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2017 (5) TMI 1270 - AT - Income TaxBogus accommodation entries - CIT-A allowed claim - Held that - It is clear from the finding recorded by CIT(A) that assessee has satisfied all the three conditions of cash credit. As per the finding of CIT(A), assessee has not only established the identity of the loan creditors but also genuineness of the loan transaction as well as the credit worthiness of loan creditors. The detailed finding recorded by CIT(A) has not been controverted by department by bringing any positive material on record. Accordingly, do not find any reason to interfere in the order of CIT(A). - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition of ?40,00,000/- under Section 68 of the Income Tax Act. 2. Disallowance of interest expenditure of ?1,88,273/- on account of bogus accommodation entry. Issue-wise Detailed Analysis: 1. Deletion of Addition of ?40,00,000/- under Section 68 of the Income Tax Act: The Revenue was aggrieved by the deletion of an addition of ?40,00,000/- made under Section 68 of the Income Tax Act. The Assessing Officer (AO) had received information from the DIT (Investigation), Mumbai that a search and seizure operation in the Bhanwarlal Jain Group revealed that the assessee was a beneficiary of accommodation entries in the form of unsecured loans from M/s. Daksh Diamond and M/s. Laxmi Trading Co., both operated by Shri Bhanwarlal Jain. The AO reopened the assessment and treated the transactions as non-genuine, considering the amount as undisclosed income. During the appellate proceedings, the assessee contended that the loans were genuine, taken through account payee cheques, and provided sufficient evidence to support the claim. The CIT(A) observed that the assessee had satisfied the three conditions required under Section 68: identity of the creditor, genuineness of the transaction, and the creditworthiness of the creditor. The CIT(A) cited various judicial precedents, including decisions from the Gauhati High Court and the Supreme Court, emphasizing that the onus on the assessee is limited to proving the source from which the cash credit was received and not the source of the lender's funds. The CIT(A) noted that the AO had not conducted any independent inquiry and solely relied on the statements of Bhanwarlal Jain without considering the documentary evidence provided by the assessee. It was held that without pointing out any defects in the evidence, the transactions could not be deemed non-genuine. The CIT(A) directed the deletion of the addition of ?40,00,000/-. 2. Disallowance of Interest Expenditure of ?1,88,273/- on Account of Bogus Accommodation Entry: The AO had disallowed interest expenditure of ?1,88,273/- on the grounds that it was related to bogus accommodation entries. However, since the loan transactions were held to be genuine by the CIT(A), the disallowance of interest expenditure was also deemed unsustainable. The CIT(A) directed the deletion of the disallowance of ?1,88,273/-. Final Judgment: The Appellate Tribunal upheld the findings of the CIT(A), noting that the assessee had satisfied all conditions for cash credit and that the Revenue had failed to bring any positive material to counter the detailed findings of the CIT(A). Consequently, the appeal of the Revenue was dismissed. Order Pronounced: The order was pronounced in the open court on 23/05/2017, with the result that the appeal of the Revenue was dismissed.
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