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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI MANJUNATHA G, ACCOUNTNAT MEMBER & SHRI PRAKASH CHAND YADAV
आदेश/ORDER PER PRAKASH CHAND YADAV, J.M:- Present appeal of revenue is arising from the order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [Ld. CIT(A)] with DIN No. ITBA/NFAC/S/250/2024-25/1064747749(1) dated 09.05.2024 for the A.Y. 2017-18. The assessee has also filed cross objections maked as C.O Number-11/Hyd/2024.
The revenue has raised the following grounds: “ (1) The Ld.CIT(A) failed to appreciate the fact that the assessee failed to furnish the documentary evidences of proving the identity, genuineness and creditworthiness towards unsecured loans of Rs.98,75,994/- as on 31.03-2017. (2) The assessee failed to furnish the cash book and other relevant information as called for u/s. 142(1) during assessment proceedings towards cash deposits made during demonetization period. (3) The assessee failed to substantiate the compliance towards provisions of section 40(a)(ia) during the assessment proceedings. The Ld.CIT (A) restricted the addition to Rs.63,860/- from Rs.20,67,263/-. (4) The assessee failed to furnish the proof for additions made to fixed assets along with copy of invoices as called for u/s. 142(1) leading to disallowance of depreciation claimed for Rs.53,293/-. (5) The assessee failed to furnish the documentary evidences towards agricultural income of Rs.15,28,700/-.The Ld. CIT (A) ought to have called for a remand report on the submission.”
3. There is a delay of 5 days in filing of the present appeal by the revenue for which no formal application has been filed by the revenue regarding the condonation of delay. However, considering the smallness of the delay we hereby condone the delay on the basis of oral prayer made by the Ld DR and proceed to adjudicate the appeal.
The facts leading to the present appeal are that the assessee is an individual filed his return of income for the impugned assessment year on 31.10.2017 declaring an income of Rs.18,01,470/-. The case of the assessee was selected for scrutiny and statutory notices were issued to the assessee. During assessment proceedings, the Assessing Officer (AO) issued section 142(1) notices to the assessee seeking information regarding cash deposit in the bank account. However, these notices remain uncompiled with and accordingly the Assessing Officer framed the assessment u/s.144 of the Income Tax Act, 1961 (“the Act”) vide order dt.01.12.2019. The AO has framed the assessment by making following additions. a) Addition of Rs.98,75,994/- u/s.68 of the Act vis-à-vis unsecured loans appearing in the balance sheet of assessee. b) Addition of Rs.23,57,500/- deposited by the assessee in cash during the demonetisation period. c) Addition of Rs.20,67,263/- u/s.40(a)(ia) of the Act. d) Disallowance of depreciation claimed by the assessee amounting to Rs.53,393/-. e) Addition of Rs 15,28,700 by changing the head of agriculture income as income from other sources.
Aggrieved with the order of Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A) and assailed the order of Assessing Officer. The Ld. CIT(A) granted substantial relief to the assessee and partly allowed the appeal of the assessee.
Now the revenue has come up in appeal against the order of Ld. CIT(A) and contended that the Ld. CIT(A) has erred in deleting the addition of Rs.98,75,994/- towards the unsecured loans. It is the contention of the Ld. DR that the Ld. CIT(A) has allowed the appeal of the assessee without appreciating that the assessee has failed to discharge his onus u/s.68 of the Act in as much as the assessee has failed to prove the identity, creditworthiness and genuineness of the transaction.
Ld. Authorised Representative appearing for the assessee has drawn the attention of the bench towards various submissions made before the lower authorities as well as the documentary evidences filed before the Ld. CIT(A) and contended that out of total loan, the assessee has received an amount of Rs.7,43,028/- during the year under consideration and rest of the amounts are opening balances as appearing on 1St April in the Balance Sheet and hence section 68 provisions cannot be applied to the facts of the present case.
Second ground as raised by the revenue relates to the deletion of Rs.23,57,500/- made by the Assessing Officer on account of cash deposited during demonetisation period.
The Ld. DR basically contended that the Ld. CIT(A) has deleted the addition simply by going with the figures of turnover of the assessee and relying upon the cash book and bank statement filed by the assessee before CIT(A) only. The contention of the Ld. DR that the Ld. CIT(A) ought to have called for a remand report from the Assessing Officer. 10. The learned counsel for the assessee has argued that admittedly the cash deposit was out of the sale proceeds of the firm and hence without disturbing the profit as declared by the assessee, the Assessing Officer cannot doubt the transactions of sale. 11. The next ground of the revenue is in respect of disallowance made by the Assessing Officer under the provisions of section 40(a)(ia) of the Act. 12. The Ld. DR relied upon the order of Assessing Officer and contended that the Ld. CIT(A) has erred in restricting the addition under section 40(a)(ia) of the Act of Rs.53,860.
The next ground of appeal
raised by the revenue relates to the disallowance of depreciation amounting to Rs.53,293/-. For this ground the Ld. DR has relied upon the order of Assessing Officer.
14. Similarly for the ground Nos.5 & 6, the Ld. DR has relied upon the order of Assessing Officer.
15. The learned counsel for the assessee in respect of the Ground Nos.2 to 5 reiterated the submissions made before the Ld. CIT(A) and drawn the attention of the bench towards the documentary evidence filed before the lower authorities. -Finding-
16. After considering the rival submissions and perusing the material on record, we hereby adjudicate each ground as under.
17. So far as the Ground No.1 is concerned i.e. restriction of addition made u/s.68 by the AO to the tune of Rs.7,43,028/-, we observe that the Ld. DR has failed to refute the findings of Ld. CIT(A), wherein it has been recorded that out of the total credits of Rs.98,77,994/-, an amount of Rs.91,32,968/- was the opening balance for the year under consideration. It is settled position of law that the provisions of section 68 cannot be invoked for the opening balance coming out from the previous year. A reference can be made to the following judgments: (i) Kohinoor Enterprises Vs. ACIT 410 ITR 153 (J & K) (ii) CIT Vs. Parmeshwar Bohra 301 ITR 404 (Raj) 18. In the above cases, it has been unanimously held that provisions of section 68 can only be applied for the current year credits. Therefore, we affirm the view of the Ld. CIT(A) and delete the addition of Rs.91,32,966/-.
19. So far as the remaining credits of Rs.7,43,028/-, we remit the matter to the file of Assessing Officer for examining afresh in accordance with law. This will take care of ground number-1 of the the Cross Objections filed by the assessee.
20. Coming to the next ground i.e. deletion of Rs.23,57,500/- on account of cash deposit during demonetisation period. We observed that the Ld. DR failed to refute the finding of Ld. CIT(A) to the effect that these cash deposits were part of sale proceeds of the assessee firm. We also observe that the Assessing Officer has neither disturbed the purchases made by the assessee nor the corresponding profits declared by the assessee. Therefore, in such a scenario it is legally not permissible to add the sale proceeds u/s.68 of the Act. We also observe that the Ld. CIT(A) has categorically noted that there was a cash balance of Rs.27,55,680/- on 8.11.2016 i.e. on the date of declaration of demonetisation. We are further conscious of the fact that the Ld. CIT(A) has not called for any remand report from the Assessing Offic er before relying upon the cash book produced before the Ld. CIT(A). It is settled position of law that powers of Ld. CIT(A) are coterminous with that of Assessing Officer as held by Hon'ble Supreme Court in the case of Kanpur Coal Syndicate reported in 51 ITR. Therefore the Ld. CIT(A) can also do what the AO can do. In this case, we observe that the Ld. CIT(A) has not merely relied upon the cash book of the assessee rather he has also reconciled the cash book with the bank statement of the assessee and then reached to a logical conclusion. Therefore, we affirm the view of the Ld. CIT(A).
21. Coming to the next ground i.e. disallowance under section 40(a)(ia) of the Act. We observe that the Ld. CIT(A) had written a categorical finding that the assessee has paid interest to bank on term loan and overdraft. These repayments of interest on term loan and overdraft are not covered by the provisions of section 194A of the Act. There are circulars of CBDT to that effect also. Therefore the view of the CIT(A) restricting the disallowance to the tune of Rs63,860/- i.e. being 30% of Rs.2,12,868/- for failing to deduct TDS on audit fees as well as interest paid on vehicle loan is a plausible view. We do not find any infirmity in the order of Ld. CIT(A) and hence we affirm the view taken by the Ld. CIT(A).
22. The next ground relates to the disallowance of depreciation. We are of the view that considering the smallness of amount i.e. Rs.53,293/- we affirm the view taken by the Ld. CIT(A).
23. Coming to the next ground i.e. treatment of agriculture income as income from other sources by the Assessing Officer. We are of the view that this issue requires fresh adjudication at the end of Assessing Officer because the Ld. CIT(A), in our view could have called for a remand report vis-à-vis the documentary evidence filed by the assessee before the Ld. CIT(A) to prove its claim. Therefore, this ground is remanded to the file of Assessing Officer for examining afresh.
In the result, the appeal of the revenue and cross objections of the assessee are partly allowed for statistical purposes in above terms.
Order pronounced in the open Court on 20th Sept., 2024. Sd/- Sd/- (MANJUNATHA G) (PRAKASH CHAND YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad. Dated: 20.09.2024.