2020 (2) TMI 1091 - AT - Income Tax

Addition u/s 68 - advances received by the assessee for booking of commercial space - HELD THAT - Revenue has not brought any tangible material on record to support the addition made u/s 68 of the Act regarding the advances received by the assessee for booking of commercial space, we hereby decline to interfere with the order of the ld. CIT (A). - Decided against revenue.

Summary

Issues Involved:
1. Identity, creditworthiness, and genuineness of advances received by the assessee.
2. Compliance with notices issued under sections 133(6) and 131 of the Income Tax Act, 1961.
3. Allegations of accommodation entries and bogus transactions.
4. Assessment of addition made under section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Identity, Creditworthiness, and Genuineness of Advances:
The assessee company received advances totaling ?2,19,00,000 from six companies during the FY 2011-12. The Assessing Officer (AO) questioned the identity, creditworthiness, and genuineness of these transactions. The assessee provided confirmations, Income Tax returns, bank statements, and balance sheets of these companies. Despite this, the AO found discrepancies such as the simultaneous receipt and transfer of funds, common auditors, and the directors' involvement in multiple companies, suggesting a lack of creditworthiness.

2. Compliance with Notices Issued under Sections 133(6) and 131:
Notices under section 133(6) were initially unresponded but later complied with by the investor companies. Summons under section 131 issued to the directors were returned un-served, leading to further summons which resulted in partial compliance. Statements from some directors were recorded, but the AO doubted their credibility due to their educational qualifications and the nature of their business activities.

3. Allegations of Accommodation Entries and Bogus Transactions:
The AO suspected the transactions to be accommodation entries, citing reasons like low taxable income of the lending companies, simultaneous change of addresses, and the involvement of dummy directors. However, the CIT (A) found that the AO's suspicions were not substantiated with concrete evidence. The CIT (A) noted that the money was refunded within a short period, all transactions were through banking channels, and the companies were regularly filing their tax returns and other statutory documents.

4. Assessment of Addition Made under Section 68:
The AO made an addition under section 68 of the Income Tax Act, 1961, suspecting the advances to be non-genuine. The CIT (A) deleted this addition, emphasizing that the AO's conclusions were based on mere suspicion without corroborative evidence. The CIT (A) relied on judicial precedents which state that assessments cannot be made on suspicion alone. The CIT (A) concluded that the assessee had discharged its onus of proving the identity, genuineness, and creditworthiness of the transactions.

Conclusion:
The Tribunal upheld the CIT (A)'s order, noting that the revenue failed to provide tangible evidence to support the addition under section 68. The Tribunal found that the assessee had complied with all requirements and provided sufficient documentation to prove the genuineness of the transactions. The appeal by the revenue was dismissed.

Order Pronounced:
The appeal of the revenue was dismissed, and the order was pronounced in the open court on 04/02/2020.