2012 (11) TMI 1261 - HC - Income Tax

Unexplained Cash Credits u/s 68 - Assessee had taken loan from few firms which were not found genuine by AO as those firms were allegedly involved in providing bogus entries. - HELD THAT - Merely because there was a search in aforementioned companies, no inference regarding giving of bogus entries could be drawn. - During search, there is no admission by the assessee therein that they were involved giving bogus/accommodation entries - Findings recorded by the AO is not correct and can not be relied upon.

Summary

Issues:
1. Deletion of addition of Rs. 16,91,600 on account of bogus credit entries of loans.
2. Deletion of addition of Rs. 1,11,600 on account of interest claimed on unexplained cash credits.

Analysis:
1. The appeal involved challenging the deletion of additions made by the Assessing Officer on account of bogus credit entries of loans totaling Rs. 16,91,600. The loans were taken from four firms allegedly related to a group known for providing accommodation entries. The Commissioner of Income-tax (Appeals) found the lenders to be genuine as they were regular taxpayers, had PANs on record, and transactions were conducted through Account Payee Cheques. The Commissioner held that the lenders' identity and creditworthiness were established, and the loans were repaid through legitimate channels. The Tribunal upheld the Commissioner's decision, emphasizing that no evidence linked the lenders to providing bogus entries. The High Court concurred with the lower authorities, dismissing the Revenue's appeal as unfounded.

2. The second issue pertained to the deletion of an additional Rs. 1,11,600 claimed as interest on unexplained cash credits. The Revenue argued that due to the lenders' association with a group involved in providing bogus entries, the loans should be considered unexplained under Section 68 of the Income-tax Act. However, the High Court disagreed, noting that the loans were transacted through legitimate means with proper documentation, including PAN numbers and Account Payee Cheques. The Court upheld the Commissioner's decision to delete the interest addition, as there was no concrete evidence linking the loans to illegitimate activities. The Tribunal's decision was upheld, and the appeal was dismissed based on the lack of substantial grounds to challenge the lower authorities' findings.