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2020 (1) TMI 1239 - AT - Income TaxAddition u/s 68 - ingenuine loans - Whether genuineness of the transactions cannot be established merely on the basis of documentation filed by the assessee and further probe is required to ascertain whether what was apparent was real? - CIT-A deleted addition - HELD THAT - Assessee has paid interest on said loans after deducting necessary TDS applicable as per law - AO was never brought on record any evidences to prove that the assessee had paid cash to the loan creditors in lieu of loans received from them. It is also not in dispute that the assessee has repaid said loans in subsequent financial years through proper banking channel. CIT(A) has recorded categorical findings in light of various evidences filed by the assessee, including confirmation letters from the creditors and observed that the assessee has filed necessary details, in respect of each and every loan creditors to establish the fact that transactions between the parties are genuine, which are carried out through proper banking channel. CIT(A) has rightly appreciated the fact that in light of various evidences filed by the assessee before reaching to the conclusion that unsecured loans taken from those parties are genuine transactions, which are supported by the necessary evidences. There is no error in findings recorded by the Ld.CIT(A) and hence, we are inclined to uphold the findings of the Ld.CIT(A) and direct the Ld. AO to delete additions made towards unsecured loans taken from those parties and consequent additions made towards interest paid on said loans. - Decided against revenue.
Issues Involved:
1. Whether the loan of ?1,40,00,000/- received from entities managed by Praveen Kumar Jain is genuine. 2. Whether the Ld. CIT(A) erred in treating the loan as genuine by ignoring the decision in Pavankumar M Sanghvi vs ITO. 3. Whether the Ld. CIT(A) erred in allowing interest expenses of ?26,45,096/- on the loan deemed as accommodation entry and sham. Detailed Analysis: Issue 1: Genuineness of the Loan The Revenue contended that the loan of ?1,40,00,000/- received from entities managed by Praveen Kumar Jain was not genuine, citing that these entities were dummy companies providing accommodation entries. The Assessee countered by submitting comprehensive documentation, including confirmation letters, financial statements, and bank statements, proving that the loans were taken through proper banking channels. The Ld. AO, however, based his conclusion on the survey findings and the statement of Praveen Kumar Jain, which had been retracted. The Ld. CIT(A) observed that the Assessee had discharged the initial burden under Section 68 of the Income Tax Act by providing substantial evidence, including TDS certificates for the interest paid. The Ld. AO did not present any evidence to suggest that the Assessee paid cash to the loan creditors. The unsecured loans were repaid over time, and the transactions were conducted through proper banking channels. Thus, the Ld. CIT(A) concluded that the loans were genuine. Issue 2: Ignoring Decision in Pavankumar M Sanghvi vs ITO The Revenue argued that the Ld. CIT(A) ignored the decision in Pavankumar M Sanghvi vs ITO, where it was held that documentation alone cannot establish the genuineness of transactions. The Assessee rebutted by referencing multiple judicial precedents supporting their position, including the decision in DCIT vs Marathon Fiscal Pvt Ltd., where similar issues were adjudicated in favor of the Assessee. The Ld. CIT(A) distinguished the facts of the present case from those in Pavankumar M Sanghvi, noting that the Assessee had provided extensive evidence to substantiate the genuineness of the transactions. Issue 3: Allowing Interest Expenses The Ld. AO had disallowed the interest expenses of ?26,45,096/- on the grounds that the underlying loan was not genuine. However, the Ld. CIT(A), after concluding that the loans were genuine, allowed the interest expenses. The Assessee had deducted TDS on the interest paid, further supporting the legitimacy of the transactions. The Ld. CIT(A) found no reason to disallow the interest expenses once the loans were accepted as genuine. Conclusion: The ITAT upheld the findings of the Ld. CIT(A), affirming that the Assessee had discharged the burden of proof under Section 68 by providing substantial evidence. The Revenue's reliance on the retracted statement of Praveen Kumar Jain was insufficient to discredit the Assessee's documentation. The ITAT dismissed the appeal filed by the Revenue, confirming the genuineness of the loans and allowing the interest expenses. Order: The appeal filed by the Revenue is dismissed. The order was pronounced in the open court on 10/01/2020.
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