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2013 (9) TMI 42 - AT - Income TaxUnexplained income u/s 68 - Receipt of loan - Held that - assessment orders did not indicate any substantial evidence which establish the fact that creditors of the present case were part of the scam which was unearthed during the course of search operation in the case of Manoj Aggarwal, Bishan Chand Aggarwal, Mukesh Kumar and others. Therefore, on the basis of admission made by Manoj Aggarwal in his case (in Manoj Aggarwal s own search case) cannot be used to borrow this view that the creditworthiness of the creditors of the present case who provided loan to the assessee of the present case, i.e., Shri Rajiv Kumar Aggarwal and Shri Bharat Bhushan Bansal could not be established by the assessee. Assessee has discharged the burden which lay upon him and further, the assessee could not do anything. Hence, the addition made by the Assessing Officer in both relevant years cannot be sustained as we have already noted that the identity and creditworthiness of both these loan creditors was established in the form of said documents, i.e., copies of permanent account number card, ration card, income-tax assessment orders of the relevant years and also wealth tax assessment orders - as the transactions of receiving and returning of loan have been routed through bank accounts, the genuineness of the transaction is also established - assessee established the genuineness of the transaction and the identity creditworthiness of the alleged creditors - addition made by the Assessing Officer in both assessment years is without any basis and it was merely based on surmises and conjectures, without bringing any adverse material on record - Decided in favour of assessee
Issues Involved:
1. Whether the loan received by the assessee should be treated as income under section 68 of the Income-tax Act, 1961. 2. Evaluation of the identity, creditworthiness, and genuineness of the loan creditors. 3. The applicability of judgments from higher courts and tribunals, including those involving entry operators and accommodation entries. Issue-wise Detailed Analysis: 1. Treatment of Loan as Income under Section 68 of the Act: The primary issue in both appeals was whether the loans received by the assessee (Rs. 2 lakhs in AY 2003-04 and Rs. 3 lakhs in AY 2004-05) should be construed as income and taxed under section 68 of the Income-tax Act, 1961. The Assessing Officer (AO) added these amounts to the income of the assessee, concluding that the loans were not genuine and the creditors lacked the financial capacity to advance such amounts. 2. Identity, Creditworthiness, and Genuineness of Loan Creditors: The AO recorded statements from the creditors, Mr. Rajiv Kumar Aggarwal and Mr. Bharat Bhushan Bansal, who confirmed the transactions. However, the AO deemed them as accommodation entry providers, doubting their creditworthiness and the genuineness of the transactions. The assessee provided documents like PAN cards, ration cards, and income tax returns to establish the identity and creditworthiness of the creditors. The transactions were conducted through bank cheques, further supporting their genuineness. 3. Applicability of Higher Court Judgments: The Commissioner of Income-tax (Appeals) relied on several judgments: - CIT v. Durga Prasad More [1971] 82 ITR 540 (SC): This case emphasized that apparent statements must be considered real until proven otherwise, and taxing authorities can examine surrounding circumstances. - McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC): This judgment related to the enforcement of taxation laws and their proper implementation. - Manoj Aggarwal v. Deputy CIT [2009] 310 ITR (AT) 99 (Delhi): The Commissioner noted that the creditors were part of a scam involving accommodation entries, as unearthed during a search operation. The Departmental representative supported these findings, arguing that the creditors were entry providers, thus their creditworthiness and the genuineness of transactions were doubtful. Conversely, the assessee's representative argued that the creditors' names were not mentioned in the Manoj Aggarwal case and that the facts differed. Tribunal's Observations and Judgment: The Tribunal observed that the AO and the Commissioner did not provide substantial evidence linking the creditors to the scam unearthed in the Manoj Aggarwal case. The Tribunal noted that the creditors appeared before the AO and provided sufficient documents to establish their identity and creditworthiness. The transactions were conducted through cheques, further supporting their genuineness. The Tribunal referred to the Supreme Court judgment in CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC), which held that once the assessee provides sufficient evidence regarding the identity and creditworthiness of the creditors, the burden shifts to the Revenue to disprove it. The Tribunal concluded that the Revenue did not pursue the matter further to disprove the creditors' creditworthiness. The Tribunal also distinguished the present case from CIT v. Nova Promoters and Finlease P. Ltd. [2012] 342 ITR 169 (Delhi), where the entry providers admitted to providing accommodation entries. In the present case, the creditors appeared before the AO and confirmed the transactions. Conclusion: The Tribunal held that the assessee had discharged the burden of proof regarding the identity, creditworthiness, and genuineness of the loan transactions. The additions made by the AO were based on surmises and conjectures without substantial evidence. Consequently, the Tribunal deleted the additions for both assessment years and allowed the appeals of the assessee. Result: The appeals of the assessee were allowed.
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