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TMI ID= 330360
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Pr. Commissioner of Income Tax-II. Lucknow Versus Shri Abhishek Agarwal Prop. M/s Merchant Associates

Unexplained cash credit - Held that: - On affirmation by the Tribunal, we find that the burden of proof had been clearly discharged satisfactorily relating to the capacity of the creditors. - Decided in favour of assessee.

No.- Income Tax Appeal No. - 72 of 2016

Dated.- July 5, 2016



  2. Asstt. CIT, Range V, Lucknow Versus Abhishek Agarwal - 2016 (2) TMI 617 - ITAT LUCKNOW

Hon'ble Amreshwar Pratap Sahi And Hon'ble Dr. Vijay Laxmi,JJ.

For the Appellant : Manish Misra


Heard Sri Manish Misra, learned Counsel for the appellant.

The appeal questions the correctness of the order passed by the Income Tax Appellate Tribunal dated 3.2.2016. The contention of Sri Manish Mishra is that the conformation of the order of the Commissioner of Income Tax by the Tribunal is erroneous inasmuch on facts, a remand report had been submitted by the Assessing Officer whereas the finding is that the Assessing Officer had not submitted a remand report. He urges that the report was admittedly on record, but neither the Commissioner of Income Tax nor the Appellate Tribunal has appreciated the same.

The second contention is that the Commissioner of Income Tax has committed a manifest error by entertaining fresh evidence and then, proceeded to treat them as genuine without examining it independently.

The third contention is that the Assessee had failed to disclose the source of the depositors or the capacity of the creditors and therefore, the transactions which were sham were clearly designed to evade tax which has not been appreciated by the authorities below.

The other grounds have also been raised but the substantial questions of law that have been framed have proceeded on the aforesaid grounds and in addition thereto, the absence of justification to treat the amount of interest on delayed payment of TDS as compensatory.

We have gone through the order of the Assessing Officer where he has recorded that the Assessee had been asked to produce the books of accounts and details and at several places, it has been commented that the amounts were unexplained, particularly with regard to the identity and capacity of the said persons who had advanced the loan.

The Commissioner of Income Tax after having noticed all details and judgments that were cited entertained the details of deposits and the lenders and then arrived at the following findings:-

"I have examined the finding given by A.O. in assessment order, written submissions filed by the appellant during appellate proceedings and papers/documents, confirmations to prove identity, credit worthiness & genuineness of cash credits reflected in the books of account of appellant. On my examination of these papers/documents, confirmation letters, bank statements and books of accounts of the appellant I find that the appellant has duly explained the identity, credit worthiness & genuineness of different lenders/depositors from whom the appellant has received loans during the assessment year under consideration. The appellant has discharged the obligation to prove the identity, credit worthiness and genuineness of creditors, by furnishing the confirmations, copy of PAN, copy of ITR, copy of bank account and details of cheques received from lenders showing the details of TDS on interest payment on the loans obtained by appellant which were treated by A.O. as unexplained u/s 68 of I.T. Act, 1961. Further the appellant has also filed the copy of audit report alongwith its annexures and explained that the appellant has shown and claimed interest on these creditors in P&L account. The A.O. has allowed the interest payment to these cash creditors whereas the principal amount of loans reflected in the name of different creditors were wrongly treated unexplained cash credits and added back to the income of appellant. Further the appellant has duly deducted TDS on interest payment on these balances appearing in the books of accounts, which were considered by A.O. as unexplained in the hands of appellant. The amount of TDS deducted in the name of different creditors were duly paid and these said creditors have duly shown the interest income and TDS in their respective ITR for the period under consideration.

Looking into these facts & circumstances, papers/documents filed during appellate proceedings and written submissions of appellant, I find that the action of A.O. in treating the loan amount received from different persons which was either credited in his capital account by appellant directly or recorded in the books of accounts of appellant as creditors in their respective names, as unexplained u/s 68 of I.T. Act can not be said proper and justified in the eye of law. Further I have observed that the A.O. has made huge addition without conducting any enquiry/verification from the records of appellant and the concerned A.O. of creditors. Even in appellate proceedings an opportunity was provided to the A.O. to plead the case in person alongwith assessment record but the A.O. did not avail opportunity. As mentioned above the papers/documents which were received during appellate proceedings alongwith written submission of appellant, have been sent to A.O. for remand report and it was the duty of A.O. to submit the comprehensive remand report within the time provided but the A.O. did not make the compliance of the letters issued by this office.

As mentioned supra the appellant has filed confirmation letters and bank statement in support of his version that from where the money was received by the appellant, PAN, copy of ITR, details of interest payment allowed by the A.O. on principal amount of these cash credits, therefore, the appellant has satisfactorily discharged obligation cast upon him to prove the identity, credit worthiness and genuineness of different cash creditors of ₹ 2,42,90,000/- (Rs.42,40,000/- + ₹ 2,00,50,000/-). Therefore, the A.O. has wrongly made the additions of ₹ 2,42,90,000/-, treating loan amount, unexplained u/s 68 of I.T. Act, 1961. The entire transactions in respect of money received from different lenders were under taken through banking channel. Since the assessee has filed relevant evidences to establish the identity, genuineness of the transaction and credit worthiness of the creditor. A detailed chart of different persons from whom the appellant received the monies which were accounted for in his books of accounts is given as below:-"

The details are already included in the order of the Commissioner of Income Tax which are not being reproduced in order to avoid unnecessary repetition. The Commissioner of Income Tax came to the conclusion that the Assessing Officer was not justified in treating the details as unexplained.

The Tribunal also went on to examine the same and came to the conclusion that the Commissioner of Income Tax had also called for a remand report but the same was not submitted in time, in spite of time having been granted to the Assessing Officer to submit a comprehensive report. Thus, the finding is that no effort had been made to demolish the evidence that was assessed by the Commissioner of Income Tax, who admittedly had co-extensive powers to deal with the evidence.

In view of the aforesaid findings, on affirmation by the Tribunal, we find that the burden of proof had been clearly discharged satisfactorily relating to the capacity of the creditors. The judgment in the case of Banarasi Prasad v. Commissioner of Income Tax [2008 (304) ITR 239] as cited by Mr. Manish Mishra does not come to the aid of the appellant-department. No substantial question of law arises so as to entertain this appeal.

Dismissed with the said observations.

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