2018 (1) TMI 665 - AT - Income Tax

Addition u/s 68 - bogus accommodation entries - Xeroxed copies of documents submitted by the assessee - Held that - The assessee in its response has only mentioned that the assessee has given the name and address and PAN numbers of the investing companies and, hence, it has discharged the onus. In none of the responses, the assessee submitted that these companies are actually in existence at the addresses mentioned. That these companies should be issued summons. That assessee is prepared to bring the directors or the principal officers for confirmation. In fact, the assessing officer has noted that assessee has failed to submit the ledger copies of these concerns duly signed by the principal officers. That the documents submitted are only xeroxed copies. This clearly bolsters the Revenue s case that these are non-existent companies and are operating only on paper to provide accommodation entry being run by Shri Praveen Kumar Jain and his group concerns. The transaction through banking channel does not absolve the assessee from the finding that these are dubious entities by way of which the assessee s undisclosed income has been channeled back as share application money. Thus assessee has obtained bogus accommodation entries from entities operated by Shri Praveen Kumar Jain and his group, the mere production of Xeroxed copies of documents cannot support the case of the assessee - Decided against assessee

Summary

Issues Involved:
1. Justification of deletion of unexplained income under Section 68 of the Income Tax Act, 1961.
2. Proof of identity, creditworthiness, and genuineness of share application money.
3. Applicability of the decision in CIT vs. Lovely Exports Pvt. Ltd.

Detailed Analysis:

1. Justification of Deletion of Unexplained Income under Section 68:
The Revenue's appeal challenged the deletion of ?45,00,000 by the CIT(A) as unexplained income under Section 68 of the Income Tax Act, 1961. The genesis of the case was a search and survey action on Shri Pravin Kumar Jain and his group, which revealed that the group was engaged in providing accommodation entries through benami concerns. The Assessing Officer (AO) received information that the assessee received ?45,00,000 as share application money from these concerns. The AO noted that the documents submitted by the assessee were Xerox copies and not authenticated, leading to the conclusion that the assessee failed to fulfill the onus of proof.

2. Proof of Identity, Creditworthiness, and Genuineness of Share Application Money:
The AO's investigation revealed that the entities operated by Shri Pravin Kumar Jain were non-existent at their registered addresses and were not conducting any genuine business. Statements and admissions from related persons corroborated that these entities were providing bogus accommodation entries. The AO concluded that the assessee received ?45,00,000 as share application money from these non-existent entities, and thus, the amount was treated as 'cash credit' under Section 68, added to the income of the assessee.

3. Applicability of the Decision in CIT vs. Lovely Exports Pvt. Ltd.:
The CIT(A) deleted the addition by relying on the Supreme Court decision in CIT vs. Lovely Exports Pvt. Ltd., which held that once the name, address, and other details are given, the Department can reopen the individual assessment records, and the share application money cannot be declared as undisclosed income under Section 68. However, the ITAT found this reliance misplaced as the facts of the present case involved clear evidence that the share applicant companies were bogus and operated by Shri Pravin Kumar Jain to provide accommodation entries. The ITAT emphasized that the assessee failed to dislodge the findings of the Revenue, and the mere production of Xeroxed documents could not support the assessee's case.

Conclusion:
The ITAT concluded that the overwhelming evidence indicated that the assessee obtained bogus accommodation entries from entities operated by Shri Pravin Kumar Jain. The decision of the CIT(A) was set aside, and the appeal filed by the Revenue was allowed. The addition of ?45,00,000 as unexplained income under Section 68 was upheld, supporting the AO's findings and rejecting the applicability of the decision in CIT vs. Lovely Exports Pvt. Ltd. in this context.