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Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: MS SUCHITRA KAMBLE, & SHRI PRASHANT MAHARISHI
PER SUCHITRA KAMBLE, JUDICIAL MEMBER
This appeal is filed by the Revenue against the order dated 01/10/2015 passed by the CIT(A)-17, New Delhi, for Assessment Year- 2011-12.
The grounds of appeal are as under:-
“1. The Ld. CIT(A) has not appreciated the facts and circumstances of the case that assessee was unable to prove the genuineness and creditworthiness of the lender during the course of assessment proceedings and remand report. However, the facts of the cases upon which the Ld. CIT(A) has relied are totally different from this case.
2. The Ld. CIT(A) has erred in accepting the additional submissions of the assessee during the appellate proceedings in spite of the objection raised by the AO.”
The assessee firm is engaged in the business of manufacturing and resale of aluminium casting of auto parts and job work. The assessee has declared income from business or profession. The assessee filed its return of income on 27/09/2011 declaring income of Rs.2,01,86,310/-.
The case was selected for scrutiny. Accordingly, notice u/s 143(2) was issued on 27/09/2012 and served upon the assessee. Subsequently, notice u/s 142(1) along with questionnaire was issued and served upon the assessee. In response to these notices, the Chartered Accountant/Authorised Representative of the assessee attended the assessment proceedings from time to time. The assessment was completed on 25/03/2014 at a total income of Rs.4,69,86,080/- after making addition of following income:- a. Liability of unsecured loan of Rs.2,66,97,000/- b. Addition out of expenses on account of personal expenditure of partners of Rs.1,02,766/-
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
The Ld. DR submitted that the CIT(A) did not appreciate the fact that the assessee was unable to prove the genuineness and creditworthiness of the lender during the course of assessment proceedings as well as at the stage of remand report as called for by the CIT(A). The Ld. DR further submitted that the loan transactions with M/s V.M. Trading company did not occur in Assessment Year 2011-12 and as per the income tax return of the said party, it has only annual income of Rs.4,08,378/- during the year. Thus, the Ld. DR submitted that the genuineness of the loan and the creditworthiness of the said party from whom loan transaction was dealt with was never proved by the assessee before the Assessing Officer as well as during the appellate proceedings before the CIT(A). The credit of Rs.2,66,97,000/- were unexplained which was extended into books of the assessee and further invested into other entities. Therefore, the Assessing Officer was right in making addition in that respect.
The Ld. AR submitted that the assessee has received unsecured loan of Rs.2,66,97,000/- from M/s V. M. Trading Company on 31/03/2011. Three cheques numbers 106828, 106829 and 106830 dated 31/03/2011 of Central Bank of India were given by M/s V. M.
Trading Company and the same cheques were not in cash during the year. The Ld. AR further submitted that the assessee’s account office inadvertently mentioned cheque number 106824, 106825 and 106826 instead of cheque number 106828, 106829 and 106830. Thus, this was a clerical mistake done inadvertently. The said cheques were not cleared before 31st March, that is why they were not reflecting in the bank account of the assessee and were outstanding in the Bank Reconciliation Statement. Bank Reconciliation statement was filed during the course of assessment proceedings. The said cheques got cleared in the next financial year, for which bank statement of M/s V. M. Trading Co. Who has advance the money as well as the assessee was filed during the course of assessment proceedings, which shows that none of the cheques were cleared during the year under assessment. The Ld. AR relied upon the order of the CIT(A) and submitted that the CIT(A) has rightly deleted this addition as there was no evidence placed on record by the Assessing Officer that there was any cash deposits before or after or cash withdrawal before or after loan given which squared up.
We have heard both the parties and perused the relevant material available on record. From the perusal of the assessment order, order of the CIT(A) as well as the remand report filed before the CIT(A). It can be seen that all the evidences before the authorities were not in consonance with the genuineness and creditworthiness of the loan transactions. In fact, the CIT(A) mentioned that during the year 31/03/2011. Further loan was received of Rs.2,66,97,000/-, out of which a payment of Rs.2,49,95,000/- was made during the year Financial Year 2010-11 and thereby there was closing balance of Rs.6,04,02,000/- as on 31/03/2011, the loan amount of Rs.6,04,02,000/- was repaid during the financial year 2011-12 and all these figures or receipts and payment of loan amount was appearing in the bank statement of the assessee as well as M/s V. M. Trading Company. But at the same time, as regards AY 2011-12 i.e. FY 2010-11, there was no documentary evidence relating to the creditworthiness of the M/s V. M. Trading Company was produced before either of the revenue authorities. Therefore, it will be appropriate to remand back this issue to the file of the CIT(A) thereby proving the creditworthiness and genuineness of the transaction before the revenue authorities by the assessee. Needless to say that the assessee be given proper hearing by following principle of natural justice. The appeal of the Revenue is partly allowed for statistical purposes.
In the result, appeal of the Revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 18/10/2019.