THE INCOME TAX OFFICER, WARD-1, UDUPI V. MR. M. N. RAJENDRA KUMAR, UDUPI

MA 1/BANG/2025

AI Insights

The case involves the Income Tax Officer, Ward -1, Udupi as the appellant and Mr. MN Rajendra Kumar as the respondent. The revenue filed a miscellaneous application pointing out alleged mistakes in the ITAT's earlier order regarding the assessment year 2013-14. The revenue contended that the ITAT had overlooked certain facts during the original proceedings, such as the admission of bogus creditors by the assessee during search proceedings and the failure to prove the genuineness of trade creditors. The ITAT, however, found that the issues raised by the revenue were already considered in the original order and dismissed the application, stating that the revenue's request amounted to a review of the decision, which is not allowed under the provisions of section 254(2) of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396346 (ITAT-BANGALORE)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: Southern India Plywood Co. V Asst. CIT(IT Appeal No. 180/2022 dated 16/11/2007)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S; WAY OF THIS MISCELLANEOUS APPLICATION IS POINTING
• Assessee Lawyers: SHEETAL BOARKAR
• Keywords: Set aside; Unexplained cash credit; Tax effect; Opportunity of cross examination; Bogus
• Section: 143(3); 153A; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER MA No.1/Bang/2025 [In ITA No. 644/Bang/2021] Assessment Year: 2013-14 The Income Tax Officer, Ward -1, Udupi. Vs. Mr. MN Rajendra Kumar, 1-276, PO 721, Pulkeri, Karkala – 574 104. Udupi District. PAN – AFOPK 5638 K APPELLANT RESPONDENT Assessee by : Smt. Sheetal Boarkar, Advocate Revenue by : Shri Subramanian S, JCIT(DR) Date of hearing : 28.02.2025 Date of Pronouncement : 26.05.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The revenue by way of this miscellaneous application is pointing out certain apparent mistakes in the order of the ITAT dated 28 March 2022 and accordingly the revenue is stating that the order of the ITAT is not acceptable for the reasons given hereunder: “The order of the Hon'ble ITAT,\"A\" Bench, Bangalore order in ITA No. 644/Bang/2021 dated 28/03/2022 is not acceptable due to the following: 1. The Hon'ble ITAT has not considered the fact that during the search proceedings, the assessee has admitted to bogus creditors. 2. The Hon'ble ITAT has not considered the fact that during the assessment proceedings the assessee could not prove the genuineness of the trade MA No.1/Bang/2025 Page 2 of 8 . creditors with appropriate evidence and hence can be held to be covered under unexplained cash credits which have not been accounted for. 3. The Hon'ble ITAT held that the unsubstantiated credits should be examined in the year of receipt or repayment. The Hon'ble ITAT has not considered the fact that the AO has found that creditors are not genuine/ do not exist and the assessee has failed to prove their genuineness in spite of being given an opportunity to do so. 4. The Hon'ble ITAT held that the unsubstantiated credits should be examined in the year of receipt when the jurisdictional High Court in the case of Southern India Plywood Co. V Asst. CIT(IT Appeal No. 180/2022 dated 16/11/2007) has held that authorities are justified in making addition on account of unproved creditors in the year of assessment, even if the credit entries pertain to earlier assessment years. This facts has not been appreciated by the Hon'ble ITAT. 5. The Hon'ble ITAT held that the AO relied on the statement of one of the creditors M/s Shruthika Securities denying the credit balance of Rs. 15,00,000/- as on 31/03/2013 without affording of the Hon'ble ITAT is factually incorrect. The Hon'ble ITAT has not considered the fact that the AO vide order sheet entry dated 29/12/2016 had confronted the assessee's AR with the statement of the above creditors and providing him copy of the same which was acknowledged by the AR by affixing his signature to the order sheet? In view of the above, a Miscellaneous Application is filed before the Hon'ble Income Tax Appellate Tribunal, Bengaluru Bench, Bengaluru.” 2. In view of the above, the learned DR appearing on behalf of the revenue submitted that the order passed by the ITAT suffers from certain apparent mistakes and therefore the same should be recalled within the meaning of the provisions of section 254(2) of the Act. 3. On the other hand, the ld. AR appearing on behalf of the assessee submitted that the ITAT has passed a speaking and reasoned order considering all the arguments advanced by the revenue at the time of hearing. Accordingly, there is no mistake apparent from record so as to rectify the order of the ITAT within the meaning of the provisions of section 254(2) of the Act. 4. We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 254(2) of the Act empowers the ITAT to rectify any type of mistake in its MA No.1/Bang/2025 Page 3 of 8 . order provided it should be apparent from the record. The mistake apparent from the record has been the subject matter of continuous litigation. The Hon’ble Courts time and again has defined the apparent mistakes through judicial pronouncements. As such, the apparent mistake refers to those errors or inconsistency that is evident from the face of the documents/order of the authority in respect of which two views are not possible. The apparent mistake can be in the form of calculation, data, wrong assumption of facts, misinterpretation of the provisions of law, misreporting of income, deduction, or any other relevant information. However, the mistakes which require arguments, debate, evaluation of law/facts in its determination, the same cannot be referred as mistake apparent from the record. Likewise, in the event of any order given by the ITAT which is alleged to be based on the ground assumption of facts or law, but after due application of mind, then the same cannot be said a mistake apparent from the record. It is because the view has been formed by the ITAT after considering the necessary facts and the law on the point of dispute, then the same cannot be reviewed again in the garb of apparent mistake. In other words, the error of judgment cannot be described as a mistake apparent from record. In such a situation, the aggrieved party should approach the higher forum for the redressal of the issue involved in the dispute. 5. Coming to the facts of the present case, regarding the allegation that the assessee has admitted sundry creditors as bogus in the search proceedings, we note that the ITAT in its order vide paragraph No. 12 has considered the aspect of the assessment framed in the case of the assessee under the provisions of section 143(3) read with section 153A of the Act. As such the similar contention was raised by the learned DR MA No.1/Bang/2025 Page 4 of 8 . at the time of original hearing of the appeal, which was duly considered by the ITAT in its order dated 28th of March 2022. The relevant extract of the order of the ITAT in ITA No. 644/Bang/2021 dated 28 March 2022 is reproduced as under: “6. The Ld. CIT(A) accordingly entertained the view that the assessee has submitted forged confirmation letters from the .- creditors. He also took the view that the assessee had already repaid the loans to these creditors. The Ld CIT(A) also took support of the search proceedings, wherein the assessee appears to have admitted that the genuineness of creditors could not be proved by him. Accordingly, he confirmed the addition made by the A.O. The Ld. CIT(A) also observed that the A.O. has not invoked the provisions of section 41(1) of the Act because the A.O. has made the addition by treating the loan creditors outstanding as on 31.3.2013 as bogus. Aggrieved by the order so passed by Ld CIT(A), the assessee has filed this appeal before us. 7. We heard the parties and perused the record. There is no dispute with regard to the fact that all the impugned creditors are loan creditors. The Ld. CIT(A) has expressed the view that the addition was not made by the A.O u/s 41(1) of the Act. Hence, there is no necessity to go into the question of applicability of provisions of section 41(1) of the Act in the present case. 8. The Ld. CIT(A) has also noted that the creditors have been held to be bogus by the A.O and accordingly confirmed the addition, meaning thereby, the addition has been made by the A.O. u/s 68 of the Act as unexplained cash credit. The Ld. A.R. submitted that all these loans have been taken by the assessee in the earlier years and not during the year under consideration. The assessee has furnished ledger account copies of loan creditors at pages 34 to 57 of the paper book. These pages contained the ledger account copies of the year in which these loans were taken; Ledger account copy of the current year and also confirmation obtained from them. A perusal of these details would show that none of these loans have been received by the assessee during the year under consideration. We notice that these loans have been taken in the earlier years and it is the submission of the assessee that they were accepted as genuine in those years. 9. There should not be any doubt that the provisions of section 68 of the Act can be invoked for examining the loan received during the year under consideration. Accordingly, the A.O. should have examined the above said loans in the year in which they were received and not during the year under consideration. Hence there is no scope for making any addition u/s 68 of the Act during the current year in respect of loans received in earlier years. 10. Further, we noticed that the Ld CIT(A) has entertained presumption that the assessee would have repaid the loan outside the books of account, We notice that the' tax authorities have entertained the view on the basis of information collected by the AO from a creditor named M/s. Shruthika Securities, who appears to have replied that it has received back the loan amount of Rs.15 lakhs from the assessee prior to 31.3.2012. It was the contention of the assessee before the Ld. CIT(A) that the A.O. did not confront the reply so given by Shruthika Securities and hence, the A.O. could not have relied on the same. We find merit in the said contention of the assessee. It is MA No.1/Bang/2025 Page 5 of 8 . well settled proposition that the tax authorities are not entitled to rely upon evidences collected behind the back of the assessee without confronting the same with the assessee. Even, according to AO, M/s Shruthika Securities has claimed to have received back the loan prior to 31.3.2012, in which case, the cause of action, if any, shall arise in the year in which the repayment, if any, was made by the assessee and not during the year under consideration. 11. Thus, we notice that there is no material available with the tax authorities in support of their inference that these, loans have been paid back by the assessee outside the books of account. Hence the said inference of tax authorities is liable to be rejected. Accordingly, we are of the view that the A.O. was not justified in making the addition of Rs.4.70 crores for the reasons stated above and accordingly, the Ld. CIT(A) was not justified in confirming the addition. Accordingly, ewe set aside the order passed by Ld CIT(A) and direct the AO to delete the 'above said addition of Rs.4.70 crores. 12. The Ld. D.R. submitted that the similar addition has been made in the assessment completed u/s 143(3) r.w.s. 153A of the Act and hence, the Tribunal should protect the interest of the revenue while adjudicating the present appeal. It may be noticed that we have deleted the addition on the legal ground that the loans taken in the earlier years cannot be subject to examination u/s 68 of the Act during the year under consideration and there is no material to infer that the loans had been repaid by the assessee in the earlier years. Further, we have also confirmed the view of Ld. CTT(A) that these loans were not added u/s 41(1) of the Act. Thus, we have deleted the addition on legal principles only in the present appeal. Hence, this decision shall not have any impact on the order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, which will be governed by relevant provisions relating to that assessment.” 6. Thus, considering the same contention of the revenue in the miscellaneous application will amount to review of the order of the ITAT which is not permissible under the provisions of law. 7. Furthermore, the ITAT has recorded the finding that irrespective of the fact whether the sundry creditors represent bogus or not, but the same can be made subject to the dispute in the year in which such loans were received by the assessee. As such the ITAT has given relief to the assessee on technical grounds without going into the veracity of the genuineness of the sundry creditors. In other words, the ITAT in its order has recorded the finding that amount of loan in dispute was not received in the year under dispute and therefore the same cannot be made subject to the addition under section 68 of the Act in the year MA No.1/Bang/2025 Page 6 of 8 . under consideration. As such, the ITAT has given its finding after due application of mind. Accordingly, we are of the view no adverse inference can be drawn based on the present miscellaneous application filed by the revenue. 8. The next allegation of the revenue is that the opportunity of cross examination was afforded to the tax consultant of the assessee, in the case of sundry creditor namely M/s Shruthika Securities whereas the ITAT has recorded the finding that the opportunity of cross examination was not afforded which according to the revenue is opposite to the materials available on record. Even assuming, the contention of the revenue is correct but yet the fate of the case of the revenue will not change for the simple reason that the ITAT in this order has recorded the finding as detailed below: “10. Further, we noticed that the Ld CIT(A) has entertained presumption that the assessee would have repaid the loan outside the books of account, We notice that the' tax authorities have entertained the view on the basis of information collected by the AO from a creditor named M/s. Shruthika Securities, who appears to have replied that it has received back the loan amount of Rs.15 lakhs from the assessee prior to 31.3.2012. It was the contention of the assessee before the Ld. CIT(A) that the A.O. did not confront the reply so given by Shruthika Securities and hence, the A.O. could not have relied on the same. We find merit in the said contention of the assessee. It is well settled proposition that the tax authorities are not entitled to rely upon evidences collected behind the back of the assessee without confronting the same with the assessee. Even, according to AO, M/s Shruthika Securities has claimed to have received back the loan prior to 31.3.2012, in which case, the cause of action, if any, shall arise in the year in which the repayment, if any, was made by the assessee and not during the year under consideration.” MA No.1/Bang/2025 Page 7 of 8 . 9. Thus, from the above it is transpired that the ITAT has applied its mind before giving its finding and therefore, an error of judgement cannot be classified as a mistake apparent from the record. 10. Without prejudice to the above, it is also important to note that the revenue in the miscellaneous application has stated that the order of the ITAT is not acceptable on account of certain reasons but without pointing out the mistake which is apparent on the record. If the revenue is not agreeable with the finding of the ITAT, it can avail other remedies if available under the provisions of law. But it cannot ask the ITAT to review its own order. Additionally, it is also pertinent to note that the revenue at the 1st instance did not file the miscellaneous application against the order of the ITAT. As such the miscellaneous application was filed by the revenue only once the appeal filed before the higher forum was rejected on account of low tax effect. Thus apparently, the revenue was convinced that there is no apparent mistake in the order of the ITAT and therefore it has approached earlier to the higher forum. Accordingly, we do not find any merit in the miscellaneous application filed by the assessee. Hence, the miscellaneous application filed by the revenue is hereby dismissed. 11. In the result, the miscellaneous application filed by the revenue is hereby dismissed. Order pronounced in court on 26th day of May, 2025 Sd/- Sd/- (PRAKASH CHAND YADAV) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 26th May, 2025 MA No.1/Bang/2025 Page 8 of 8 . / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "