2018 (4) TMI 178 - AT - Income Tax

Unexplained cash credit - addition u/s 68 - Held that - Assessee filed copies of the acknowledgments of I.T.returns, audited accounts, bank statements, ROC Certificate, PAN of the creditor, confirmation of the accounts of the creditor, copy of the bank statement with ledger account of the creditor before the authorities below. Copies of the same are filed in the paper book. The documents filed on record have not been disputed by the authorities below. The credit have been taken through banking channel and creditor was having sufficient amount with them to make investment in assessee-company. The assessee, therefore, discharged its initial onus to prove identity of the creditor, creditworthiness of the creditor, genuineness of the transaction in the matter. A.O. suspected the transaction between the assessee and the creditor because the creditor has received the credits from Company controlled by Jain brothers but it would not prove that credit received by assessee was not genuine. A.O. cannot ask the assessee to prove the source of the source. None of the statements recorded during the course of search as are referred to in assessment order prove that assessee has received any accommodation entry from any person despite the fact that same were not confronted to the assessee at assessment stage. Therefore, it is proved on record that assessee has been able to explain the identity of the creditor, its creditworthiness and genuineness of the transaction in the matter - Decided in favour of assessee Annual letting value determination - assessee submitted that it is co-owner with others and that the same is used for the purpose of business for the assessee and for part period it was let-out for which rental income has already been shown - Held that - In the case of other co-owners similar addition have been deleted when allegation have been made that it is used by Gambhir brothers for residence only. The statement of Shri Vinay Subhikhi (supra), was recorded at the back of the assessee without confronting the same to the assessee. Therefore, it cannot be read in evidence against the assessee. The A.O. in present case initiated the re-assessment proceedings under section 148 of the I.T. Act at the same address in dispute i.e., 48-Friends Colony (East), New Delhi and all the other documents also have the same address. Even the assessment order has been passed at the same address. Therefore, the contention of assessee is acceptable that the property in question have been used by the assessee for its business purpose, therefore, no annual letting value to be computed for same property. No justification to enhance the annual letting value, the addition is therefore, liable to be deleted. - Decided in favour of assessee

Summary

Issues Involved:
1. Addition under Section 68 of the Income Tax Act for unexplained cash credits.
2. Addition on account of annual letting value of property under income from house property.

Issue-wise Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act for unexplained cash credits:

The case involves the reopening of assessment under Section 148 of the Income Tax Act due to a search and seizure operation at the premises of M/s. Today Homes and Infrastructure Pvt. Ltd. The assessee received ?1,01,00,000 from M/s. Golden Technobuild Pvt. Ltd., which was alleged to be an accommodation entry. The Assessing Officer (A.O.) noted that M/s. Golden Technobuild Pvt. Ltd. was controlled by dummy directors and used as a conduit to transfer money to the assessee. The A.O. made an addition of ?1,01,00,000 under Section 68, as the assessee failed to prove the genuineness of the transaction.

The assessee argued that it provided all necessary documents, including audited financial statements, PAN card, bank statements, and confirmation from the creditor, to prove the identity, creditworthiness, and genuineness of the transaction. The assessee relied on several judicial precedents, including CIT vs. Sophia Finance Ltd., CIT vs. Lovely Exports, and CIT vs. Value Capital Services Pvt. Ltd., to support its contention that the initial onus was discharged by providing these documents.

The Tribunal found that the A.O. did not confront the assessee with the statements of certain individuals recorded during the search, which were used to discredit the transaction. The Tribunal held that the assessee had discharged its initial onus by providing adequate evidence, and the A.O. failed to conduct further investigation to substantiate the suspicion. The Tribunal relied on various High Court decisions, including CIT vs. Kamdhenu Steel and Alloys Ltd., CIT vs. Laxman Industrial Resources Pvt. Ltd., and CIT vs. Winstral Petrochemicals P. Ltd., which emphasized that the burden shifts to the Revenue once the assessee provides prima facie evidence.

The Tribunal concluded that the assessee had adequately proved the identity, creditworthiness, and genuineness of the transaction. Therefore, the addition of ?1,01,00,000 under Section 68 was deleted.

2. Addition on account of annual letting value of property under income from house property:

The A.O. computed the annual letting value of the property at 48-Friends Colony (East), New Delhi, at ?12,25,897 and made an addition of ?10,20,897 after giving credit for ?1,05,000 declared by the assessee. The A.O. based this on the statement of Shri Vinay Subhikhi, who stated that the property was used by Gambhir brothers for their residence.

The assessee contended that the property was used for its business activities and provided evidence, including the address used for business and rental income declared for a part of the property. The Tribunal noted that similar additions were deleted in the cases of co-owners, M/s. Mission Verdes Estate Pvt. Ltd. and M/s. Palos Verdes Estate Pvt. Ltd., where it was established that the property was used for business purposes.

The Tribunal found that the A.O. did not confront the assessee with the statement of Shri Vinay Subhikhi and relied on the same without further verification. The Tribunal held that the property was used for business purposes, and no annual letting value should be computed. Therefore, the addition of ?10,20,897 was deleted.

Separate Judgment for Rancho Place Estate Pvt. Ltd.:

In the case of Rancho Place Estate Pvt. Ltd., the issues were identical to those in the case of Takshila Distributers Pvt. Ltd. The Tribunal followed the same reasoning and deleted the additions of ?51 lakhs under Section 68 and ?5,88,764 on account of income from house property.

Conclusion:

Both appeals were allowed, and the additions under Section 68 and on account of annual letting value were deleted for both Takshila Distributers Pvt. Ltd. and Rancho Place Estate Pvt. Ltd.