2022 (3) TMI 1137 - AT - Income Tax

Unexplained cash credit u/s.68 - assessee company has obtained accommodation entry in the form of loans and advances from M/s Basant Marketing P. Ltd - HELD THAT - The provisions of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders/investor/creditor, establish the genuineness of the transactions and creditworthiness of the parties. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient. As such the same should also be proven by circumstantial surrounding evidences as held by the Hon ble supreme court in case of Durga Prasad More 1971 (8) TMI 17 - SUPREME COURT With respect to the identity of the party, we find that the assessee has furnished the details such as copy of bank statements, ITR and audited financial statement of the lender party. We also note there was assessment framed in case of lender parties which was challenged before the first appellate authority. Thus, from the above, there remains no doubt with regard to the identity of the party, as it has been proved beyond doubt. With respect to the genuineness of transaction and creditworthiness, we note that the assessee has submitted the copy of own bank statement as well as bank statement of party showing the transaction carried out through banking channel, audited balance sheet and copy of ITR. The assessee has also furnished affidavit of the director of the lander company. However the AO without pointing any defect in all these document or without bringing any cogent material on record in nutshell and without conducting independent enquiry disbelieved genuineness of transaction merely on the basis of statement given by one Shri Arun Dalimia before CBI. Therefore, in the given facts and circumstances, the genuineness of the transaction and the creditworthiness of the party cannot be doubted. Assessee is not the beneficiary in the loan transaction with M/s Basant Marketing Pvt. Ltd. Thus we can assume that the impugned transaction of loan received by the assessee which was subsequently repayable. We are of the opinion that, the transactions of the loan received by the assessee in the given facts and circumstances has been explained fully. Therefore, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed.

Summary

Issues Involved:
1. Deletion of disallowance of ?8.71 crores made on account of unexplained cash credit under Section 68 of the Income Tax Act.
2. Whether the assessee satisfied the conditions of identity, genuineness, and creditworthiness of the lender.

Detailed Analysis:

1. Deletion of Disallowance of ?8.71 Crores:
The primary issue raised by the Revenue was that the learned CIT(A) erred in deleting the addition of ?8.71 crores made under Section 68 of the Income Tax Act. The Assessing Officer (AO) had reopened the case based on information that the assessee had obtained accommodation entries in the form of loans and advances from M/s Basant Marketing Pvt. Ltd. The AO treated the loan as unexplained credit under Section 68 due to the lack of documentary evidence supporting the genuineness of the transaction and the creditworthiness of the lender. The AO also relied on findings from a CBI investigation that suggested M/s Basant Marketing Pvt. Ltd. was involved in money laundering and insider trading.

2. Satisfaction of Conditions under Section 68:
The assessee contended that during the assessment proceedings, it had provided all necessary documents to prove the identity, genuineness, and creditworthiness of the lender. These included the bank statement, ITR, and audited balance sheet of M/s Basant Marketing Pvt. Ltd., along with an affidavit from the director of the lender company. The learned CIT(A) found the addition made by the AO unjustified for several reasons:

- Identity and Genuineness: The loan was received through regular banking channels, and the appellant had filed a confirmation from the creditor. The bank account of M/s Basant Marketing Pvt. Ltd. showed no immediate cash deposits before transferring the money, indicating regular transactions.
- Creditworthiness: M/s Basant Marketing Pvt. Ltd. was assessed to Income-tax in Kolkata, and the appellant filed its PAN before the AO. The CIT(A)-20, Kolkata, had previously adjudicated that M/s Basant Marketing Pvt. Ltd. was a genuine company and its transactions were in order.
- Lack of Inquiry by AO: The AO did not conduct any independent inquiry to verify the genuineness of the transactions and relied solely on a general statement by Shri Arun Dalmiya, which did not specifically mention the appellant.
- Repayment of Loan: The loan amount was repaid through normal banking channels in FY 2014-15.

The learned CIT(A) also cited several case laws from the Hon’ble Gujarat High Court, which supported the assessee's case by establishing that once the primary onus of proving the identity, genuineness, and creditworthiness is discharged, no addition under Section 68 should be made.

Tribunal's Findings:
The Tribunal upheld the findings of the learned CIT(A), noting that the assessee had indeed provided sufficient evidence to establish the identity, genuineness, and creditworthiness of the lender. The Tribunal emphasized that the AO had failed to point out any defects in the documents provided by the assessee or conduct any independent inquiry. The Tribunal also referred to various judicial precedents and previous orders where M/s Basant Marketing Pvt. Ltd. was held to be a genuine company.

The Tribunal concluded that the transactions of the loan received by the assessee were fully explained and there was no infirmity in the order of the learned CIT(A). Consequently, the appeal of the Revenue was dismissed.

Conclusion:
The appeal filed by the Revenue was dismissed, and the order of the learned CIT(A) deleting the addition of ?8.71 crores made under Section 68 was upheld. The Tribunal found that the assessee had satisfactorily discharged the onus of proving the identity, genuineness, and creditworthiness of the lender, and the AO had failed to provide any substantial evidence to the contrary.