2018 (8) TMI 1484 - AT - Income Tax

Addition u/s 68 - proof of genuineness of loan - discharge of onus - Held that - No defect in the various documentary evidences filed by the assessee to discharge his initial onus could be pointed out by the revenue. The service of notice u/s.133(6) of the Act on the loan creditor proves the existence of the said loan creditor and merely because of not receiving of response from the said loan creditor cannot be taken as an evidence against the assessee. Further in the statement of said Shri Raj Kumar Tharad, neither the name of the said loan creditor nor the name of the assessee is appearing. Thus, the said statement cannot be a basis to draw an adverse inference against the assessee. Thus the initial onus which was on the assessee was duly discharged by the assessee and, thereafter the department could not bring any cogent material on the basis of which, the addition or disallowance made could be sustained. - Additions deleted. - Decided in favour of assessee

Summary

Issues:
- Disallowance of loan amount claimed by the assessee
- Disallowance of interest claimed by the assessee
- Confirmation of loan creditor's identity and creditworthiness
- Adverse inference drawn by the Assessing Officer based on lack of response from loan creditor

Analysis:

The appeal was filed by the assessee against the order of the CIT(A)- Cuttack for the assessment year 2012-2013. The assessee raised multiple grounds of appeal, primarily challenging the addition of a loan amount of ?1,82,00,000 and the disallowance of interest. The Assessing Officer deemed the loan from M/s. Pyramid Suppliers (P) Ltd. as not genuine due to lack of response to notice u/s.133(6) of the Act and added the loan amount to the assessee's income u/s.68 of the Act.

On appeal, the CIT(A) confirmed the Assessing Officer's action based on a statement by one of the promoters of the loan creditor indicating involvement in accommodation entries through shell companies. The assessee contended that all necessary documents, including loan confirmation, bank statements, and audited accounts, were submitted to prove the loan's genuineness and the creditor's creditworthiness. The assessee also highlighted subsequent loans accepted by the department in later assessment years.

The Tribunal found in favor of the assessee, noting that the initial onus to prove the loan's genuineness and creditor's identity was discharged satisfactorily. The non-response to the notice by the loan creditor did not warrant adverse inference, as the notice was served, indicating the creditor's existence. The Tribunal emphasized that lack of response alone cannot be a basis for adverse inference. Additionally, a statement implicating accommodation entries did not mention the loan transaction in question, further supporting the assessee's case.

Given the documentary evidence provided by the assessee and the lack of rebuttal by the revenue, the Tribunal concluded that the addition of the loan amount and disallowance of interest were unwarranted. Consequently, the Tribunal allowed the assessee's appeal, deleting the additions made by the Assessing Officer. The Tribunal also dismissed the stay petition filed by the assessee as it became infructuous post the appeal decision.