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2016 (12) TMI 1756 - AT - Income TaxBogus unsecured loan - incriminating documentary evidence found from the search and seizure carried out by Investigation Wing - statement recorded u/s 132(4) - Held that - In the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. - Decided against revenue.
Issues Involved:
1. Deletion of addition of ?1,00,27,500/- made by the AO under Section 143(3) of the IT Act, 1961 on account of bogus unsecured loan taken by the assessee. Detailed Analysis: 1. Background and Assessment Proceedings: The AO received information that M/s Mehul Gems (P) Ltd. is a benami company of Shri Bhanwarlal Jain, involved in providing bogus accommodation entries of unsecured loans. Based on this, the AO issued a show-cause notice to the assessee, who denied any knowledge of Shri Bhanwarlal Jain and claimed that the loan from M/s Mehul Gems (P) Ltd. was genuine, supported by account payee cheques and other documents. The assessee requested copies of incriminating documents and an opportunity to cross-examine the concerned persons, which were not provided by the AO. The AO concluded that the loan was bogus and added ?1,00,00,000/- as unexplained cash credit under Section 68 of the IT Act, 1961. 2. CIT(A) Proceedings: The assessee appealed to the CIT(A), who examined the documentary evidence provided by the assessee, including confirmation letters, bank statements, balance sheets, and affidavits from the directors of M/s Mehul Gems (P) Ltd. The CIT(A) noted that the AO did not bring any positive material to counter the evidence provided by the assessee and had not conducted any fruitful enquiry. The CIT(A) found that the AO's addition was based on suspicion and surmises without concrete evidence and deleted the addition. 3. Tribunal's Analysis: The Tribunal reviewed the submissions and evidence. It noted that the primary onus to establish the genuineness of the loan transaction lies with the assessee, who had provided sufficient documentary evidence. The AO had relied solely on information from the investigation wing without sharing the incriminating documents or allowing cross-examination, violating the principles of natural justice. The Tribunal referred to several Supreme Court judgments emphasizing that material used against an assessee must be disclosed to them, and they must be given an opportunity to rebut it. 4. Legal Precedents: The Tribunal cited the Supreme Court's rulings in: - Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC), which held that the assessee must be informed about the material used against them and given an opportunity to explain. - C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC), which stated that if the AO desires to use material collected privately, the assessee must be informed and given an opportunity to explain. - Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC), which held that evidence not disclosed to the assessee cannot be relied upon. 5. Conclusion: The Tribunal concluded that the AO's reliance on undisclosed information and denial of cross-examination violated the principles of natural justice. The assessee had discharged their onus by providing sufficient documentary evidence. The addition made by the AO under Section 68 was unsustainable, and the CIT(A)'s order deleting the addition was upheld. The appeal filed by the Revenue was dismissed. Order Pronounced: The Tribunal pronounced the order in the open court on 16/12/2016, confirming the deletion of the addition and dismissing the Revenue's appeal.
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