2021 (6) TMI 1148 - AT - Income Tax

Addition u/s 68 - unsecured loans and disallowance made on account of interest and commission - HELD THAT - No good reason to interfere and reverse the findings of the CIT(A), especially when the facts being identical to the A.Y.2013-14 and A.Y.2014-15 wherein the Tribunal deleted the addition made u/s. 68 of the Act which order has been followed by the Ld.CIT(A). Thus, we do not find any infirmity in the order passed by the Ld.CIT(A). Grounds raised by the revenue are dismissed. Penalty u/s. 271(1)(c) - addition u/s. 68 in assessment proceedings - HELD THAT - we observe that the Tribunal has deleted the quantum addition made by the AO u/s. 68 of the Act. Since the quantum addition has been deleted by the Tribunal the Ld. Commissioner of Income-tax (Appeals) has rightly deleted the penalty as no penalty will survive. Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act regarding alleged bogus loans.
2. Consequential disallowance of interest on such loans.
3. Deletion of penalty under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income Tax Act:
The Revenue appealed against the deletion of additions made under Section 68 of the Act, which were based on alleged bogus loans obtained by the assessee. The Assessing Officer (AO) reopened the assessments based on information from the DGIT(Inv.), Mumbai, suggesting that the assessee had taken accommodation entries in the form of loans from entities controlled by the Bhanwarlal Jain Group. The AO treated these transactions as bogus accommodation entries and brought them to tax as unexplained cash credits under Section 68 of the Act.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] followed the Tribunal's earlier decision in the assessee's case for AY 2013-14 and AY 2014-15, where it was held that the assessee had discharged the initial burden of proof by providing various documents to establish the identity, genuineness, and creditworthiness of the parties. The Tribunal had observed that the AO erred in making additions towards unexplained cash credits under Section 68 and deleted the additions, including the disallowance of consequential interest.

The Tribunal reiterated that the AO had not brought any contrary evidence to disprove the assessee's claims and relied solely on the statement of Bhanwarlal Jain, which had been retracted. The Tribunal concluded that the transactions were genuine and undertaken under normal business circumstances, thus directing the deletion of additions made under Section 68 of the Act.

2. Consequential Disallowance of Interest on Such Loans:
The AO also disallowed the interest paid on the alleged bogus loans. The CIT(A) and the Tribunal, following the same rationale as in the deletion of additions under Section 68, directed the deletion of disallowance of interest. The Tribunal noted that the assessee had provided sufficient evidence, including bank statements and TDS certificates, to prove the genuineness of the interest payments.

3. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act:
The Revenue appealed against the deletion of penalty under Section 271(1)(c) for AY 2013-14. The CIT(A) had deleted the penalty after the Tribunal had deleted the quantum addition under Section 68. The Tribunal upheld the CIT(A)'s decision, stating that since the quantum addition had been deleted, no penalty could survive.

Conclusion:
The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s orders to delete the additions under Section 68, the consequential disallowance of interest, and the penalty under Section 271(1)(c). The Tribunal emphasized that the assessee had provided sufficient evidence to prove the genuineness of the transactions and that the AO had not brought any contrary evidence to substantiate the claims of bogus transactions.