ITAT Remands Case Back to CIT(A) for Fresh Adjudication Over Unsecured Loans of Rs.1.42 Crore [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) remanded a case involving unsecured loans of Rs.1.42 crore back to the Commissioner of Income Tax (Appeals), CIT(A) for fresh adjudication.

Bhupendra Shantilal Shah,the appellant-assessee filed his income tax return for the year 2017-18 on 27th March 2018, declaring an income of Rs 9,97,030. His return was selected for detailed review because of large cash deposits during the demonetization period and the size of the deposits compared to his declared income.

The tax officer sent a notice on 23rd August 2018 to start the scrutiny process and requested documents on 10th July 2019, asking for details about the cash deposits and other deposits during the year. Despite several reminders, the assessee did not submit all the required documents, such as confirmations of unsecured loans, bank statements, and proof of commission income.

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During the assessment process, the Assessing Officer (AO) noticed large cash deposits totaling Rs. 96,25,414 in the assessee’s bank accounts during the demonetization period and other times throughout the year. The assessee explained these deposits by claiming they were from commission and brokerage income, unsecured loans, and personal savings, but failed to provide any documents to support these claims. The assessee stated he earned Rs.9,30,500 in commission income in cash but did not provide any invoices, vouchers, or details of the recipients to verify the legitimacy of this income. The AO also observed that the assessee had unsecured loans of Rs.1,42,45,240 during the year, supposedly from various parties, but the assessee failed to submit necessary confirmations, PAN details, and bank statements of the lenders to prove their credibility. As a result, the AO treated these loans as unexplained under Section 68 of the Income Tax Act. Additionally, the AO questioned the assessee’s declared household expenses of Rs.2,10,000, considering the assessee’s ownership of luxury vehicles and a high standard of living, which led to an estimate of higher household expenses. Based on the lack of evidence and non-cooperation from the assessee, the AO made the following additions to the taxable income: Rs.96,25,414 as unexplained cash deposits under Section 69A, Rs.1,42,45,240 as unexplained unsecured loans under Section 68, and Rs.2,10,000 for inadequate household expenses.

The assessee appealed against the AO’s decision. However, the CIT(A) issued multiple notices to the assessee, but the assessee either failed to respond or asked for adjournments without valid reasons. These notices included hearings on 10th March 2021, 4th November 2022, 5th January 2024, 24th January 2024, and 12th February 2024, with no proper responses from the assessee, leading the CIT(A) to dismiss the appeal ex-parte due to the non-cooperation and delays. The assessee then filed a further appeal before the Tribunal with several grounds, including claims that the CIT(A) had dismissed the appeal without giving a reasonable opportunity, and that the additions made by the AO were based on assumptions without proper evidence. The assessee also claimed that certain amounts were added twice and that the unsecured loans should not have been treated as unexplained.

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During the hearing before the Tribunal, the assessee’s representative submitted a request under Rule 29 of the ITAT Rules to introduce new evidence, including loan confirmations, PAN cards, bank statements, and other documents that were not previously available during the assessment or appeal stages. The representative argued that these documents would prove the sources of the cash deposits and loans. The Departmental Representative (DR) acknowledged that these documents were submitted late and had not been provided earlier, despite multiple opportunities. The DR emphasized that the documents need to be verified for authenticity and relevance before any decisions are made.

The Tribunal, after considering the facts and the submissions, decided to admit the additional evidence but stated that it should be verified by the CIT(A). Due to the assessee’s repeated non-compliance and delays, the Tribunal imposed a penalty of Rs.5,000 on the assessee, to be paid to the Income Tax Department within 30 days, to stress the importance of timely compliance with the rules during both assessment and appeal proceedings.

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The two member Bench of Suchitra Kamble(Judicial Member) and Makarand V Mahadeokar(Accountant Member) without going into the merits of the case set aside the order of CIT(A) and remanded the matter back to the CIT(A) , also directed the CIT(A) to verify the authenticity, completeness, and relevance of the documents submitted, also to provide a reasonable opportunity to the AO to examine the additional evidence and ensure that the principles of natural justice are followed by allowing the assessee a fair hearing.

In Conclusion,the appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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