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Income Tax Appellate Tribunal, G Bench, Mumbai
Before: Shri B.R. Baskaran & Shri Ravish Sood
O R D E R
Per Ravish Sood, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-4, Mumbai, dated 09.12.2016, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961, (for short ‘Act’), dated 27.02.2015 for A.Y. 2012-13. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal: “The Appellant appeals against the impugned order dated December 09, 2016 (received by her on January 31, 2017) passed by the Commissioner of Income-tax (Appeals)-4, Mumbai (the CIT(A)), under section 253 of the Income-tax Act, 1961 (the Act), on the following amongst other grounds each of which is in the alternative and without prejudice to one another:
1. The CIT(A) erred in upholding the addition of Rs.53,42,550/- under section 68 of the Act on the ground that the Appellant has not been able to establish the identity and creditworthiness of the loan creditors and genuineness of the loan transactions.
2. The CIT(A) failed to consider the relevant information and material and erred in upholding the addition of Rs.53,42,550/- as made by the P a g e | M/s Shalini Khanchandani Vs. Income Tax Officer, Ward-16(1)(4) A.O under section 68 of the Act based on irrelevant and factually incorrect considerations. Further, the conclusion reached by the CIT(A) is vitiated by errors of facts and law.
3. The CIT(A) erred in upholding disallowance of Rs.4,00,300/- under section 40(a)(ia) of the Act on the ground that the Appellant had failed to deduct tax on source on labour charges, interest expenditure and transportation charges.
The A.O erred in levying interest under sections 234B and 234C of the Act. The Appellant craves leave to add to, amend or to alter any of the above grounds of appeal
.”
2. Briefly stated, the assessee who is engaged in the business as that of a hair dresser and providing beauty parlour services had e-filed her return of income for A.Y 2012-13 on 27.09.2012, declaring total income at Rs.5,07,780/-. Subsequently, the case of the assessee was selected for scrutiny assessment 143(2) of the Act.
3. During the course of the assessment proceedings, it was observed by the A.O that a perusal of the ‘balance sheet’ of the assessee revealed that she had taken huge loans from various parties. As the assessee, despite sufficient opportunities failed to establish the identity and creditworthiness of the parties and the genuineness of the loan transactions, thus the A.O treated the same as unexplained cash credits under Sec.68, and made an addition of Rs.53,42,440/- in the hands of the assessee. Further, as the assessee had failed to deduct tax at source on certain payments which were claimed as expense in her ‘Profit and loss account’ viz. (i) labour charges paid to Mr. Salim Ansari: Rs. 97,800/-; (ii). interest expenses: Rs.82,500/-; and (iii). transportation charges: Rs.2,20,000/-, thus the same were disallowed by the A.O under Sec.40(a)(ia) of the Act.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee, was however not persuaded to subscribe to the same and upheld the additions/disallowances made by the A.O.
5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We find that the assessee has filed an P a g e | M/s Shalini Khanchandani Vs. Income Tax Officer, Ward-16(1)(4) application seeking liberty for admission of certain documents viz. confirmation of accounts; copies of bank accounts; copies of returns of income; copy of death certificate; and copies of PAN Numbers, as additional evidence before us. The ld. Authorized Representative (for short ‘A.R’) of the assessee at the very outset of the hearing of the appeal sought liberty for admission of the aforesaid documents by way of additional evidence, on the ground that though the same have a material bearing on the adjudication of the issue under consideration, but due to reasons beyond the control of the assessee, could not be filed before the lower authorities. It was submitted by the ld. A.R, that the assessee a middle aged lady was during the year under consideration engaged in the business as that of a hair dresser and running a beauty parlour. It was submitted by the ld. A.R that the financial affairs of her business were being looked after by her husband. The ld. A.R averred, that the husband of the assessee had raised loans from various parties in her account, while for the assessee was kept in the dark. Subsequently, relations of the assessee were severed with her husband, and the marriage ended up in a divorce. It was submitted by the ld. A.R, that as the assessee was absolutely unaware of the parties from whom her husband had raised loans in her account during the year, thus she could not furnish the requisite details before the A.O during the course of the assessment proceedings. In the backdrop of the aforesaid state of affairs the A.O treated the respective amounts as unexplained cash credits under Sec. 68, and added the same to the total income of the assessee. Subsequently, the additions made by the A.O were confirmed by the CIT(A).
The ld. A.R submitted, that as the assessee was unaware about the parties from whom loans were raised by her husband in her account, thus for the said reason the requisite details like PAN Numbers, addresses etc. pertaining to them could not be furnished before the lower authorities. It was averred by the ld. A.R, that the assessee after getting divorced was unaware about the whereabouts of her husband. It was claimed by the ld. A.R, that under the aforesaid set of circumstances that some of the persons from whom the husband of the assessee had raised loans in her name, P a g e | M/s Shalini Khanchandani Vs. Income Tax Officer, Ward-16(1)(4) contacted her for repayment of the outstanding loans. The ld. A.R submitted, that in the backdrop of the aforesaid developments which had taken place after the culmination of the proceedings before the lower authorities, the assessee was able to collect details viz. PAN Numbers, addresses, loan confirmations, copies of acknowledgment of returns of income and copies of bank statements of few of such lenders, which had been placed on record by way of additional evidence. Further, the ld. A.R averred that that assessee was also trying her level best to collect the requisite details in respect of the remaining lenders. On the basis of the aforesaid contentions, it was averred by the ld. A.R that in all fairness the aforementioned documents, which but for compelling circumstances beyond the control of the assessee could not be furnished before the lower authorities, may be admitted, as the same have a material bearing on the adjudication of the issue under consideration.
Per contra, the ld. Departmental Representative (for short ‘D.R’) objected to the admission of the additional evidence. It was submitted by the ld. D.R that as the assessee had failed to avail the ample opportunity that was afforded to her to furnish the said documents before the lower authorities, thus the same could not be now admitted. The ld. D.R in support of his contention took us through the observations of the CIT(A) at Page 6 – Para 3.4 of the order. It was thus, the contention of the ld. D.R. that as the appeal filed by the assessee was devoid of any merit, thus the same may be dismissed.
We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find from a perusal of the orders of the lower authorities, that as the assessee despite having been afforded sufficient opportunity to substantiate the identity and creditworthiness of the parties from whom loans were raised, as well as prove genuineness of the transactions, had failed to discharge the onus so cast upon her, thus the said respective amounts were characterised by the A.O as unexplained cash credits under Sec. 68 of the Act. We have deliberated at length on the reasoning given by P a g e | M/s Shalini Khanchandani Vs. Income Tax Officer, Ward-16(1)(4) the ld. A.R, for the failure on the part of the assessee to substantiate the genuineness of the transaction, along with proving the identity and creditworthiness of the respective lenders, and find substantial force in the same. We find ourselves as being in agreement with the contention of the ld. D.R that the assessee had failed to discharge the onus as was cast upon her, and could not prove the genuineness of the transaction, along with the identity and creditworthiness of the respective lenders in the course of the proceedings before the lower authorities. However, the reasons leading to the failure on her part to place the requisite documentary evidence, to our understanding were clearly beyond her control. We are of the considered view, that the fact that the assessee had placed on record confirmations along with supporting documentary evidence in respect of some of the parties, in itself establishes that her explanation for not having placed the same before the lower authorities was not a concocted story or a mere eyewash, but was backed by bonafide reasons, which as canvassed by the ld. A.R before us were beyond her control. We thus, in terms of our aforesaid observations are of the considered view, that the application filed by the assessee seeking admission of certain documents by way of additional evidence merits acceptance. The documents placed on record by the assessee at Page No.1-14 along with her application dated 26.09.2018 are thus admitted.
We find that the assessee had placed on record the confirmations of certain parties, copies of acknowledgment of return of income, bank statements of few of the lenders, copies of PAN No. etc. However, as the aforesaid documents were not there before the lower authorities, therefore, in all fairness we restore the matter as regards the addition of Rs.53,42,550/- made by the A.O under Sec. 68 to the file of the A.O for fresh adjudication. The A.O shall after considering the aforesaid documents which have been filed by the assessee before us by way of additional evidence, readjudicate the matter. Needless to say, the A.O shall during the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee. Further, the assessee shall also remain at a liberty to