2021 (10) TMI 437 - AT - Income Tax

Addition of unsecured loans by treating the same as accommodation entry - Addition based on transaction of bogus purchases - HELD THAT - We notice that AO has merely proceeded to make addition of unsecured loans merely because the Rajat Group of Companies involved in the transaction of bogus purchases and rejected the evidences submitted before him i.e. assessee has submitted the confirmation balance and the transactions were only routed through bank and there is nothing on record brought by the AO to believe that these transactions were non-genuine and except relying on the fact that the assessee is taken some accommodation entries from Gautam Jain Group and they were subjected to search proceedings. Therefore, we inclined to accept the findings of the Ld. CIT(A). Bogus purchases - CIT(A) has agreed with the findings of the Assessing Officer that certain transactions entered by the assessee with Frontline Diamonds Pvt. Ltd. and Rajat Diamond Pvt. Ltd are non-genuine - HELD THAT - We are of the opinion that the purchases are no doubt bogus at the same time, the Revenue has accepted the sales/stock declared by the assessee. Therefore, we are in agreement with the findings of the Ld. CIT(A) that as decided by various Hon ble High Courts held that the additional benefit acquired by the assessee in this transaction can be brought to tax not the entire value of alleged bogus purchases are not disputing the declared sales. Therefore, in the given case, the Ld. CIT(A) after analyzing the nature of business of the assessee and the transactions, he has confirmed addition of 3% of the alleged non-genuine transactions. Appeal filed by the Revenue is dismissed.

Summary

Issues:
- Appeal filed by Revenue against CIT(A) order for AY 2012-13
- Ex-parte hearing due to absence of assessee
- Addition of sundry creditors as income
- Addition of unsecured loan from Rajat Diamond
- CIT(A) decision on unsecured loan and sundry creditors
- Reduction of addition on bogus purchases
- Revenue's grounds of appeal against CIT(A) decision
- ITAT decision on unsecured loan and bogus purchases
- Dismissal of Revenue's appeal

Analysis:
The present case involves an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The hearing proceeded ex-parte as the assessee did not appear, while the Revenue was represented by the Departmental Representative. The case pertains to the assessment completed under section 143(3) read with section 147 of the Income Tax Act, 1961.

The Assessing Officer had observed discrepancies in the original assessment regarding the treatment of sundry creditors and unsecured loans received from Rajat Diamond. The AO considered the purchases from certain entities as non-genuine and linked them to accommodation entries. Consequently, significant additions were made to the total income of the assessee in the original assessment.

Upon appeal, the CIT(A) remanded the matter back to the Assessing Officer, who subsequently deleted the unsecured loan received from Rajat Diamond. The CIT(A) also reduced the quantum of addition related to bogus purchases by considering the nature of the transactions and the documentation provided by the assessee.

The Revenue, aggrieved by the CIT(A) decision, raised specific grounds of appeal challenging the reduction of additions made by the Assessing Officer. However, the ITAT upheld the CIT(A) decision, emphasizing that the Assessing Officer lacked concrete evidence to support the additions made. The ITAT concurred with the CIT(A) on the treatment of unsecured loans and bogus purchases, ultimately dismissing the Revenue's appeal.

In conclusion, the ITAT affirmed the CIT(A) decision regarding the additions made in the assessment, highlighting the importance of substantiated evidence in such cases. The appeal filed by the Revenue was ultimately dismissed, concluding the legal proceedings in this matter.