2016 (10) TMI 420 - AT - Income Tax

Addition u/s 68 - unsecured loans - bogus bills for purchases - Held that - Tribunal has reached the findings that the assessee has duly proved the genuineness of transaction, creditworthiness and identity of the creditor by producing the Principal Officer of the company and also by filing the details of the company like banks statement, audited account of the lender. Same records were produced and the Principal Officer was also produced and his statement was also recorded by the AO. We find that the identical issue of addition u/s 68 was decided in the assessee own case in the AY 2007-08. Therefore, respectfully following the decision of the co-ordinate bench of the Tribunal we set aside the order of ld. CIT(A) and direct the AO to delete the addition - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under section 148 based on search and seizure operations.
2. Legality of the assessment order passed under section 143(3) read with section 147.
3. Addition of ?1,05,00,000 as unexplained cash credit under section 68.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under section 148 based on search and seizure operations:
The assessee contended that the notice under section 148 dated 28.3.2013 was invalid as it was based on information from search and seizure operations on KSL Group, which was already available to the Assessing Officer (AO) when the original assessment for the year under reference was completed on 15.12.2011. The assessee argued that the AO had no new information to justify the re-opening of the assessment, making the notice and subsequent reassessment order bad in law.

2. Legality of the assessment order passed under section 143(3) read with section 147:
The assessee argued that the AO, in the reasons recorded for reopening the assessment, mentioned that the assessee had taken bogus bills for purchases from certain parties but did not make any addition on this account in the reassessment order. Instead, the AO made an addition of ?1,05,00,000 for an unsecured loan from Seaview Trading Co. Pvt. Ltd. The assessee contended that under Explanation 3 to section 147, the AO must assess the specific income that escaped assessment, which formed the basis of the belief for reopening. Since no addition was made on account of the alleged bogus purchases, the AO could not validly make any other addition.

3. Addition of ?1,05,00,000 as unexplained cash credit under section 68:
The AO added ?1,05,00,000 as unexplained cash credit under section 68, doubting the identity, creditworthiness of the lender, and genuineness of the transaction with Seaview Trading Co. Pvt. Ltd. The assessee argued that the identity and creditworthiness of the lender and the genuineness of the transaction were proven beyond doubt, and the AO violated the principles of natural justice by not allowing the assessee to cross-examine Mr. Girishchand Yadav, the main witness.

The Tribunal noted that the assessee had filed its return of income declaring ?1,47,76,121, which was processed under section 143(1). The case was reopened under section 147, and notice under section 148 was issued on 28.3.2013. The AO recorded reasons based on the search and seizure operation on the KSL Group, which indicated that the assessee had taken bogus bills from certain parties, including Seaview Trading Co. Pvt. Ltd. The AO was not satisfied with the transactions and doubted the credits of ?1,05,00,000, leading to the addition under section 68.

The Tribunal considered the assessee's argument that a similar issue was decided in its favor by the co-ordinate bench of the Tribunal in ITA No.6765/Mum/2012 (AY-2007-08). The Tribunal found that the facts of the current year were identical to those of the earlier year, where the addition was deleted as the assessee had proved the genuineness of the transaction, creditworthiness, and identity of the creditor. The Tribunal held that the assessee had discharged the initial burden of proof, and the AO did not bring any material to disprove the assessee's claim. Therefore, the Tribunal directed the AO to delete the addition of ?1,05,00,000.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that the addition of ?1,05,00,000 under section 68 was not justified as the assessee had proved the genuineness of the transaction, creditworthiness, and identity of the creditor. The other grounds of appeal on legal/technical issues were rendered academic and dismissed as infructuous. The decision in ITA No.3812/Mum/2016 was applied mutatis mutandis to ITA No.3813/Mum/2016. The appeals were allowed, and the AO was directed accordingly.