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Facts
The Revenue preferred appeals against the common order of the CIT(A)-3, Noida, concerning assessment years 2012-13 and 2013-14. The assessee had filed a return declaring a loss. During scrutiny, the Assessing Officer (AO) identified an amount of Rs.9,32,00,000 received from M/s RAN International Pvt. Ltd. as unaccounted. The AO reopened the case and made an addition of Rs.7,25,00,000, treating it as unexplained cash credits under section 68 of the Income Tax Act, 1961. The CIT(A) deleted this addition, leading to the present appeals by the Revenue.
Held
The Tribunal found no substance in the Revenue's contentions. Regarding the deletion of the addition by the CIT(A), the Tribunal observed that the assessee had provided necessary details and the CIT(A) had taken into consideration the reserves and surpluses of the lender company. The Tribunal also held that the CIT(A)'s direction to the AO to conduct an inquiry under section 133(6) was within the scope of his powers and not an error. The same findings were applied to the assessment year 2013-14.
Key Issues
Whether the CIT(A) erred in deleting the addition of Rs.7,25,00,000/- made by the AO under section 68 as unexplained cash credits, and whether the CIT(A)'s direction for inquiry was justified.
Sections Cited
68, 143(3), 147, 148, 131, 133(6), 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
These appeals preferred by the Revenue against the common order of the Ld. CIT(A)-3, Noida, (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) arising out of the different assessment orders dated 29.12.2019 & 25.03.2022 u/s 143(3)/147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the ACIT, Central Circle, Meerut, for AYs: 2012-13 & 2013-14.
The appeals were heard together as they involved common question of law and facts and for convenience the facts and the impugned orders wherever relevant for AY: 2012-13 shall be discussed. The assessee’s return of income for AY: 2012-13 was filed declaring loss and the case of the assessee was selected for scrutiny assessment which was completed by order dated 30.03.2015 later assessing officer found that an amount of Rs.9,32,00,000/- was received from M/s RAN International Pvt. Ltd. by the assessee and the said amount was found unaccounted during investigation.
Hence, considering this amount as escaped assessment the case was reopened vide notice u/s 148 of the Act and the addition was made of Rs.7,25,00,000/-
P a g e | Dr. JagatNarainSubharti Charitable Trust (AYs: 2012-13 & 2013-14) by the Assessing Officer which has been deleted by the ld. CIT(A) for which department is in appeal and for convenience the grounds of the department for AY: 2012-13 is reproduced below:
Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3, Noida has erred in deleting the addition of Rs.7,25,00,000/- made by the Assessing Officer by treating the unsecured loans of Rs. 7,25,00,000/- as unexplained cash credits u/s 68 ofthe course LT. Act, 1961, without appreciating the fact brought on record by the AO during the course of assessment proceedings.
2. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,25,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961, without appreciating the fact that the assessee failed to establish the identity & creditworthiness of the lender and the genuineness of the transaction for want of sufficient documentary evidences during the course of entire assessment proceedings.
3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 7,25,00,000/- made by the AO u/s 68 of the I.T. Act, 1961, without appreciating the fact that the creditworthiness to advance loans of Rs. 7,25,00,000/- by M/s RAN International Pvt. Ltd. has not been proved as the lender company an annual income of Rs. 3,70,856/-only.
Whether on facts and circumstances of the case and in law, the Ld. CIT(A) is justified in pronouncing its decision only based upon the judgements in favour of the appellant. However, reliance should have also been placed on other judicial pronouncements and analysis with respect to decision of Hon'ble Supreme Court in the case of Kale Khan Mohammad Hanif vs. CIT [1963]50 ITR-1 wherein it has been held that "If an assessee fails to prove satisfactorily the source and nature of certain amount received during the accounting year the Assessing Officer is entitled to draw the inference that the receipts or of an assessable nature.”
Further, in the case of Som Nath Maini vs. CIT [2008] 306 ITR 414 the Hon'ble Punjab and Haryana High Court held that "the burden of proving that income is subject to tax is on the Revenue but on the facts, to show that the transaction is genuine, burden is primarily on the assessee." However, in the P a g e | Dr. JagatNarainSubharti Charitable Trust (AYs: 2012-13 & 2013-14) instant case, the assessee had been failed to prove the creditworthiness ofthe transaction. That the appellant craves leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
The ld. DR has vehemently contested that ld. CIT(A) has fallen error in directing the Assessing Officer to issue notice u/s 133(6) while the Assessing Officer already examined the genuineness of transaction and identity by issuance notice u/s 131 of the Act and inquire thereafter. It was submitted that when the case was reopened for the purpose of examining this aspect only then the burden on assessee was to establish not only identity but also creditworthiness. The ld. DR submitted that during relevant assessment year lender company has shown very meager income. It was submitted that it is an intermediary company for routing unaccounted money from various entities.
Ld. DR has relied decisions which is reproduced as under:
“i. PCIT(Central)-1 Vs. NRA Iron & Steel (P) Ltd. [2019] 103 taxmann.com 48 (SC) ii. Pavan Kumar M. Sanghvi Vs. ITO [2018] 90 taxmann.com 386 (Gujarat) iii. J.J. Development (P) Ltd. Vs. CIT, Kolkata [2018] 100 taxmann.com 102 (SC) iv. Konark Structural Engineers (P) Ltd. Vs. DCIT [2018] 96 taxmann.co 255 (SC) v. CIT Vs. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) vi. CIT Vs. N.R. Portfolio (P) Ltd. [2013] 29 taxmann.com 291 (Delhi) vii. CIT Vs. Nova Promoters &Finlease (P) Ltd. [2012] 18 taxmann.com 217
P a g e | Dr. JagatNarainSubharti Charitable Trust (AYs: 2012-13 & 2013-14) (Delhi) viii. CIT Vs. MAF Academy (P) Ltd. [2014] 42 taxmann.com 377 (Delhi) ix. PCIT, New Delhi Vs. NDR Promoters (P) Ltd. [2019] 102 taxmann.com 182 (Delhi) x. Sumati Dayal Vs. CIT [1995] 80 Taxmann.com 89 (SC)”
4. On the other hand, the ld. AR has primarily relied the findings of CIT(A) and as we go through the same we find that Assessing Officer has primarily doubted the transaction as notice u/s 131 of the Act was issued but not responded. It comes up that ld. CIT(A) observed that during assessment u/s 143(3) of the Act itself the complete details such as bank statement, ITR and confirmation was provided to the AO and no adverse inference was drawn. During the appellate proceedings an application under Rule 46A of the Income Tax Rules, 1962 was filed to produce the additional evidences for which remand report was called from the assessing officer which has been reproduced by ld. CIT(A) in para 4.2 of the impugned order. The ld. CIT(A) also took into consideration the verification letter dated 18.03.2015 issued u/s 133(6) by the assessing officer during the original assessment proceedings to the unsecured loan giverM/s RAN International Pvt. Ltd. It was submitted to the Ld. First Appellate Authority that address of M/s RAN International Pvt. Ltd. changed which was also registered with Registrar of Companies,
P a g e | Dr. JagatNarainSubharti Charitable Trust (AYs: 2012-13 & 2013-14) therefore, no notice could be served on the old address. The ld. CIT(A) observed that during the appellate proceedings AO was directed to conduct enquiry u/s 133(6) of the Act vide email dated 28.12.2023 and AO in the report dated 13.02.2024 submitted the result of said enquiry report wherein M/s RAN International Pvt. Ltd. Filed a copy of ITR for year under consideration along with ledger account of assessee trust and copy of bank statement. The AO submitted that lendercompany has attached documentary evidences in support of its claim and respective bank statements and submitted that lender company has a low income as well as creditworthiness of the entities is not proved.
Thus, with regard to identity assessing officer has not disputed anything. Coming to creditworthiness which actually the assessing officer and ld. DR have both objected to cast doubt on the genuineness of transaction we find ld. CIT(A) has taken into consideration reserves and surpluses of lender company and drawn conclusion that lender had sufficient reserve and surpluses to make investment. This being factual aspect could not be controverted by the department. Thus, conclusion drawn by the ld. CIT(A) apparently are justified and require no interference.
P a g e | Dr. JagatNarainSubharti Charitable Trust (AYs: 2012-13 & 2013-14)
We find no substance in the contention of ld. DR that by giving directions to issue notice and inquire by resort to Section 133(6) of the Act, ld. CIT(A) has in any way committed any error. The provisions of Section 131 or 133(6) of the Act may be available at different stages but the purpose is same and it is the discretion of the tax authorities below to resort to one of the modes in the given set of facts and circumstances. Here during the assessment u/s 143(3) assessing officer had invoked u/s 133(6) notice procedure and First Appellate Authority was very much in its power to send a particular direction to AO to make enquiry in particular manner and that cannot be basis to challenge the impugned order of Ld. CIT(A). Even otherwise,during the hearing it was pointed out to the ld. DR that department could have raised specific ground questioning the jurisdiction of CIT(A) to issue such directions to Assessing Officer. However, that has not been done at this stage raising this plea has no ground to stand.
Accordingly, we hold that there is no substance in the ground raised and the appeal of department deserves to be dismissed. Accordingly ordered.
P a g e | Dr. JagatNarainSubharti Charitable Trust (AYs: 2012-13 & 2013-14) AY: 2013-14
Except for figures of amount of addition involved being Rs.2,30,00,000/- there is no other distinguishing facts which may require separate discussion. The findings drawn for AY: 2012-13 are applicable Mutatis mutandis to AY 2013-14 too.
In the light of aforesaid the appeal of Revenue in is also stand dismissed.
Both the appeals of the Revenue are dismissed.
Order pronounced in the open court on 30.01.2026