2021 (11) TMI 145 - AT - Income Tax

Addition u/s 68 - addition on account of unsecured loan - HELD THAT - As decided in assessee's own case 2021 (7) TMI 1120 - ITAT MUMBAI AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences in order to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for AO to suspect the transactions between the parties only on the ground that the person who gave unsecured loan had admitted in his statement u/s 132(4) of the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. AO failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal Jain to make additions u/s 68 of the Act No doubt, the AO is having every right to suspect the transactions but, that by itself would not give rise an occasion for the AO to make additions u/s 68 of the Act, when the evidences filed by the assessee clearly proves the facts that these transactions were genuine transactions which are undertaken under normal commercial business circumstances. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed u/s 68 - Decided in favour of assessee.

Issues Involved:
1. Deletion of addition of ?2,00,00,000/- on account of bogus loan.
2. Failure to establish the identity, genuineness, and creditworthiness of the lenders.
3. Consideration of modus operandi in obtaining accommodation entries.
4. Applicability of the Supreme Court judgment in Principal Commissioner of Income Tax (Central)-1 Vs NRA Iron & Steel Pvt. Ltd.
5. Applicability of the Supreme Court judgment in Commissioner of Income Tax Vs Golcha Properties Pvt. Ltd.
6. Consequential additions on account of interest paid on bogus loan and commission.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?2,00,00,000/- on Account of Bogus Loan:
The Revenue challenged the deletion of an addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, for bogus loans amounting to ?2,00,00,000/- from entities belonging to the Bhanwarlal Jain group. The AO's addition was based on statements from Shri Bhanwarlal Jain and his associates, which were later retracted. The learned Commissioner of Income Tax (Appeals) [CIT(A)] observed that the loans were repaid through banking channels before the survey and search actions, interest was paid regularly, and TDS was deducted. The CIT(A) found that the assessee provided sufficient documentary evidence, including PAN details, bank statements, and confirmations from lenders, to prove the genuineness of the transactions.

2. Failure to Establish the Identity, Genuineness, and Creditworthiness of the Lenders:
The AO contended that the identity, genuineness, and creditworthiness of the lenders were not substantiated. However, the CIT(A) noted that the assessee had filed exhaustive documentary evidence, such as PAN details, confirmation of accounts, bank statements, and TDS certificates, to prove these aspects. The CIT(A) also highlighted that the lenders' companies were active and continued to file their tax returns, showing significant income and audited accounts.

3. Consideration of Modus Operandi in Obtaining Accommodation Entries:
The AO argued that the modus operandi of obtaining accommodation entries should be considered in light of surrounding circumstances and human conduct. The CIT(A) countered this by emphasizing that the AO relied solely on retracted statements without bringing any contrary evidence on record. The CIT(A) reiterated that the assessee had discharged its onus by providing credible evidence, and the AO failed to establish the non-genuineness of the transactions.

4. Applicability of the Supreme Court Judgment in Principal Commissioner of Income Tax (Central)-1 Vs NRA Iron & Steel Pvt. Ltd:
The Revenue cited the Supreme Court judgment in NRA Iron & Steel Pvt. Ltd., where the practice of converting unaccounted money was scrutinized. The CIT(A) distinguished this case by noting that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the transactions, unlike the NRA Iron & Steel case, where the AO had conducted field inquiries and found the investor companies to be non-existent.

5. Applicability of the Supreme Court Judgment in Commissioner of Income Tax Vs Golcha Properties Pvt. Ltd:
The Revenue also referenced the judgment in Golcha Properties Pvt. Ltd., where the genuineness of transactions was decided based on primary facts. The CIT(A) maintained that the assessee had provided primary facts and documentary evidence to substantiate the genuineness of the loans, and the AO did not bring any evidence to the contrary.

6. Consequential Additions on Account of Interest Paid on Bogus Loan and Commission:
The AO had made consequential additions of ?3,57,534/- for interest paid on the bogus loan and ?1,20,000/- for commission. The CIT(A) directed the deletion of these additions, as they were based on the primary addition of ?2,00,00,000/- which was found to be genuine. The CIT(A) relied on previous decisions of the ITAT in similar cases involving the same group, where similar additions were deleted.

Conclusion:
The Tribunal upheld the CIT(A)'s order, noting that the assessee had provided sufficient evidence to prove the genuineness of the loans, and the AO's reliance on retracted statements without further inquiry was unjustified. The Tribunal dismissed the Revenue's appeal, affirming the deletion of the additions made by the AO.

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