2021 (1) TMI 93 - AT - Income Tax

Validity of assessment under section 153A - addition u/s 68 of long term capital gains as undisclosed income by treating the same as bogus - addition of commission on capital gain, addition under section 68 of loans, addition of interest on loans - HELD THAT - We note that the co-ordinate bench of ITAT in the case of Shri Vijayrattan Balkrishan Mittal 2019 (10) TMI 439 - ITAT MUMBAI in similar situation held that, dehorse incriminating Material assessment u/s.153A is not sustainable in the case of unabated assessment. Addition of long term capital gain as bogus is not sustainable. The case laws relied by the revenue is duly dealt with in the order of the tribunal referred above. Accordingly we set aside the orders of authorities below and delete the addition on merits in this regard. It may not be out of place to mention here that the ITAT in assessee s own case for A.Y. 2007-08 2008-09 has decided the issue of treatment as bogus of the long term capital gain of shares in favour of the assessee. The same has not been reversed yet. Despite that learned CIT(A) erroneously distinguished the same. We have already held that the long-term capital gain cannot be treated as undisclosed income under section 68 the addition of commission on capital gain done in these cases is consequently not sustainable. Hence we delete the same also. Addition of unsecured loan - we note that assessing officer has accepted that assessee has submitted the confirmation, ITR, bank statement of the parties. However he rejected by simply observing that investigation wing at Kolkata has reported that some of the entry operators are providing bogus loans at Kolkata. The assessing officer did not make any enquiry of his own the only referred to the date of confirmation of the unsecured loan and drew adverse inference. The learned CIT appeals also has confirmed the assessing officer s action by simply making general observations that the loan creditors are bogus in as much as they don t have much income, that the entire TDS have been claimed as refund by them, that they have same IP address of filing return and same corresponding address. By simply referring to General findings of investigations wing at Kolkata entry operators providing bogus loans the revenue authorities cannot fasten liability of undisclosed income upon the assessee, unless the assessing officer makes enquiry of his own and rebuts the documentary evidences submitted by the assessee. The assessee has duly discharged its onus by submitting the loan confirmation, income tax details and bank statements and financial statement of the loan creditors. Without making enquiry of his own the Assessing Officer has rejected them which is totally unsustainable. In the present case assessee has also refunded the loan amount to the loan creditor. This aspect further supports the assessee s plea that these laws cannot be treated as undisclosed income of the assessee. Authorities below have totally ignored this aspect. In this regard case law from Hon'ble Bombay High Court referred by learned counsel of the assessee above supports the proposition that when loan amount is duly repaid the same cannot be treated as undisclosed income under section 68. Accordingly in the background of aforesaid discussion and precedents in our considered opinion the addition of unsecured loans as undisclosed income of the assessee is not sustainable. Hence, we set aside the orders of authorities below and delete the addition. Since we have already deleted the addition of unsecured loan as undisclosed income the addition of interest thereon is consequently also not sustainable. Hence, the same is also deleted.

Summary

Issues Involved:

1. Validity of assessment under section 153A.
2. Addition under section 68 of long-term capital gains as undisclosed income.
3. Addition of commission on capital gains.
4. Addition under section 68 of loans.
5. Addition of interest on loans.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 153A:

The assessees challenged the validity of the additions made in the assessment framed under section 153A, arguing that no incriminating material was found during the search. The learned CIT(A) opined that in non-abated assessments, additions could still be made even in the absence of incriminating material. The Tribunal, however, held that in case of unabated assessments, addition under section 153A cannot be made without reference to incriminating material, citing the Hon'ble Bombay High Court's decision in CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd., 374 ITR 645. The Tribunal emphasized that assessments which are not pending and have attained finality cannot be disturbed unless new material is unearthed during the search.

2. Addition under Section 68 of Long-term Capital Gains:

The Assessing Officer (AO) had treated the long-term capital gains (LTCG) on sale of shares as bogus and added them as undisclosed income under section 68. The AO relied on statements from various brokers and entry operators, and general reports from the Kolkata Directorate of Income Tax Department. The learned CIT(A) upheld these additions. However, the Tribunal found that the additions were based on general observations and statements without specific incriminating evidence against the assessees. The Tribunal noted that the assessees had provided all necessary documents, such as contract notes, Demat account statements, and bank statements, to substantiate the genuineness of the transactions. The Tribunal held that without corroborative material, the mere reliance on retracted statements and general reports was insufficient to justify the additions under section 68.

3. Addition of Commission on Capital Gains:

The AO added 5% of the LTCG as commission paid for obtaining the alleged bogus gains. The learned CIT(A) confirmed this addition. The Tribunal, however, deleted this addition, reasoning that since the LTCG itself was not treated as undisclosed income, the related commission also could not be added.

4. Addition under Section 68 of Loans:

The AO had added loans received by the assessees as undisclosed income under section 68, citing general findings from the Kolkata Investigation Wing about bogus loan entries. The learned CIT(A) upheld these additions. The Tribunal found that the assessees had provided sufficient documentary evidence, such as loan confirmations, bank statements, and financial statements of the creditors, to prove the genuineness of the loans. The Tribunal emphasized that the AO had not conducted any independent inquiry to rebut the evidence provided by the assessees. It was also noted that the loans had been repaid, further supporting the genuineness of the transactions. The Tribunal deleted the additions under section 68.

5. Addition of Interest on Loans:

The AO had disallowed the interest paid on the loans, treating the loans as bogus. The learned CIT(A) confirmed this disallowance. The Tribunal, having deleted the additions of the loans themselves, also deleted the related interest disallowance, stating that the interest on genuine loans cannot be disallowed.

Separate Judgments:

The Tribunal's decision was unanimous, and no separate judgments by different judges were mentioned. The order was pronounced by placing the result on the notice board on 31.12.2020.