Whether case can be remanded back to lower authority to provide adequate opportunity to assessee to substantiate with evidences creditworthiness  and genuineness of transactions?

There are lor of cases where an ex party orde is passed by the authorities and heavy demand is raised on the assessee due to non reply during the course of the proceeding. Here is one case before Delhi ITAT wherein the issue involved was whether case can be remanded back to lower authority to provide adequate opportunity to assessee to substantiate with evidences creditworthiness  and genuineness of transactions?

The case details is as under: 

Plutus Industries Pvt Ltd Vs ITO

ITA No. 4211/Del/2017

Short Overview of the case:

Assessee company, engaged in the business of import/trading of mobile phones, had filed return of income for relevant AY.

During assessment proceedings, the AO noted that the assessee had received unsecured loan amounting to Rs. 10,41,999/- from Sh. Akshay Mahajan (Director), Rs. 1,24,97,192/- from Sh. Anuj Mahanjan (Director) and Rs. 1,04,789/- from Sh. Dev Raj Mahajan (Director).

He asked the assessee to file the relevant details like ITR, saving bank account copy and copy of TDS etc. in respect of the Directors for the relevant period.

The assessee filed the relevant details.

Thereafter, the Assessing Officer asked the assessee to substantiate the identity and creditworthiness of the Directors/loan creditors and genuineness of the transactions.

Although, the assessee proved to the satisfaction of the Assessing Officer regarding the identity of the directors, however, according to the Assessing Officer, the assessee failed to substantiate to establish the creditworthiness of the Directors/loan creditors as well as the genuineness of the transactions.

 He, therefore, made addition of Rs. 1,36,39,191/- to the total income of the assessee u/s 68 of the Act. On appeal, CIT (A) upheld the addition made.

On appeal, the issue before Tribunal was whether case can be remanded back to lower authority to provide adequate opportunity to assessee to substantiate with evidences creditworthiness of the Directors and genuineness of transactions.

ITAT while deciding the application in favour of the assessed held as under:

AO made addition of Rs. 1,36,39,191/- u/s 68 of the Act in respect of unsecured loan obtained by the assessee from three directors on the ground that the assessee failed to substantiate with evidences to his satisfaction regarding creditworthiness of the three directors and the genuineness of the transactions. CIT (A) sustained the addition made by the Assessing Officer, since, the assessee did not appear before her to substantiate the creditworthiness of the directors and the genuineness of the transactions.

It is the submission of the counsel for the that adequate opportunity was not granted by the CIT (A) and given an opportunity, the assessee is in a position to substantiate with evidences to the satisfaction of the CIT (A) regarding the creditworthiness of the Directors and the genuineness of the transactions.

It is the submission of the DR that despite five opportunities granted by the CIT (A), the assessee did not appear before her and file the requisite details to substantiate the creditworthiness of the loan creditors and the genuineness of the transactions and therefore, the order of the CIT (A) should be upheld.

 It was deem proper to restore this issue to the file of the CIT (A) with a direction to grant one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law.

The assessee is also hereby directed to appear before the CIT (A) to substantiate its case without seeking any adjournment under any pretext failing which, the CIT (A) shall be at liberty to pass appropriate order as per law.

In the result, the appeal filed by the assessee is allowed for statistical purposes.