2019 (8) TMI 1062 - HC - Income Tax

Addition u/s 68 - claim of the Appellant it is dealing with Moxdiam was not for accommodation entry, but a genuine loan transaction - HELD THAT - It is now an admitted position that Moxdiam was indulging in accommodation entries. Majority of the activities of Moxdiam are of accommodation entries. It is the Appellant which seeks to assert a deviation from Moxdiam's regular activity of accommodation entry to contend that in Appellant s case it was not an accommodation entry, but a genuine loan. The burden on the Appellant to show the genuineness of the entry was thus heavier than situation where no such established evidence regards the lender indulging into accommodation entries exists. Such a burden cannot be casually shifted as contended. Merely because certain entries have been shown in the books of accounts of Moxdiam, they cannot be held to be conclusive and must be construed in light of all surrounding circumstances. The genuineness of the loan transaction, financial capacity, and the surrounding circumstances are some criteria for determination in such matters. It is in this background that the claim of the Appellant it is dealing with Moxdiam was not for accommodation entry, but a genuine loan transaction, had to be tested by the authorities. Two authorities and the Tribunal have evaluated each piece of evidence to conclude that this transaction was not a genuine loan transaction. If the Tribunal has given more weight to some pieces of evidence vis-a-vis others, the conclusion is in the realm of assessment of the evidence. It cannot be said that the pieces of evidence relied upon by the Tribunal are irrelevant. The view taken by the Tribunal is thus on the assessment of evidence is not perverse, and merely because another view by re-appreciating the evidence is possible, it cannot give rise to a question of law as envisaged under Section 260A of the Income Tax Act. Tribunal has noted the decisions referred to by the Appellant and also by the Revenue. Following the principles laid down in the decisions in the case of CIT v. Durga Prasad More 1971 (8) TMI 17 - SUPREME COURT and Sumati Dayal v. CIT 1995 (3) TMI 3 - SUPREME COURT that the nature of the transaction will depend on facts and circumstances, the Tribunal rightly did not get weighed down by multiplication of decisions dealing with separate sets of fact. This approach adopted by the Tribunal would not lead to a substantial question of law as proposed by the Appellant.

Summary

Issues:
Challenging common order by Income Tax Appellate Tribunal for Assessment Years 2007-08 and 2008-09.

Detailed Analysis:

Issue 1: Assessment Year 2007-08 - Genuineness of Loan
The Appellant, engaged in real estate business, claimed a loan from Moxdiam, which was questioned by the Assessing Officer due to Moxdiam's involvement in hawala entries. Despite producing evidence, including a confirmation letter, the Commissioner (Appeals) and Tribunal deemed the loan as not genuine. The Tribunal considered Moxdiam's financial position and activities, concluding the loan was fictitious. The Appellant argued burden of proof was met, but the Tribunal upheld the decision, emphasizing the surrounding circumstances and evidence evaluation.

Issue 2: Assessment Year 2008-09 - Interest Deduction Disallowed
In this year, the Assessing Officer disallowed interest claimed on the loan, similar to the previous year's findings. The Commissioner (Appeals) upheld this decision based on the 2007-08 assessment. The Appellant's appeal to the Tribunal was dismissed, reiterating the non-genuineness of the loan and justifying the disallowance of interest expenditure.

Detailed Analysis of Judgement:
The Appellant's arguments centered on satisfying Section 68 of the Income Tax Act, shifting the burden of proof to the Revenue. Despite producing documents like bank statements and loan confirmations, the Tribunal, Commissioner (Appeals), and Assessing Officer found the loan from Moxdiam to be non-genuine. The Tribunal emphasized Moxdiam's admission of issuing accommodation entries due to financial constraints and lack of investment capacity, supporting the decision to treat the loan as fictitious. The Appellant's reliance on case law and evidence was countered by the Tribunal's assessment of the circumstances, financial capacity, and Moxdiam's activities, leading to the dismissal of the appeals. The Tribunal's approach in evaluating evidence and not getting swayed by multiple decisions was deemed appropriate, concluding that no substantial questions of law arose from the Appellant's contentions. Ultimately, the Appeals were dismissed based on the Tribunal's assessment and findings.

This comprehensive analysis covers the issues involved, the arguments presented, and the Tribunal's rationale for dismissing the appeals, providing a detailed understanding of the legal judgment.