2018 (7) TMI 361 - AT - Income Tax

Addition u/s. 68 - availing accommodation entries for unsecured loans - Held that - In the case under consideration the assessee had filed all the necessary details like affidavits and the confirmations of the lenders along with the bank details and the returns of income tax. The AO had not made any comments about these documentary evidences. Secondly, the case before us is about accommodation entries and not about bogus purchases. We find that in the cases of Vikram Mukti Lal Vora (2017 (5) TMI 1270 - ITAT MUMBAI), the Tribunal has dealt with the identical issue, that that in that matter issue of accommodation entries by the group concerns of BLJ was deliberated upon. The Tribunal, in the similar circumstances, had upheld the order of the FAA who had deleted the addition made by the AO under the head addition on account of accommodation entries. Considering the above, we decide the first effective ground against the AO. Addition on account of interest paid by the assessee on the loans received by it from RS and GV - Held that - As we have decided the first effective ground of appeal against the AO and the interest issue is directly linked with the loan transactions. So, we hold that there is need to interfere with the order of the FAA. Second effective ground of appeal is decided against the AO. Validity of reassessment proceedings - validity of reasons to believe - Held that - A perusal of the reasons reveal that the AO has no where alleged that there was failure on part of the assessee to disclose fully and truly the material facts necessary for completing the assessment. In our humble opinion, the allegation of not disclosing the material facts fully and truly has to be proved i. e. as to how the assessee did not disclose the material facts. Mere repetition of the language of the section is not sufficient. It has to be proved as to how and which material facts were not disclosed. AO has not whispered anything about the failure of the assessee. - Decided in favour of assessee

Summary

Issues:
1. Addition made under section 68 of the Income Tax Act.
2. Deletion of addition of interest paid on loans received.
3. Validity of reassessment proceedings.

Issue 1: Addition under Section 68
The Assessing Officer (AO) made an addition under section 68 of the Income Tax Act, alleging that the assessee availed accommodation entries for unsecured loans. The AO based this on information from the Director-General of Income Tax (Inv.). The First Appellate Authority (FAA) found that the lenders did not admit to providing accommodation entries, and the AO's conclusion lacked documentary evidence. The FAA noted that the loans were repaid through account payee cheques, and the lenders were regular taxpayers. The FAA concluded that the loans were genuine, overturning the AO's decision.

Issue 2: Deletion of Interest Addition
The AO added interest paid on loans received by the assessee from certain parties. This issue was directly linked to the first issue. The Tribunal decided against the AO on the first issue, leading to the deletion of the interest addition as well.

Issue 3: Validity of Reassessment Proceedings
The assessee challenged the validity of the reassessment proceedings, arguing that there was no failure to disclose material facts. The AO issued a notice under section 148 after four years, triggering the proviso to section 147. The AO's reasons for reassessment did not allege any failure on the part of the assessee to disclose material facts. The Tribunal found that the AO did not provide evidence of the alleged failure to disclose material facts, leading to the dismissal of the AO's appeal and allowing the assessee's cross-objection.

In conclusion, the Tribunal upheld the FAA's decision, finding that the assessee had provided sufficient evidence to prove the genuineness of the loans. The Tribunal also ruled in favor of the assessee on the validity of reassessment proceedings, highlighting the importance of proving any alleged failure to disclose material facts.