2020 (12) TMI 554 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - Notice u/s 133(6) remaining unserved - AO received information from the office of DGIT (Inv.), Mumbai that those loans were not genuine and they represented accommodation entries taken by the assessee from companies floated by Shri Praveen Kumar Jain his Group - HELD THAT - The authorities below have not done any enquiry or examination to dislodge the submissions. AO is solely relying upon the aspect that section 133 (6) notices have returned unserved - notices u/s 133(6) enable the assessing officer to obtain information and other explanations from the persons to whom the notices have been served. In the present case we note that all the necessary documents from the loan creditors have been supplied to the assessing officer. They include their bank statement, balance sheet, profit and loss account and confirmation. No adverse inference so much as to treat the unsecured loan as bogus can be drawn solely on the ground of 133(6) notice remaining unserved. The assessee has duly explained before the authorities below that the loans were taken 8 years before and assessee was not in a position to bring the loan creditors before the assessing officer. That loans have also been duly paid back. We note that income tax act contains provision for summoning the concerned person before the assessing officer for examination under section 131(1). However we note that no such summon was issued by the assessing officer. Except for relying upon the income tax investigation wing investigation in the case of Praveen Kumar Jain no other material is there for the assessing officer to make the addition of the impugned loans as unexplained income of the assessee. Assessee having given all the necessary confirmation document has cogently discharged its onus. No attempt whatsoever to dislodge the veracity of these documents is there in the orders of the authorities below. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of reassessment proceedings under sections 147 to 151 of the Income-tax Act.
2. Addition of ?2,60,00,000 under section 68 of the Income-tax Act as unexplained cash credits.
3. Discretionary application of section 68 based on facts and circumstances.
4. Consideration of relevant facts and admissible evidence by the CIT(A).

Detailed Analysis:

1. Jurisdiction of Reassessment Proceedings:
The appellant contested that the reassessment proceedings were without jurisdiction as the necessary pre-conditions under sections 147 to 151 of the Income-tax Act were not met. The reassessment was initiated based on information that the appellant had obtained accommodation entries of ?2,60,00,000, leading the Assessing Officer (AO) to believe that income had escaped assessment for A.Y. 2008-09. Notice under section 148 was issued on 28/03/2015.

2. Addition under Section 68:
The AO received information from the DGIT (Inv.), Mumbai, that the loans taken by the appellant were not genuine and represented accommodation entries from companies associated with Shri Praveen Kumar Jain. Notices issued under section 133(6) to the alleged bogus concerns were returned unserved, and an inspector reported that no such entities operated from the given addresses. Consequently, the AO added ?2,60,00,000 to the appellant's income under section 68 as unexplained cash credits.

3. Discretionary Application of Section 68:
The appellant argued that the provisions of section 68 are discretionary and should not apply in their case. They submitted various documents, including balance sheets, profit and loss accounts, ledger confirmations, bank statements, and confirmations from creditors at the time of loan repayment, to prove the identity, genuineness, and creditworthiness of the loan creditors. The appellant contended that the AO did not comment on these documents and solely relied on the inspector's report and the unserved notices.

4. Consideration of Relevant Facts and Evidence:
Before the CIT(A), the appellant reiterated that the AO had only relied on departmental investigation information and ignored the submitted documents. The CIT(A) upheld the AO's order, stating that the appellant failed to produce the loan creditors for examination despite taking significant loans. The CIT(A) also dismissed the appellant's reliance on the submitted documents, noting that the notices had returned unserved and the inspector reported non-existence at the concerned addresses.

Tribunal's Findings:
The Tribunal found that the appellant provided necessary documents to substantiate the loan transactions, including financial statements, ledger confirmations, and bank statements. The authorities below did not conduct any further enquiry or examination to disprove these submissions. The Tribunal noted that the AO did not issue summons under section 131(1) to the loan creditors and solely relied on the inspector's report, which was not confronted to the appellant. The Tribunal emphasized that the AO's reliance on the investigation in the case of Praveen Kumar Jain was insufficient without dislodging the veracity of the appellant's documents.

The Tribunal cited precedents, including CIT Vs. Orchid Industries (P) Ltd. and ITO Vs. Smt. Pratima Ashar, where similar additions under section 68 were deleted due to lack of sufficient evidence from the AO to disprove the genuineness of the loan transactions. The Tribunal concluded that the appellant had discharged their onus by providing all necessary confirmation documents, and the AO failed to provide contrary material evidence.

Conclusion:
The Tribunal set aside the orders of the lower authorities and decided the issue in favor of the appellant, allowing the appeal partly. The Tribunal did not engage in the adjudication of the grounds relating to the validity of reopening, considering it of academic consequence due to the decision on merits.

Order Pronouncement:
The order was pronounced under Rule 34(4) of the ITAT Rules by placing the result on the notice board on 1.12.2020.