2019 (2) TMI 2061 - AT - Income Tax

Addition u/s 68 - unsecured loans - CIT-A deleted the addition - HELD THAT - In the instant case, as rightly held by the Ld. CIT(A), the assessee has filed sufficient documents to prove the genuineness of the loan transaction during the year. AO has relied exclusively on the statement of Shri Pravin Kumar Jain recorded u/s 132(4) of the Act. The AO has not brought on record any corroborative evidence to support the addition made by him. In fact, the assessment order is a narration of the statement given by Shri Jain. In view of the above facts, we uphold the order of the Ld. CIT(A). - Decided in favour of assessee. Reopening of assessment u/s 147 - assessment was processed u/s 143(1) - HELD THAT - We find that in the instant case, the AO has linked the material to connect that the assessee has indulged in activities which give rise to reason to believe that income chargeable to tax has escaped assessment. Also the recorded reasons mention the amount which according to the AO has escaped assessment. Therefore, the decision in M/s Shodiman Investments Pvt. Ltd. 2018 (4) TMI 1287 - BOMBAY HIGH COURT is distinguishable from the present case. As mentioned earlier, the AO reopened the assessment which was processed u/s 143(1) of the Act. In the case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 2007 (5) TMI 197 - SUPREME COURT held that intimation u/s 143(1)(a) is not an assessment and held valid the notice issued u/s 148. In the case of Kone Elevator India P. Ltd 2011 (3) TMI 1340 - MADRAS HIGH COURT , CIT v. Ideal Garden Complex P. Ltd. 2011 (9) TMI 731 - MADRAS HIGH COURT it is held that in the case of return of income processed u/s 143(1), the only condition to be satisfied for reopening is taxable income has escaped assessment and the assessee s plea that no fresh material before the AO warranting reopening, is not relevant. Cross objection filed by the assessee is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of unsecured loans.
2. Deletion of addition on account of interest paid on loans.
3. Consideration of information from DIT(Inv.) regarding accommodation entries.
4. Consideration of sworn statement of Shri Pravin Kumar Jain.
5. Genuineness of loan transactions and notices issued u/s 133(6).
6. Non-recorded purchases and application of section 40A(3).
7. Reopening of assessment u/s 147.

Detailed Analysis:

1. Deletion of Addition on Account of Unsecured Loans:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 1,40,00,000/- on account of unsecured loans, arguing that the nature and source of these transactions were not explained. The AO had reopened the assessment based on information from the Director General of Income Tax (Investigation) about bogus loans from entities controlled by Shri Pravin Kumar Jain. The AO added the amount as unexplained cash credit u/s 68 due to the assessee's failure to provide confirmations and the return of notices issued u/s 133(6). However, the CIT(A) found that the assessee had submitted sufficient documents, including loan confirmations, bank statements, and repayment proofs through banking channels, establishing the genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, noting that the AO relied solely on Shri Jain's statement without corroborative evidence.

2. Deletion of Addition on Account of Interest Paid on Loans:
The Revenue also challenged the deletion of Rs. 3,63,445/- on account of interest paid on loans. The CIT(A) had deleted this addition, stating that the interest payments were genuine. The Tribunal agreed with the CIT(A), emphasizing the sufficiency of the documents provided by the assessee to prove the genuineness of the loan transactions and related interest payments.

3. Consideration of Information from DIT(Inv.) Regarding Accommodation Entries:
The AO had based the reassessment on information from DIT(Inv.) about Shri Pravin Kumar Jain providing accommodation entries. The Tribunal noted that while such information could initiate reassessment, the AO needed to substantiate the addition with more than just the statement of Shri Jain. The lack of corroborative evidence led the Tribunal to uphold the CIT(A)'s deletion of the addition.

4. Consideration of Sworn Statement of Shri Pravin Kumar Jain:
The AO relied on Shri Jain's sworn statement admitting to providing accommodation entries. The Tribunal found this reliance insufficient without additional evidence directly linking the assessee's transactions to the bogus activities described by Shri Jain. The CIT(A) had correctly assessed the primary responsibility of the assessee, who had provided adequate documentation.

5. Genuineness of Loan Transactions and Notices Issued u/s 133(6):
The AO's notices u/s 133(6) were returned unserved, leading to doubts about the genuineness of the loan transactions. However, the Tribunal noted that the assessee had provided sufficient documentation, including confirmations and bank statements, to establish the genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for the AO to provide more substantial evidence.

6. Non-recorded Purchases and Application of Section 40A(3):
The Revenue argued that the purchases were made from unrecorded parties, attracting the provisions of section 40A(3). The Tribunal did not find sufficient grounds to overturn the CIT(A)'s decision, which had not specifically addressed this issue but had generally found the assessee's documentation adequate.

7. Reopening of Assessment u/s 147:
The assessee contested the reopening of the assessment u/s 147. The CIT(A) dismissed this ground, stating that a prima facie belief was sufficient for reopening. The Tribunal agreed, citing case law that supported the AO's action in reopening the assessment based on information from DIT(Inv.). The Tribunal distinguished the present case from others where reopening was deemed invalid due to lack of specific information linking the assessee to the alleged activities.

Conclusion:
The Tribunal upheld the CIT(A)'s decisions, dismissing both the Revenue's appeal and the assessee's cross-objection. The Tribunal emphasized the sufficiency of the assessee's documentation and the need for the AO to provide more substantial evidence when relying on third-party statements and information for reassessment and additions.