10 June 2024


Income Tax Appellate Tribunal

Abhijavala Developers Pvt Ltd. vs. Income Tax Officer



Direct Taxation

No additions could be based merely on doubts, conjectures or surmises

The assessee being resident corporate assessee is stated to be engaged in civil construction. It was assessed for year under consideration under Section 143(3) of Income Tax Act, 1961 (IT Act) wherein it was saddled with aggregate additions of Rs.250 Lacs as unexplained cash credit under Section 68 of the IT Act and the same form subject matter of present appeal. During assessment proceedings, it transpired that the assessee was in receipt of unsecured loans as well as share application money from 6 corporate entities. Accordingly, the assessee was asked to prove the identity of the parties, creditworthiness of loan creditors and genuineness of transactions in terms of the requirement of Section 68 of the IT Act. The unsecured loans as well as share application money received from all the 6 entities was held to be non- genuine and a sham claim made by the assessee. Therefore, these amounts were added to the income of the assessee under Section 68 of the IT Act.

On further appeal, Learned Commissioner of Income Tax (CIT(A)) primarily going by the findings of Learned Assessing Officer (AO) and relying upon various judicial decisions concluded that, the assessee failed to explain the credits which would justify addition thereof under Section 68 and accordingly, the assessee's appeal was dismissed.

Upon perusal of documents, present Tribunal finds that, the primary onus of establishing the identity of the investor entities, proving their respective creditworthiness and to establish the genuineness of the transactions was duly been discharged by the assessee. Therefore, the onus was on revenue to rebut these evidences by bringing on record cogent material to dislodge assessee's evidences. However, except for the fact that summons remained un-served, there is nothing in the armory of revenue to unsettle the assessee's claim. The allegations are not supported by any corroborative evidences. Once the initial onus was discharged by the assessee, it was incumbent upon revenue to carry out further investigation to support the allegation that the credits were unexplained. However, nothing of that sort has been shown to have been carried out.

So far as the information of DGIT (Inv.) is concerned, these were merely third party statements which were never confronted to the assessee and those statements on standalone basis could not form the basis of making additions in the hands of the assessee. It is trite law that, no additions could be based merely on doubts, conjectures or surmises. Therefore, the additions as made by AO are not sustainable in the eyes of law. Therefore, the impugned additions as sustained by CIT(A) are deleted. The grounds, thus raised, stand allowed.

Further, it is submitted that, the case of the assessee was selected for scrutiny under CASS for the reason that, there was large interest expenses relatable to exempt investments under Section 14A of the IT Act. However, no such additions were made by Learned AO in the assessment order and therefore, the scope of scrutiny could not be enlarged to make additions of unexplained cash credit under Section 68 of the IT Act. However, these arguments do not convince much since it is quite evident that the type of scrutiny was complete and it was not a limited scrutiny case. Therefore, Learned AO was quite empowered to make correct assessment of assessee's income considering all the facts and issues. There is nothing on record which would show that, there was any defect in the jurisdiction of Learned AO, in any manner. Therefore, this plea was to be rejected. Appeal allowed in part.

Tags : Assessment Additions Legality

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