2021 (7) TMI 1120 - AT - Income Tax

Addition u/s.68 - bogus loans obtained by the assessee and consequential disallowance of interest thereon on such loans - CIT-A deleted the addition - HELD THAT - We observe that identical issue came up before the Tribunal for assessment years in own cases wherein the Assessing Officer made addition u/s. 68 of the Act in respect of alleged bogus loans obtained by the assessee from Bhanwarlal Jain Group. The Tribunal considering various materials placed on record held that the assessee has discharged initial burden by filing various documents to prove identity, genuineness and creditworthiness of the parties. The Tribunal held that the Assessing Officer was erred in making addition towards unexplained cash credits u/s. 68 of the Act and deleted the addition including the disallowance of consequential interest thereon. - Decided in favour of assessee.

Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act concerning alleged bogus loans.
2. Consequential disallowance of interest on such loans.
3. Deletion of penalty under Section 271(1)(c) of the Income Tax Act for the assessment years 2013-14 and 2014-15.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68 of the Income Tax Act Concerning Alleged Bogus Loans:

The primary issue in the appeal was the deletion of the addition made under Section 68 of the Income Tax Act due to alleged bogus loans obtained by the assessee. The Assessing Officer (AO) had reopened the assessments based on information from the DGIT (Inv.), Mumbai, indicating that the assessee had taken accommodation entries in the form of loans from various parties controlled by the Bhanwarlal Jain Group. The AO treated these transactions as bogus accommodation entries and brought them to tax under Section 68 as unexplained cash credits, also disallowing interest on such loans.

Upon appeal, the Learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)] followed the order of the Tribunal in the assessee’s own case for the assessment years 2013-14 and 2014-15, where similar additions were deleted. The Tribunal had previously held that the assessee discharged the initial burden by filing various documents to prove the identity, genuineness, and creditworthiness of the parties. The Tribunal noted that the AO's reliance on the statement of Bhanwarlal Jain, which was later retracted, was insufficient to treat the loans as unexplained cash credits under Section 68.

The Tribunal observed that the AO failed to bring any contrary evidence to disprove the genuineness of the transactions. The Tribunal emphasized that once the assessee had provided sufficient documentation, including PAN details, bank statements, and confirmation letters, the onus shifted to the AO to prove otherwise. The Tribunal found no reason to suspect the transactions merely based on the retracted statement of Bhanwarlal Jain and directed the deletion of the additions made under Section 68.

2. Consequential Disallowance of Interest on Such Loans:

Alongside the deletion of the addition under Section 68, the AO had also disallowed the interest paid on the alleged bogus loans. The Tribunal, following its decision on the primary issue, held that since the transactions were genuine, the interest paid on such loans could not be disallowed. The Tribunal directed the AO to delete the disallowance of interest, reiterating that the AO's suspicion alone was insufficient to disallow the interest when the transactions were proved to be genuine.

3. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act for the Assessment Years 2013-14 and 2014-15:

The revenue also appealed against the deletion of the penalty under Section 271(1)(c) for the assessment years 2013-14 and 2014-15. The Ld. Counsel for the assessee argued that since the quantum addition under Section 68 was deleted by the Tribunal, the penalty levied on such addition would not survive. The Tribunal agreed with this submission, noting that the penalty could not stand once the quantum addition was deleted. Consequently, the Tribunal sustained the order of the Ld.CIT(A) in deleting the penalty, dismissing the revenue’s appeals.

Conclusion:

The Tribunal upheld the deletion of the addition made under Section 68 concerning alleged bogus loans and the consequential disallowance of interest. It also confirmed the deletion of the penalty under Section 271(1)(c) for the assessment years 2013-14 and 2014-15, leading to the dismissal of the revenue's appeals. The Tribunal's decision was based on the assessee's successful discharge of the initial burden of proof and the lack of contrary evidence from the AO.

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