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2018 (9) TMI 59 - AT - Income TaxAddition u/s 68 - onus to prove - transaction conducted through banking channel - Held that - Since the investor companies have confirmed the transaction with the assessee-company which were conducted through banking channel and entire evidence were brought on record, thereafter, if the A.O. was not satisfied with the documents on record and explanation of the assessee- company and the Investors, the A.O. should have made further enquiry on the same. However, it is a case where the A.O. has failed to conduct necessary enquiry, verification and deal with the matter in depth. Therefore, the explanation of the assessee- company should not have been disbelieved by the authorities below. Thus set aside the orders of the authorities below and delete the addition of ₹ 40 lakhs. This ground of appeal of assessee is allowed.
Issues Involved:
1. Reopening of the assessment under sections 147/148 of the I.T. Act, 1961. 2. Addition of ?40 lakhs under section 68 of the I.T. Act, 1961. Detailed Analysis: 1. Reopening of the Assessment under Sections 147/148 of the I.T. Act, 1961: The original return declaring an income of ?9,74,054/- for the assessment year 2008-2009 was filed and processed under section 143(1) of the I.T. Act. Subsequently, based on information from the DCIT, Investigation Wing, regarding incriminating documents found during a search action under section 132/133A at the premises of certain individuals, it was established that the assessee had obtained an accommodation entry of ?40 lakhs. Consequently, the assessment was reopened under section 148. The assessee did not file any objection to the reopening and requested that the original return be treated as the return filed in response to the notice under section 148. The Ld. CIT(A) upheld the reopening, noting that the investigation wing had produced sufficient evidence for reopening the assessment. The Tribunal found no interference necessary in the matter of reopening as the assessee did not specifically argue or object to this ground in the appeal. 2. Addition of ?40 Lakhs under Section 68 of the I.T. Act, 1961: The assessee-company received ?40 lakhs from two investor companies, M/s. Finage Leasing and Finance (India) Ltd., and M/s. Singhal Securities Pvt. Ltd. The A.O. issued notices under section 133(6) to verify the genuineness and creditworthiness of these companies. Both companies responded with documentary evidence, including bank statements, return copies, and confirmations. The A.O. asked the assessee to produce the directors of these companies. The assessee produced Ms. Lovely Kumari, a director of M/s. Finage Leasing and Finance (India) Ltd., but the A.O. did not accept the contention, noting that the assessee failed to prove the creditworthiness of the investors. Consequently, an addition of ?40 lakhs was made under section 68. The assessee contended that it had provided complete documentary evidence proving the identity, creditworthiness, and genuineness of the transactions. The Tribunal noted that the assessee had provided substantial evidence, including balance sheets showing significant funds, confirmations, and other relevant documents. The Tribunal relied on various judicial precedents, including the decisions in CIT vs. Goel Sons Golden Estate (P) Ltd., CIT vs. Fair Investment Ltd., and CIT vs. Lovely Exports Pvt. Ltd., which emphasized the need for the A.O. to conduct thorough inquiries and not draw adverse inferences solely based on non-production of directors or shareholders. The Tribunal observed that the A.O. failed to conduct necessary inquiries and verification despite the substantial evidence provided by the assessee. It was concluded that the explanation of the assessee should not have been disbelieved, and the addition of ?40 lakhs was deleted. Conclusion: The appeal of the assessee was partly allowed. The Tribunal upheld the reopening of the assessment under sections 147/148 but deleted the addition of ?40 lakhs under section 68, citing the failure of the A.O. to conduct necessary inquiries and the substantial evidence provided by the assessee proving the identity, creditworthiness, and genuineness of the transactions.
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