2019 (8) TMI 981 - AT - Income Tax

Addition u/s 68 - enquiry investigation made by the AO as well as Investigation Wing of the department, the parties from whom the assessee had received unsecured loan were mere accommodation entry providers - HELD THAT - In this case, there is an important undisputed fact that the unsecured loan had already been repaid and in this respect, documents were placed on record by the AO. We are also relying upon the judgment of Hon ble Apex Court in the case of Lovely Exports Pvt Ltd. 2008 (1) TMI 575 - SC ORDER , wherein it was held that the AO is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. In this case, the creditworthiness of the investors even if is not proved, even then it will not automatically give license to the assessing authority to make additions in the hands of the recipient u/s 68, unless that is proved that it is the unexplained and unaccounted money of the assessee which has been introduced in its books of account in the name of bogus/non-existent entities. In the instant case, the AO had not made any dent on these lines. On the other hand the appellant has filed all the details and supporting documentary evidence to prove the identity, genuineness and creditworthiness of these three unsecured loan parties No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Resultantly, these ground raised by the revenue stands dismissed.

Issues Involved:
1. Validity of the notice issued under Section 148 and the reassessment.
2. Deletion of additions made under Section 68 of the Income-tax Act, 1961.
3. Onus of proving the identity, creditworthiness, and genuineness of transactions.
4. General grounds raised by the revenue.

Detailed Analysis:

1. Validity of the notice issued under Section 148 and the reassessment:

The Tribunal examined the validity of the notice issued under Section 148 and the subsequent reassessment. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the notice was validly issued based on information from the Investigation Wing of the Income Tax Department. The reopening was done within four years from the end of the relevant assessment year (A.Y.). The CIT(A) cited several judicial precedents, including the Hon'ble Bombay High Court in the case of Hitesh R. Shah, which upheld the validity of reopening assessments based on bogus purchases. The Tribunal concurred with the CIT(A) that the reassessment was valid as there was "tangible material" available with the Assessing Officer (AO) at the time of reopening.

2. Deletion of additions made under Section 68 of the Income-tax Act, 1961:

The primary issue was the deletion of additions made by the AO under Section 68, treating the unsecured loans received by the assessee as unexplained cash credits. The AO had made additions based on the belief that the loans were accommodation entries provided by certain entities. The CIT(A) found that the assessee had provided sufficient evidence, including PAN, incorporation certificates, IT returns, confirmations, and bank statements, to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal noted that the AO had excessively relied on the statements of third parties without giving the assessee an opportunity to cross-examine them. The Tribunal upheld the CIT(A)'s decision to delete the additions, emphasizing that the transactions were routed through banking channels and that the AO failed to gather evidence to prove that the transactions were sham or fictitious.

3. Onus of proving the identity, creditworthiness, and genuineness of transactions:

The Tribunal reiterated the principles laid down in the case of Anant Shelters Pvt. Ltd. regarding Section 68. The assessee must provide a reasonable explanation about the nature and source of credits found in its books. Once the assessee discharges its initial burden by providing evidence of identity, genuineness, and creditworthiness, the onus shifts to the revenue. The Tribunal found that the assessee had met this burden, and the AO failed to bring positive evidence to contradict the assessee's claims. The Tribunal also referred to the Hon'ble Supreme Court's decision in Lovely Exports Pvt. Ltd., which held that amounts could be taxed in the hands of investors if their identity, genuineness, and creditworthiness were not proved.

4. General grounds raised by the revenue:

The Tribunal found that the general grounds raised by the revenue did not require specific adjudication. Consequently, the appeals filed by the revenue were dismissed.

Separate Judgments:

The Tribunal applied the same findings to the appeals for AY 2012-13 and 2013-14, maintaining judicial consistency.

Conclusion:

The Tribunal dismissed all three appeals filed by the revenue, upholding the CIT(A)'s order to delete the additions made under Section 68 and validating the reassessment proceedings initiated under Section 148. The Tribunal emphasized the importance of providing the assessee an opportunity to cross-examine witnesses and the necessity for the AO to gather substantive evidence when making additions under Section 68.

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