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2018 (5) TMI 1801 - AT - Income TaxAddition on account of bogus loans - Held that - Here is a case, clearly defined by the accounts. The ledger account of Daksh Diamonds appearing in the books of accounts of the assessee shows that on 03.07.2006, the assessee received ₹ 30,00,000/- vide cheque No. 812561 and ₹ 20,00,000/- vide cheque No. 812562 being amounts received towards loan from Daksh Diamonds (Indusland Bank Ltd., Opera House Branch, Indusland House, 425 Mumbai-04). On 06.05.2010 the assessee issued cheque No. 265949 amounting to ₹ 20,00,000/- being cheque to Daksh Diamonds towards refund of loans. Further, on 22.06.2010 the assessee issued cheque No. 263943 amounting to ₹ 30,00,000/- being cheque to Daksh Diamonds towards refund of loans. The transactions were routed through Vijay Bank. The ledger confirmation by Daksh Diamonds tell the same facts. The search and seizure action conducted by the Department in Bhanwarlal Jain Group took place on 03.10.2013. The loans taken by the assessee from Daksh Diamonds in the year 2006 was refunded in the year 2010. One has to respect the transactions which occurred more than three years before the search and seizure action by the Department. Thus the addition made by the AO without any documents is devoid of merit.
Issues:
- Addition of ?50,00,000 on account of bogus loans - Failure to prove genuineness and creditworthiness of loan transaction parties - Reliance on third-party statements without corroborative evidence - Disregard of documentary evidence submitted by the assessee - Appeal against the order of the Commissioner of Income Tax (Appeals)-37, Mumbai Analysis: Issue 1: Addition of ?50,00,000 on account of bogus loans The Assessing Officer (AO) made an addition of ?50,00,000 as unsecured loans based on information received from the Investigation Wing regarding accommodation entries provided by Shri Bhanwarlal Jain Group. The Commissioner of Income Tax (Appeals) held that the AO solely relied on a statement without conducting independent inquiry and ignored documentary evidence submitted by the assessee. The CIT(A) concluded that without corroborative evidence, transactions cannot be deemed non-genuine. Thus, the addition was deleted by the CIT(A). Issue 2: Failure to prove genuineness and creditworthiness of loan transaction parties The AO contended that the assessee failed to prove the genuineness and creditworthiness of the loan transaction parties during assessment proceedings. However, the CIT(A) found that the AO disregarded documentary evidence provided by the assessee, leading to the deletion of the addition. Issue 3: Reliance on third-party statements without corroborative evidence The Department relied on statements by hawala operators during a search and seizure operation. The Department argued that these statements should have been considered. However, the assessee presented evidence of receiving loans from M/s Daksh Diamonds, paying interest, and deducting TDS. The Tribunal found the transactions to be genuine based on documentary evidence and upheld the CIT(A)'s decision. Issue 4: Disregard of documentary evidence submitted by the assessee The assessee submitted various documents, including bank statements, ITR copies, and loan confirmations to prove the genuineness of transactions. The AO's decision to treat the transaction as bogus without considering this evidence was deemed unjustified by the CIT(A) and subsequently upheld by the Tribunal. Issue 5: Appeal against the order of the Commissioner of Income Tax (Appeals)-37, Mumbai The Tribunal, after reviewing the ledger account and transactions with Daksh Diamonds, concluded that the addition made by the AO lacked merit as the loans were refunded in 2010, well before the search and seizure action in 2013. The Tribunal upheld the CIT(A)'s decision to delete the addition, emphasizing the importance of respecting transactions occurring before the investigation. The appeal was dismissed, affirming the CIT(A)'s order. This detailed analysis covers the key issues raised in the legal judgment, highlighting the arguments presented by both parties and the Tribunal's final decision.
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