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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI INTURI RAMA RAO & SHRI VINAY BHAMORE
This is an appeal filed by the Revenue directed against the order of National Faceless Appeal Centre, Delhi (NFAC) dated 31.10.2023 for the assessment year 2018-19.
Brief facts of the case are that the appellant is a partnership firm engaged in the business of investment and other construction activities.
Return of income for the A.Y. 2018-19 was filed on 24.07.2018 disclosing Nil income. Against the said return of income, the assessment was completed by the AO vide order dated 23.04.2021 u/s.143(3) after making addition of cash credits received/loans taken from several persons to the tune of Rs.93,54,700/- by holding that the appellant firm had failed to prove the identity, genuineness and credit worthiness of the creditors.
Being aggrieved, an appeal was filed before the CIT(A) who vide impugned order deleted the addition by holding that if there was doubt about the source of investment or the said investors, the additions should have been made in the case of those parties and not in the hands of the appellant firm, placing on the decision of Hon’ble Delhi High Court in the case of CIT Vs. Divine Leasing and Finance Ltd. 299 ITR 268.
Being aggrieved, the Revenue is in appeal before the Tribunal in the present appeal.
When the appeal was called on, none appeared on behalf of 5. the appellant despite due service of notice of hearing. After hearing the ld. DR and perusing the material on record, I proceed to dispose of the appeal ex parte qua the appellant.
Heard ld. DR and perused the relevant material on record. The AO made addition of Rs.93,54,700/- of unsecured loans/capital introduced during the year as the appellant had failed to discharge the onus of proving the identity, genuineness and credit worthiness of the creditors. On appeal, the ld. CIT(A)/NFAC deleted the addition by holding that source of cash deposits stands explained. In case, the source of source was not explained, the addition can be made only in the hands of the creditors not in the hands of the appellant firm by placing reliance on the judgment of Hon’ble Delhi High Court in the case of CIT Vs. Divine Leasing and Finance Ltd.(supra). The first proviso inserted to section 68 by the Finance Act, 2012 w.e.f. 01.04.2013 reads as under :
“68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: [Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: [Provided also] that nothing contained in the first proviso 37[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
The first proviso provides that the credits cannot be accepted as genuine, unless the appellant had explained the source of the creditors to the satisfaction of the AO. Thus, the order passed by the CIT(A)/NFAC is contrary to provisions of the first proviso to section 68 of the Act.
Accordingly, the order of the CIT(A)/NFAC is set-aside and remitted the matter back to the file of CIT(A)/NFAC for denovo adjudication in accordance with law.
In the result, the appeal of the Revenue is partly allowed for statistical purposes Order pronounced on this 29th day of April, 2024.