2021 (10) TMI 1052 - AT - Income Tax

Addition u/s 68 - Unsecured loan entries facilitated - discharge of primary onus - identify , creditworthiness of lender and genuineness of transactions and discharge of primary onus or not? - addition based on information received from DCIT,Circle-2(4) Ahmedabad - HELD THAT - No independent finding was given by Ld. CIT(A) except holding that mere filing of confirmation, bank statement, copy of return of income is not sufficient to prove the genuineness of transaction and creditworthiness of lenders. CIT(A) has not given any finding as to what more evidence was required to file if any other evidence was required from the assessee. In our view the assessee has discharged the primary onus in showing the identity, creditworthiness and genuineness of such transaction. We further find that similar addition of the same amount was made in the hand of facilitator Dhirajlal Sanghvi 2019 (10) TMI 1369 - ITAT AHMEDABAD As in view the decision of Hon'ble ITAT Ahmedabad Bench in case of facilitated Dhirajlal V Sanghvi (supra), wherein it was held that he had acted as facilitator in providing the funds to the investors and from this purpose he had made noting of funds which were remitted by third party and received by another third party. Hence, we are of view that once the assessee has discharged the primary onus, the Assessing Officer without brining any adverse evidence was not justified in making addition under section 68 of the Act. This ground of assessee s appeal raised by assessee is allowed.

Summary

Issues:
- Addition of ?1,65,00,0020 under section 68 of the Income Tax Act
- Burden of proof on the assessee to establish identity, creditworthiness, and genuineness of transactions
- Reliance on information received from DCIT, Circle-2(4), Ahmedabad
- Discrepancies in treatment of similar cases by Assessing Officer and Ld. CIT(A)

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) confirming the addition of ?1,65,00,0020 under section 68 of the Income Tax Act. The assessee, a trading company, filed its return showing a loss for the assessment year 2011-12. The Assessing Officer received information regarding unsecured loan entries facilitated by a third party, which the assessee was a beneficiary of. The assessee provided confirmation of parties, bank statements, and income tax returns to establish the identity, creditworthiness, and genuineness of the transactions.

2. Despite the documents provided by the assessee, the Assessing Officer did not accept the explanation and added the entire amount to the income under section 68 of the Act. On appeal, the assessee argued that all necessary documents were submitted to prove the legitimacy of the transactions. However, both the Assessing Officer and the Commissioner upheld the addition based on suspicion raised by the information received from DCIT, Circle-2(4), Ahmedabad.

3. The Tribunal noted that the Assessing Officer and the Commissioner did not conduct independent investigations or provide specific reasons for disregarding the documentary evidence submitted by the assessee. The Tribunal observed discrepancies in the treatment of similar cases, where in a separate case involving a facilitator, the addition was deleted by the Commissioner and upheld by the Tribunal.

4. Referring to the decision in the case of the facilitator, the Tribunal held that once the assessee had discharged the primary onus of proving the transactions' genuineness, the Assessing Officer was unjustified in making the addition under section 68 of the Act. The Tribunal allowed the appeal, emphasizing the importance of proper scrutiny and independent investigation before making additions based solely on suspicion.

5. The Tribunal's decision highlighted the necessity for authorities to provide clear reasoning and conduct thorough investigations before adding amounts under section 68 of the Income Tax Act, ensuring that the burden of proof is met by the assessee while also acknowledging the importance of fair treatment and consistency in similar cases.