2020 (11) TMI 46 - AT - Income Tax

Unexplained cash credit received from bogus entities - discharge of onus - HELD THAT - As decided in ITO Vs Nextgen Construction Pvt. Ltd sister concern of the assessee 2020 (6) TMI 634 - ITAT MUMBAI assessee has discharged the primary onus to demonstrate fulfilment of primary ingredients of Sec.68 and it was incumbent upon revenue to dislodge the assessee's claim by bringing on record, cogent material to establish that the assessee's unaccounted money was routed in its books of account in the garb of unsecured loans. However, we are unable to find any such material except for the fact that additions were made merely on suspicious, conjectures and surmises. Therefore, no infirmity could be found, in the impugned order, in this regard - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of unexplained cash credit under Section 68 of the Income Tax Act.
2. Failure of the assessee to discharge the primary onus under Section 68.
3. Reopening of assessment based on information from the Investigation Wing.

Detailed Analysis:

Issue 1: Deletion of Unexplained Cash Credit under Section 68
The Revenue challenged the deletion of an addition of ?9,85,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, which was deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO had added the amount as unexplained cash credit, alleging that the assessee had routed its own unaccounted money through non-existent and shell companies.

The CIT(A) found that the assessee had provided sufficient evidence to prove the identity, creditworthiness of the lender (Minaxi Suppliers Pvt. Ltd.), and the genuineness of the transaction. The evidence included incorporation certificates, PAN, bank statements, and financial statements of the lender. The CIT(A) noted that the AO's addition was based solely on the investigation wing's report without any independent corroborative evidence.

The CIT(A) emphasized that the provisions of Section 68 require the assessee to prove the identity, genuineness, and creditworthiness of the creditor. The assessee had discharged this burden by submitting necessary documents. The AO had failed to conduct a thorough investigation or bring any material evidence to counter the assessee's submissions.

Issue 2: Failure of the Assessee to Discharge the Primary Onus under Section 68
The AO argued that the assessee failed to discharge the primary onus under Section 68 by not providing adequate details to prove the genuineness of the transaction and the creditworthiness of the lender. The AO contended that the lender was a shell company involved in hawala transactions.

However, the CIT(A) and the Tribunal found that the assessee had submitted comprehensive documentation, including bank statements, affidavits, and financial statements, which demonstrated the lender's financial capacity and the genuineness of the transaction. The Tribunal noted that the AO did not conduct any independent inquiry or issue statutory notices to verify the lender's details.

Issue 3: Reopening of Assessment Based on Information from the Investigation Wing
The case was reopened based on information from the Deputy Director of Income Tax (Investigation), Kolkata, indicating that the assessee had received funds from shell companies. The AO issued a notice under Section 148, and the assessee filed a return of income declaring ?48,790/-.

During the assessment proceedings, the AO relied heavily on the investigation wing's report, which alleged that the funds were routed through multiple layers of non-existent entities before reaching the assessee. The AO concluded that the transactions were not genuine and added the amount under Section 68.

The CIT(A) and the Tribunal found that the AO's reliance on the investigation wing's report was not sufficient to justify the addition. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided all necessary documents to prove the identity, creditworthiness, and genuineness of the transaction. The Tribunal emphasized that the AO failed to conduct a proper investigation or bring any substantive evidence to support the addition.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order to delete the addition of ?9,85,00,000/- under Section 68. The Tribunal found that the assessee had adequately discharged the burden of proof by providing comprehensive documentation, and the AO had failed to conduct a thorough investigation or provide any corroborative evidence to support the addition. The decision was based on similar facts and legal principles as in the case of the assessee's sister concern, where the Tribunal had also ruled in favor of the assessee.