2021 (3) TMI 50 - AT - Income Tax

Addition u/s 68 - 'unsecured loans received by the assessee as unexplained loans received by the assessee - AO took the view that the assessee has introduced its unaccounted cash through the bogus loans - HELD THAT - As decided in own case 2018 (8) TMI 1766 - ITAT MUMBAI and 2019 (2) TMI 835 - ITAT MUMBAI AO had no valid basis for treating the unsecured loans as accommodation entries . There is nothing on the record to show that the assessee admitted at any point of time to have procured accommodation entries of loans. - Decided in favour of assessee. Disallowance of loss on of sale shares - As per AO company was not financial sound as per the valuation of the company and did not have real business activity - CIT-A deleted the addition - HELD THAT - There is no cogent and convincing evidence on record to hold this fact that the business loss in the impugned scrip is bogus. It is also not apparent on record that the appellants name was appearing in any of the SEBI investigation in the impugned scrip. No evidence on record to which it can be assumed that the appellant had connived with any entry operator for executing the share transaction. What adverse information was received from the wing of Calcutta/investigation wing Mumbai against the assessee is not apparent on record. The evidence adduced by the assessee was not rebutted by the AO. AO also took the contradictory stand by taxing the profit on the penny stock but disallowed the loss. No proper opportunity was given to the assessee to cross-examination of the witness as well as to rebut the other evidence on record. Taking into account of all the facts and circumstances mentioned above, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue.

Summary

Issues Involved:
1. Deletion of addition of ?24.35 crore under Section 68 of the Income Tax Act for A.Y. 2011-12.
2. Deletion of disallowance of ?4,71,19,785/- on sale of shares of M/s. Mahavir Advanced Remedies for A.Y. 2016-17.

Detailed Analysis:

Issue No. 1: Deletion of addition of ?24.35 crore under Section 68 of the Income Tax Act for A.Y. 2011-12.

The revenue challenged the deletion of ?24.35 crore by the CIT(A), arguing that the Bhanwarlal Jain Group was engaged in providing accommodation entries. The CIT(A) had previously deleted similar additions for A.Y. 2012-13 and A.Y. 2013-14, which were upheld by the ITAT. The CIT(A) noted that the AO relied on the same material and arguments as in previous years without bringing new evidence. The CIT(A) emphasized that the AO failed to provide specific adverse material or allow cross-examination of witnesses, violating principles of natural justice. The CIT(A) concluded that the assessee had discharged the initial burden of proof under Section 68 by providing all necessary documentation, and the AO did not conduct further inquiries or disprove the evidence. The ITAT upheld the CIT(A)'s decision, stating that the AO's reliance on retracted statements and lack of corroborative material was insufficient to justify the addition. The appeal by the revenue was dismissed.

Issue No. 2: Deletion of disallowance of ?4,71,19,785/- on sale of shares of M/s. Mahavir Advanced Remedies for A.Y. 2016-17.

The revenue challenged the deletion of disallowance by the CIT(A), arguing that the shares were part of a penny stock scam. The CIT(A) noted that the AO failed to provide specific evidence linking the assessee to the alleged scam and did not conduct necessary inquiries. The CIT(A) highlighted that the assessee had provided comprehensive documentation supporting the genuineness of the transactions, including contract notes, bank statements, and demat accounts. The CIT(A) emphasized that the AO's conclusions were based on suspicion and conjecture without concrete evidence. The CIT(A) also noted that the assessee's name did not appear in any SEBI investigations related to the alleged scam. The CIT(A) relied on various judicial precedents, including decisions from the Supreme Court and High Courts, which held that claims supported by proper evidence cannot be denied without contrary evidence. The ITAT upheld the CIT(A)'s decision, stating that the AO's failure to provide adverse material and allow cross-examination violated principles of natural justice. The appeal by the revenue was dismissed.

Conclusion:

The ITAT upheld the CIT(A)'s decisions in both cases, emphasizing the importance of providing specific evidence, allowing cross-examination, and adhering to principles of natural justice. The appeals by the revenue were dismissed, and the additions and disallowances were deleted.