ITAT deletes additional cash credit due to absence of adverse findings in remand report

DCIT Vs Minimum Intermediates (ITAT Ahmedabad)

The Income Tax Appellate Tribunal (ITAT) at Ahmedabad recently upheld the order of the Commissioner of Income Tax (Appeals) (CIT(A)) in DCIT vs. minimal intermediates. The Department of Revenue challenged the decision of the CIT(A) levying an additional amount of Rs. 2,14,53,435 under Section 68 of the Income Tax Act which was initially applied by the assessee (AO) for the assessment year 2016-17. The AO had earlier classified these loans as unexplained cash loans due to insufficient evidence provided by the assessee at the assessment stage. However, after filing the remand report, the CIT(A) found that the transactions were genuine and supported by valid documentation including copies of bills, invoices, confirmations, proof of payment and VAT returns.

In the remand report, the AO reviewed the original bills for the specified period and did not find any discrepancies or irregularities. Since there was no adverse finding in the remand report and no indirect admission by the AO of the authenticity of the transaction, the CIT(A) held that the addition was unwarranted. The ITAT upheld this decision stating that since the genuineness of the transactions had been verified and accepted in the remand report, there was no basis for the AO’s proposed addition in respect of unexplained cash loans. Consequently, the ITAT dismissed the appeal of the Revenue thereby confirming the decision of the CIT(A) that no further additions were necessary. This decision highlights the importance of a comprehensive documentation and remand report process in confirming or disputing cash credit additions under tax law.

FULL TEXT OF ITATA AHMEDABAD ORDER

This appeal was filed by the Ministry of Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (abbreviated as “Ld. CIT(A)”), Ahmedabad vide order dated 18.05.2023 passed for AY 2016-17.

2. The Ministry of Revenue accepted the following grounds for appeal:-

“1. In the actual circumstances of the case l. CIT(A) erred in law and/or in fact in deleting the addition on account of unexplained cash loans of Rs. 2,14,53,435/- made u/s 68 of the Act, believing them to be genuine. Ld. The CIT(A) did not appreciate the facts that the assessee failed to produce supporting evidence before the Assessing Officer.

2. On the facts, circumstances of the case and law, the Ld. CIT(A) should have upheld the order of the AO”.

3. In this case, the Assessing Officer added Rs. 2,14,53,435/-under Section 68 of the Bad Creditors Act.

4. Ld. The CIT(A) deleted the additions holding that the assessee had duly furnished relevant evidence such as copy of bill for AY 2016-17, copy of bills, confirmation, proof of payment and VAT return. Ld. The CIT(A) also categorically stated that the original bills of all purchases for two months were examined in the remand report by the Assessing Officer and the Assessing Officer did not make any adverse observations in the remand report and did not provide any adverse material to report in respect of other creditors of goods. Ld. The CIT(A) held that the assessee in his remand report had admitted the genuineness of the transactions, therefore, no further arrears could be made.

5. Having perused the record of the case and also considering the fact that nothing adverse has been brought to our notice and since the remand report has categorically confirmed the genuineness of the various creditors, we are of the view that no addition regarding the difference between the various creditors as alleged appraiser. The order of Ld. CIT(A) is hereby affirmed.

6. In this connection, the appeal is dismissed.

The decision was announced in an open court session on 10/16/2024