2017 (11) TMI 1210 - AT - Income Tax

Unexplained unsecured loans - Held that - The assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer towards unexplained unsecured loans.
2. Violation of principles of natural justice.
3. Burden of proof and genuineness of transactions.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by the Assessing Officer Towards Unexplained Unsecured Loans:
The Revenue filed appeals against the deletion of additions made by the Assessing Officer (AO) towards unexplained unsecured loans for the Assessment Years 2008-09 to 2013-14. The AO reopened the assessment based on search proceedings carried out in the case of Pravin Kumar Jain Group, where it was alleged that the group provided accommodation entries in the form of bogus bills and unsecured loans. The assessee was required to prove the genuineness of transactions, identity, and creditworthiness of the unsecured loans. Despite providing loan confirmations, bank statements, and I.T. Return acknowledgements, the AO rejected the submissions, relying on the statement of Shri Pravin Kumar Jain recorded under section 132(4) of the Act. The AO concluded that the assessee obtained only accommodation entries and added the amount shown as unsecured loans as unexplained income, including the interest paid on such loans.

2. Violation of Principles of Natural Justice:
On appeal, the Learned Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions, observing that the AO merely doubted the loans and relied solely on the statement of Shri Pravin Kumar Jain, which was later retracted. The statements recorded were not supplied to the assessee, and no opportunity for cross-examination was given, violating the principle of natural justice. The CIT(A) relied on the decision of the Hon'ble Supreme Court in Kishanchand Chellaram v. CIT [125 ITR 713], emphasizing that statements could not be utilized against the assessee without giving a full and proper opportunity for cross-examination. The CIT(A) noted that the assessee submitted confirmations from the parties, audit reports, ITRs, and bank statements, thereby discharging its primary onus. The AO did not make any inquiries from the alleged lenders, and the transactions were conducted through proper banking channels with TDS deducted on interest.

3. Burden of Proof and Genuineness of Transactions:
The CIT(A) concluded that the AO made additions disregarding the evidence on record and without discharging his onus. The AO failed to establish anything contrary to the submissions of the assessee and did not verify the bank accounts or the existence of entities extending loans to the assessee. The CIT(A) directed the AO to delete the addition made towards unsecured loans and the corresponding interest. The Tribunal, upon hearing the rival submissions and perusing the orders of the authorities below, upheld the CIT(A)'s decision. It was noted that the AO relied on the statement of Shri Pravin Kumar Jain without providing it to the assessee for rebuttal. The assessee provided substantial evidence of the loans received and subsequent repayment, proving the genuineness of the transactions. The Tribunal emphasized that no addition could be made based on suspicion, surmises, and conjectures without concrete evidence.

Conclusion:
The Tribunal affirmed the order of the CIT(A) in deleting the addition made towards unexplained unsecured loans and interest thereon for the Assessment Years 2008-09 to 2013-14. The appeals filed by the Revenue were dismissed, and the decision taken for the Assessment Year 2008-09 was applied mutatis-mutandis to the appeals for the subsequent years. The order was pronounced in the open court on November 15, 2017.