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2020 (12) TMI 669 - HC - Income TaxAddition u/s 68 - Unexplained loan - addition based on recording statements under Section 131 - statement was later on retracted by the Assessee, but the time gap between the such retraction and the said statement is more than one year - HELD THAT - If at all the original statement was recorded by the Assessing Authority, under duress of coercion, the Assessee could have retracted the same at the earliest available opportunity, after such statement was recorded. Taking a period of more than one year and again except such retraction of statement, in the course of second round of recording statements under Section 131 of the Act only, retraction of such statement, without adducing any cogent evidence to establish the identity of the said Creditor and genuineness of the alleged loan transaction, the Assessee seems to have done nothing to establish the genuineness of the entire loan transaction. It is not even believable that from a person, from whom the loan of ₹ 3 Crores is taken, is not even known to the Assessee and only the banking channels are relied upon to establish the genuineness of the so called transaction, which banking channels can be used even for fake transactions of circulating one's own unaccounted money in fake names. Neither any written contract nor any identity of the Creditor, having been established in the present case, we cannot find any fault with the findings concurrently rendered by the three authorities below, that the said addition deserves to be made under Section 68 - . Merely because other two loan transactions, with two other persons was believed to be genuine and additions were set aside, that is not a sufficient ground to hold that a similar treatment should have been given with respect to the alleged loan transaction of M/s.AR.Com also. Decided against the assessee.
Issues Involved:
1. Addition under Section 68 of the Income Tax Act, 1961. 2. Burden of proof on the Assessee to establish the identity of the creditor and genuineness of the loan transaction. 3. Reliance on banking channels to prove the genuineness of transactions. 4. Retraction of statements made under Section 131 of the Income Tax Act, 1961. 5. Comparability of different loan transactions. Detailed Analysis: 1. Addition under Section 68 of the Income Tax Act, 1961: The primary issue in this case is the addition of ?3.05 crores under Section 68 of the Income Tax Act, 1961, in the hands of the Assessee. The Income Tax Appellate Tribunal (ITAT) upheld the addition made by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)], stating that the Assessee failed to prove the genuineness of the loan transaction and the identity of the creditor, M/s.AR.Com. 2. Burden of proof on the Assessee to establish the identity of the creditor and genuineness of the loan transaction: The Tribunal emphasized that the Assessee did not discharge the burden of proof regarding the identity of the parties, genuineness of the transactions, and the capacity of the lenders to advance the amount. The Tribunal cited the case of CIT v. Orissa Corporation P. Ltd. and DCIT v. Rohini Builders to highlight the requirements for proving the identity, capacity, and genuineness of the transactions. The Assessee failed to provide adequate evidence to support the loan transaction with M/s.AR.Com, including the identity of the creditor and the genuineness of the transaction. 3. Reliance on banking channels to prove the genuineness of transactions: The Tribunal noted that merely relying on banking channels for the receipt and repayment of the loan was insufficient to prove the genuineness of the transaction. The Assessee's contention that the loan was repaid through banking channels was not accepted because the repayment was made by third parties, not directly by the Assessee. The Tribunal observed that the Assessee could not prove the source of the loan amount received from M/s.AR.Com and that the repayments made by third parties did not tally with the entries in the Assessee's books or bank statements. 4. Retraction of statements made under Section 131 of the Income Tax Act, 1961: The Tribunal considered the Assessee's statements recorded under Section 131 of the Income Tax Act, 1961, where the Assessee initially admitted to taking a loan from M/s.AR.Com. However, the Assessee later retracted the statement, claiming it was made under stress. The Tribunal found the retraction to be unconvincing and noted that the Assessee failed to retract the statement at the earliest opportunity. The Tribunal held that the initial statement, coupled with the lack of evidence to support the loan transaction, justified the addition under Section 68. 5. Comparability of different loan transactions: The Tribunal distinguished the loan transaction with M/s.AR.Com from other loan transactions with M/s.MSG Associates and Mr. Bharat Chandan, which were accepted as genuine. The Tribunal noted that the Assessee provided confirmation letters and bank account details for the loans from M/s.MSG Associates and Mr. Bharat Chandan, proving their identity and creditworthiness. In contrast, the Assessee failed to provide similar evidence for the loan from M/s.AR.Com, leading to the addition under Section 68. Conclusion: The High Court upheld the Tribunal's findings, stating that the Assessee failed to establish the identity of the creditor and the genuineness of the loan transaction with M/s.AR.Com. The Court emphasized that the burden of proof lies on the Assessee to prove the identity of the creditor, the genuineness of the transaction, and the capacity of the creditor to advance the loan. The Court dismissed the Assessee's appeal, finding no question of law arising from the Tribunal's order and holding that the addition under Section 68 was justified. The appeal was dismissed with no costs.
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