2018 (5) TMI 1862 - AT - Income Tax

Addition of unsecured loans and interest u/s 68 - assessee failed to prove the identify, creditworthiness and genuineness of the said loan - accommodation entry provider admitted in the statement recorded u/s. 132(4) that he is involved in providing accommodation entries which was later retracted - CIT deleted the addition - HELD THAT - The assessee has filed confirmation letter from the loan creditors along with PAN and Income Tax Return. Assessee also filed bank statements of the loan creditors. The learned CIT(A) has recorded a categorical finding that the assessee has filed various details to prove the identity and genuineness of transactions. Although the parties did not appear before the Assessing Officer in response to notices u/s. 133(6), the assessee has filed all evidences before the Assessing Officer to prove the loan taken from the above two parties. AO has never disputed the identity of the parties. The Assessing Officer also has also not disputed that the assessee has filed confirmation letters from the parties but made addition on the basis of information received from DGIT (Investigation) and statement of Shri Bhanwarlal Jain. But the fact remains that later Shri Bhanwarlal Jain has retracted his statement made u/s. 132(4) by filing an affidavit. Therefore, we are of the considered opinion that the Assessing Officer was incorrect in making the additions towards unsecured loans only on the basis of statement of Shri Bhanwarlal Jain when such statement has been retracted by the party. - Decided against revenue

Issues Involved:
1. Deletion of addition made on account of unsecured loans and interest.
2. Allegation of involvement in accommodation entries by Bhanwarlal Jain Group.
3. Evaluation of evidence provided by the assessee to prove the identity, creditworthiness, and genuineness of the loan transactions.
4. Reassessment of the case based on information from the DGIT (Investigation) and subsequent actions.

Detailed Analysis:

1. Deletion of Addition Made on Account of Unsecured Loans and Interest:
The Revenue challenged the CIT(A)'s decision to delete the addition of ?44,13,984/- made by the Assessing Officer (AO) on account of unsecured loans and interest. The AO had added this amount under Section 68 of the Income Tax Act, 1961, citing the assessee's failure to prove the identity, creditworthiness, and genuineness of the loan transactions. The CIT(A), however, found that the assessee had provided sufficient evidence, including loan confirmation letters, PAN details, income tax returns, bank statements, and TDS records, to substantiate the legitimacy of the loans.

2. Allegation of Involvement in Accommodation Entries by Bhanwarlal Jain Group:
The AO based the addition on information from the DGIT (Investigation), which suggested that the assessee had received accommodation entries from the Bhanwarlal Jain Group, known for providing bogus loan entries. The AO relied on a statement made by Shri Bhanwarlal Jain under Section 132(4), where he admitted to such activities. However, this statement was later retracted by Shri Bhanwarlal Jain through an affidavit, weakening the AO's position.

3. Evaluation of Evidence Provided by the Assessee:
The CIT(A) evaluated the evidence provided by the assessee, which included:
- Loan confirmation from lenders.
- PAN numbers of lenders.
- Ledger extracts.
- Copies of income tax returns of the lenders.
- Bank statements of both the lenders and the assessee.
- Quarterly TDS returns filed with the department.

The CIT(A) concluded that these documents sufficiently established the identity, creditworthiness, and genuineness of the loan transactions. The CIT(A) noted that the AO did not dispute the identity of the parties but focused on the modus operandi of the Bhanwarlal Jain Group instead of the specific transactions of the assessee.

4. Reassessment Based on Information from DGIT (Investigation):
The AO reopened the case under Section 147, based on information from the DGIT (Investigation) about the assessee's alleged receipt of accommodation entries. Despite the AO's efforts, including issuing notices under Section 133(6) to the lenders, the lenders did not respond. The AO argued that mere submission of bank statements and ledger accounts was insufficient to prove the genuineness of the transactions. However, the CIT(A) and subsequently the Tribunal found that the AO's reliance on the retracted statement of Shri Bhanwarlal Jain was unjustified and that the assessee had provided adequate evidence to substantiate the loan transactions.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, affirming that the assessee had successfully demonstrated the identity, creditworthiness, and genuineness of the loan transactions. The Tribunal dismissed the Revenue's appeal, emphasizing that the AO's reliance on the retracted statement of Shri Bhanwarlal Jain was not a sufficient basis for the addition. The order pronounced on 18th May 2018 concluded that the CIT(A) had rightly deleted the addition made by the AO.

← Previous Next →