Sec. 68 AO cannot Examine Source of Source in Non-Share Capital Cases

Ld. CIT(A) has rightly observed that the assessee is not required to explain source of source of the fund gets buttressed by the amendment made in section 68 with effect from 01.04.2013, which empowers the AO to examine source of source in case of share application money from 01.04.2013 and no other cases prior to that. This amendment further does not give power to the AO to examine source of source of non-share capital cases and that too prior to 01.04.2013. Undisputedly, the assessee has given complete addresses and credit worthiness of the persons from whom she has taken loans.”

FULL TEXT OF ITAT ORDER

This appeal by the Revenue is directed against the Order of the Ld. Commissioner of Income Tax (Appeals)-XXVI, New Delhi dated 11.3.2014 pertaining to Assessment Year 2008-09 on the following grounds:-

1. The Ld. CIT(A) has erred in allowing the assessee to file fresh evidence under the Rule 46A without appreciating the fact that the assessee was given two opportunities for filing the details during the assessment proceedings.

2. The Ld. CIT(A) has erred by deleting the addition of 38,50,000/- without appreciating the fact that the assessee did not produce proof / document during the course of assessment proceedings.

3. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of hearing of the appeal.

2. The brief facts of the case are that the Assessee filed her return of income showing income of Rs. 21,23,470/-. The assessee’s case was selected for scrutiny under CASS. About the end of the assessment proceedings, the AO vide order sheet entry dated 6.12.2010 asked the assessee for first time to prove the identity, genuineness and creditworthiness in respect of the unsecured loans of Rs. 38,50,000/- taken from three persons during the relevant assessment year. Thereafter, the AO vide order sheet entry dated 16.12.2010 called same details again. However, the Assessee failed to ensure compliance and AO taxed the credit aggregating to Rs. 38,50,000/- u/s. 68 of the I.T. Act vide his order dated 29.12.2010 passed u/s. 143(3) of the I.T. Act, 1961 by assessing the income of the assessee at Rs. 59,73,470/-. Aggrieved with the assessment order, assessee filed the appeal before the Ld. CIT(A) who vide his impugned order dated 11.3.2014 deleted the additions by allowing the appeal of the assessee.