2018 (12) TMI 1618 - AT - Income Tax

Addition u/s 68 - unsecured loan from the person engaged in providing the accommodation entry - addition relying on statement of accommodation entry providers - proof to genuineness of loans - HELD THAT - The assessee had provided income tax return acknowledgement of M/s Daksh Diamonds, account confirmation, bank statement of the assessee as well as M/s Daksh Diamond, audited financial statement, details of repayment of loan. The Ld. CIT(A) while appreciating that the assessee had proved the identity, creditworthiness and genuineness of loans had taken into consideration that the transactions of both the loan received and the repayment of the loan had passed through banking channels. At the same time, the AO had not led any evidence that any cash was paid by the assessee to the parties who had given the loan. The statement of Bhanwar Lal Jain on which the AO has placed complete reliance was not given to the assessee. The proprietor of M/s Daksh Diamonds, Shri. Ritesh Siroya replied to the notice issued by the AO u/s 133(6) of the I.T. Act and offered to produce the party before the AO for examination. On the contrary, the AO merely relied upon the statement given by Shri. Bhanwar Lal Jain and the modus operandi and the affairs of BhanwarLal Jain group to make the addition. Also neither Mr. BhawarLal Jain nor Mr. Ritesh Siroya had taken the name of the assessee at any point of time to state that they had given an accommodation entry for loan to him.- decided in favour of assessee

Summary

Issues:
Challenging deletion of addition of unsecured loan under section 68 of the Income Tax Act, 1961 on account of accommodation entry.

Detailed Analysis:
The appeal and cross objection were filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2007-08. The facts raised in the appeal and cross objection were identical, so they were clubbed, heard, and disposed of together. The primary issue raised by the revenue in their appeal was the deletion of the addition of ?75,00,000 made under section 68 of the Income Tax Act, 1961, regarding an unsecured loan from a person engaged in providing accommodation entries. The revenue contended that the loan transactions with the individual in question were in the nature of accommodation entries and not genuine loans.

The Assessing Officer had made the addition based on incriminating documents seized during a search action on a group of cases, which indicated that the assessee had taken accommodation entries from the group during the relevant year. However, the Commissioner of Income Tax (Appeals) partially allowed the appeal of the assessee. The key contention of the assessee was that they had provided substantial evidence to prove the genuineness of the loans, including income tax return acknowledgments, bank statements, audited financial statements, and details of loan repayment, all of which had passed through banking channels.

The Commissioner of Income Tax (Appeals) found that the assessee had established the identity, creditworthiness, and genuineness of the loans. The transactions were reflected in the bank statements of both parties, confirmed by them, and the creditworthiness of the lender was established. The Commissioner noted that the Assessing Officer had not provided any evidence that cash was paid by the assessee to the lenders. Additionally, the statement of the individual in question, on which the Assessing Officer relied, did not mention providing accommodation entries for loans to the assessee.

The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and dismissed the revenue's appeal. The Tribunal found that the Commissioner's findings were well-reasoned and judicious, supported by the evidence provided by the assessee. The Tribunal also referred to similar cases where additions were deleted under comparable circumstances. No new facts or contrary judgments were presented to challenge the Commissioner's findings, leading to the dismissal of the revenue's appeal.

The Tribunal further noted that the revenue's general grounds of appeal did not require specific adjudication. The cross objection filed by the assessee became infructuous in light of the Tribunal's decision on the revenue's appeal. Consequently, the appeal and cross objection filed by both parties were dismissed with no order as to costs.