2019 (3) TMI 1835 - AT - Income Tax

Unexplained cash credit taxed u/s 68 - assessee has not satisfactorily discharged the primary onus of proving the identity of the creditors, their creditworthiness and the genuineness of the transaction - CIT-A deleted addition - HELD THAT - No such addition can be made under section 68 where the assessee has filed all the necessary evidences before the AO when AO has not made any further enquiry to to prove otherwise. The allegation of the AO that assessee has not proved identity and creditworthiness of the lenders and genuineness of the transactions is without any basis as stated above. The allegation of the AO that assessee has not proved identity and creditworthiness of the lenders and genuineness of the transactions is without any basis as stated above. The assessee filed the necessary evidences in the form of loan confirmations, balance sheets and profit and loss accounts, ITRs, bank statements and PAN cards of the lenders. Entire transactions were routed through the banking channels and thus the assessee has discharged the primary onus of proving the identity, creditworthiness and genuineness of the transactions. Another allegation of the AO is that assessee has failed to produce the parties and hence question of providing cross examination does not arise which is without merit as the assessee has discharged its onus by providing all the basic documentary evidences before the AO who just relying on the statement of Shri Pravin Kumar Jain treated the loan transactions as unexplained credit in the books of the assessee. On the issue that these lenders are showing low income or losses in the return of income filed, we observe that in the balance sheets the said loan advanced by the lender were duly reflected and thus there is no income in the particular year has no relevance and there were sufficient sources. Order passed by the Ld. CIT(A) is well reasoned and there is no reasons to deviate from the his findings - Decided against revenue.

Issues Involved:
1. Deletion of addition of ?3,69,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act.
2. Deletion of addition of ?19,53,222/- on account of interest expenses related to the alleged unexplained cash credit.
3. Validity of reassessment/reopening proceedings under Section 147 of the Income Tax Act.

Issue-Wise Analysis:

1. Deletion of Addition of ?3,69,00,000/- as Unexplained Cash Credit under Section 68:

The Revenue challenged the deletion of the addition of ?3,69,00,000/- by the CIT(A), which was initially made by the Assessing Officer (AO) on account of unexplained cash credits under Section 68 of the Income Tax Act. The AO's addition was based on the statement of Shri Dinesh Jain, a director of the assessee company, recorded during a survey under Section 133A, and the statement of Shri Pravin Kumar Jain, who admitted to providing accommodation entries. The AO concluded that the loans were not genuine and added the amount as unexplained cash credit.

The CIT(A) deleted the addition, noting that the statement of Shri Dinesh Jain was retracted within three days, and the AO should not have relied solely on it. The CIT(A) emphasized that the AO failed to provide the assessee an opportunity for cross-examination and did not conduct further investigations despite the assessee providing substantial documentary evidence, including loan confirmations, copies of ITRs, bank statements, balance sheets, and profit and loss accounts.

The CIT(A) referenced several judicial precedents, including the Supreme Court's decision in CIT Vs. Lovely Exports (P) Ltd., which highlighted that once the assessee provides basic details like PAN, bank statements, and confirmations, the onus shifts to the AO to disprove the evidence. The CIT(A) concluded that the AO's addition was based on suspicion without concrete evidence and that the assessee had adequately discharged its onus under Section 68.

2. Deletion of Addition of ?19,53,222/- on Account of Interest Expenses:

The AO had disallowed the interest expenses of ?19,53,222/- paid on the alleged bogus loans, treating them as unexplained cash credits under Section 68. Since the CIT(A) deleted the addition of the principal amount of ?3,69,00,000/-, it also allowed the interest expenses, holding them as genuine. The Tribunal upheld this decision, stating that once the principal addition is deleted, the related interest expenses must also be allowed.

3. Validity of Reassessment/Reopening Proceedings under Section 147:

The CIT(A) upheld the reassessment/reopening proceedings initiated by the AO under Section 147 of the Income Tax Act. However, on the merits, the CIT(A) found that the additions made by the AO were not sustainable due to lack of evidence and proper investigation.

Conclusion:

The Tribunal dismissed the Revenue's appeals for both assessment years 2011-12 and 2012-13, upholding the CIT(A)'s order that deleted the additions made by the AO. The Tribunal agreed that the assessee had provided sufficient evidence to prove the genuineness of the loan transactions and that the AO's reliance on retracted statements without further investigation was unjustified. The Tribunal also dismissed the cross-objection filed by the assessee as it became redundant after dismissing the Revenue's appeals.

← Previous Next →