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2017 (9) TMI 1604 - AT - Income TaxAddition u/s 68 - Proof of genuineness of creditors - Held that - The assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Also see M/s. Komal Agrotech P. Ltd. Versus ITO 2017 (7) TMI 605 - ITAT HYDERABAD - Decided in favour of assessee.
Issues:
1. Deletion of addition made under section 68 of the Income Tax Act. 2. Disallowance of interest on unsecured loans. 3. Ignoring findings of the Investigation Wing. 4. Acceptance of accommodation entries as unsecured loans. 5. Failure to establish genuineness of loan transactions. Issue 1: Deletion of Addition under Section 68: The Appellate Tribunal ITAT Mumbai dealt with an appeal by the Revenue against the deletion of an addition of 40 lacs made by the Assessing Officer under section 68 of the Income Tax Act. The case involved unsecured loans received by the assessee from two companies, Javda India Impex Limited and Lexus Infotech Ltd. The Assessing Officer initiated proceedings based on information regarding accommodation entries provided by Shri Praveen Kumar Jain. Despite documentary evidence submitted by the assessee to prove the genuineness of the loans, the Assessing Officer made the addition under section 68. However, the CIT(A) deleted the addition, concluding that the assessee had discharged the onus under section 68 by proving the identity, creditworthiness, and genuineness of the transactions. Issue 2: Disallowance of Interest on Unsecured Loans: In addition to the deletion of the principal amount under section 68, the Assessing Officer also disallowed interest of 45,134/- on the sum of 40 lacs. The CIT(A) overturned this disallowance, stating that since the principal amount was not deemed unexplained cash credit under section 68, there was no basis for disallowing the interest. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had fulfilled the requirements of section 68, and therefore, the interest disallowance was unwarranted. Issue 3: Ignoring Findings of the Investigation Wing: The Revenue contended that the CIT(A) erred in ignoring the findings of the Investigation Wing regarding the activities of Shri Praveen Kumar Jain and his group. However, the Tribunal found that the assessee had provided substantial documentary evidence to establish the legitimacy of the loans received, thereby justifying the CIT(A)'s decision to disregard the Investigation Wing's findings. Issue 4: Acceptance of Accommodation Entries as Unsecured Loans: The Revenue argued that the CIT(A) wrongly accepted accommodation entries as genuine unsecured loans. The Tribunal disagreed, noting that the assessee had diligently substantiated the loan transactions with documentary evidence, including confirmations from the creditors, bank statements, and other relevant documents. The Tribunal found no basis to treat the loans as accommodation entries, thereby upholding the CIT(A)'s decision. Issue 5: Failure to Establish Genuineness of Loan Transactions: The Revenue further contended that the genuineness of the loan transactions was not adequately established, especially in light of the retraction statements made by Shri Nilesh Parmar. However, the Tribunal found that the assessee had met the burden of proof under section 68 by providing comprehensive documentation and evidence confirming the loans' authenticity. The Tribunal referenced previous decisions where similar circumstances led to the deletion of additions under section 68, reinforcing the legitimacy of the CIT(A)'s decision in this case. In conclusion, the Appellate Tribunal upheld the CIT(A)'s decision to delete the addition made under section 68 and dismissed the Revenue's appeals for both assessment years. The Tribunal emphasized that the assessee had successfully demonstrated the legitimacy of the loan transactions, thereby fulfilling the requirements of section 68 of the Income Tax Act.
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