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2019 (5) TMI 1693 - AT - Income TaxAddition of bogus loans u/s 68 - creditworthiness of the creditors, genuineness of the transactions and identity of the creditors - HELD THAT - Assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three main ingredients i.e. creditworthiness of the creditors, genuineness of the transactions and identity of the creditors by filing all the details as discussed above which proved that the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors have been established by the assessee. So much so that the loan creditors in response to the notice issued under section 133(6) of the Act appeared before the AO and confirmed that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form no.16A issued to the loan creditors also filed before the AO. Once the assessee has filed all the necessary documents before the AO then the onus is shifted to the department to disprove the stand of the assessee, which department has failed to do so in the present case. AO has merely proceeded and relied on the information received from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee during the course of appellant proceedings - Decided in favour of assessee
Issues Involved:
1. Deletion of addition of ?91,33,644/- for AY 2010-11 and ?64,00,000/- for AY 2012-13 under Section 68 of the Income Tax Act, 1961. 2. Establishing the identity, creditworthiness, and genuineness of transactions by the assessee. 3. Validity of the retraction of statements by lenders. 4. Role of the Assessing Officer (AO) in verifying the claims made by the assessee. Issue-Wise Detailed Analysis: 1. Deletion of Addition under Section 68: The Assessing Officer (AO) added amounts of ?91,33,644/- for AY 2010-11 and ?64,00,000/- for AY 2012-13 as bogus loans under Section 68, based on information from the Director General of Income Tax (Investigation), Mumbai, which indicated that the loans were accommodation entries from companies controlled by Shri Praveen Kumar Jain. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted these additions, following the decision in the case of M/s Reliance Corporation vs. ACIT, which held that the assessee had discharged the initial burden of proof by providing necessary documentation, and the AO failed to disprove the evidence. 2. Establishing Identity, Creditworthiness, and Genuineness: The CIT(A) observed that the assessee provided loan confirmations, copies of returns of income, bank statements, and ledger accounts of the lending parties. The assessee demonstrated that the loans were received through account payee cheques, and there were no immediate cash deposits in the lenders' accounts before issuing the cheques. The CIT(A) noted that the AO did not carry out independent verification or issue summons under Section 131 to the lenders. The Tribunal upheld that the assessee had established the identity and creditworthiness of the creditors and the genuineness of the transactions, shifting the onus to the AO, who failed to rebut the evidence provided. 3. Validity of Retraction of Statements: The AO relied on the statement of Shri Praveen Kumar Jain, who admitted during a search under Section 132 that he provided accommodation entries. However, Jain retracted his statement through an affidavit, which the AO dismissed as an afterthought. The CIT(A) and the Tribunal found that the retraction, though delayed, was not disproved by the AO with any contrary material, thus weakening the AO's reliance on the initial statement. 4. Role of the Assessing Officer: The Tribunal noted that the AO did not conduct any independent verification of the lenders and solely relied on the information from the DGIT(Inv). The AO did not allow cross-examination of the lenders, which violated the principles of natural justice. The Tribunal emphasized that once the assessee provided all necessary documentation, the onus shifted to the AO to disprove the claims, which the AO failed to do. Conclusion: The Tribunal confirmed the CIT(A)'s order deleting the additions made by the AO under Section 68 for both AY 2010-11 and AY 2012-13. The Tribunal found that the assessee had discharged its burden of proof by providing sufficient evidence, and the AO did not bring any material to rebut the evidence. Consequently, both appeals of the Revenue were dismissed. Order Pronounced: Order pronounced in the open court on 15.05.2019.
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