food'. All such bank accounts have been reproduced by the Ld. CIT(A) in his order as mentioned 'supra', and, though, the Ld. CIT(A) forwarded the said information to the Ld. AO as stated above, but there was no response 5 from the Ld. AO. The Sub-Rule 4 of Rule 46A is being reproduced as under: Production of additional evidence before the Joint Commissioner] (Appeals)] [and Commissioner (Appeals)]. 46A. (1) The appellant shall not be entitled to produce before the Joint Commissioner] (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the 10[Assessing Officer], except in the following circumstances, namely:
(4) Nothing contained in this rule shall affect the power of the [Joint Commissioner] (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.]"
6.1 As per the above 'Sub-Rule (4)', the CIT(A) can independently examine or call for any information or make any enquiry as he may deem fit and his powers are coterminous with the powers of AO. Though the Assessing Officer did not respond to such sharing of information by the Ld. CIT(A), but still no discrepancy or any omission or error have been pointed out by the Ld. CIT (DR) of the evidences reproduced in the order of the Ld. CIT(A). Thus, there is no violation of Rule 46A and we hold that the Ld. CIT(A) was fully justified as per powers conferred with him under 'Sub-Rule 4' of Rule 46A, to make independent enquiries and thus, this ground of appeal of the department is dismissed. 6.2 Further, we find that the confirmation of the parties by giving their ITRs, copies of PAN, copies of bank account statements had been filed and merely that their ITRs were showing loss is not sufficient to doubt the capacity of the parties concerned. Even the Ld. CIT(A) has gone to the extent of examining the 'source of source' of the amount advanced by 6 the two parties to the assessee. Thus, the three ingredient i.e. identity, capacity of the creditor and genuineness of the transactions have been proved beyond doubt and the reliance by the Ld. CIT(A) on the chart in his order giving the details of the amount received by the two concerns from the various parties at page 23 to 25 of his order and the case laws as cited by the Ld. CIT(A) is in order and we confirm the order of the Ld. CIT(A) deleting the addition on account of 'unsecured loans' as made by the Ld. AO u/s 68 of the Income Tax Act, 1961.
In the result, Appeal of the Revenue is dismissed.