2022 (7) TMI 586 - AT - Income Tax

Addition u/s 68 on accommodation entry of loan and addition u/s 69C on Commission - information from the Investigation Wing was that there was a search/survey action conducted in the premises of M/s Bhanwarlal Jain Group from which it was evident that they were involved in providing in accommodation entry to beneficiary companies by providing cheque in lieu of cash and the assessee company had availed unsecured loan from few companies - CIT-A deleted the addition as opined that the AO has made the additions of entire loan merely on the basis of general statement / information - HELD THAT - CIT(A) took note of the fact that there were no specific findings by the AO on alleged involvement of the assessee in such accommodation transactions other than the general statement recorded during the search of Shri. Banwarlal Jain which has been retracted . CIT(A) further noted that during the remand proceedings before the AO the assessee had filed Affidavit in respect of loan given and received back ledger account Income tax returns and Confirmation given by all the lenders to the assessee. CIT(A) notes that the AO could not find any fault/infirmity in respect of the said relevant evidences on the issue and has simply ignored the same by merely relying on the general statement. CIT(A) has found that AO has not carried out any investigation to prove that the assessee has indulged in taking accommodation entry from the aforesaid lenders. CIT(A) also took note that even during the search the cash trail has not been identified to bring on record that the assessee had given cash in lieu of the purported loan/accommodation transaction by exposing that the cash given by assessee was deposited in some bank account which was routed to the entities/lenders which gave loans to the assessee. On the aforesaid finding of relevant facts of the CIT(A) he gave relief to the assessee. As before us the revenue could not point out any error in the finding of fact discussed (supra). In the light of the uncontroverted finding of facts by the CIT(A) according to us the assessee had discharged the onus to prove the loan transaction which could not be rebutted by the AO. Based only on the retracted general statement of Shri Bhanwarlal Jain without any incriminating oral testimony against the assessee on this issue of loan and in the light of the supporting evidence of the loan given by the assessee (which has been repaid interest income taxed in the hands of the lenders) it would be unsafe to mulct any addition in the hands of the assessee. So the impugned action of the Ld. CIT(A) is confirmed. - Decided against revenue.

Summary

Issues:
- Appeal against deletion of addition made under section 68 of the Income Tax Act for accommodation entry of loan
- Appeal against deletion of addition made under section 69C of the Income Tax Act for commission

Analysis:

Issue 1: Appeal against deletion of addition under section 68 of the Income Tax Act for accommodation entry of loan

The Assessing Officer (AO) made an addition of Rs.2,01,00,000 under section 68 of the Act, treating it as unexplained credit. The AO received information that the assessee availed accommodation entry from a group known for providing such entries. The AO, despite receiving details from the assessee and verifying the information, was not satisfied and made the addition. However, the Commissioner of Income Tax (Appeals) deleted the addition. The CIT(A) noted that the transactions were through banking channels, with TDS deducted and paid, and the loans were returned with interest through banking channels. The CIT(A) found that the AO did not provide specific findings on the alleged involvement of the assessee in accommodation transactions, relying only on general information. The CIT(A) observed that the AO failed to investigate and prove the assessee's involvement in accommodation entries. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had proven the loan transactions, and the addition based on a retracted statement without incriminating oral testimony was unjustified.

Issue 2: Appeal against deletion of addition under section 69C of the Income Tax Act for commission

The AO estimated a commission of Rs.4,02,000 paid to entry providers as unsecured expenditure under section 69C of the Act. The CIT(A) deleted this addition after considering the documents submitted by the assessee, including the trail of transactions, ledger accounts, income tax returns, and confirmations from lenders. The CIT(A) found that the AO did not provide any specific evidence to support the addition and merely relied on general statements. The Tribunal confirmed the CIT(A)'s decision, stating that the assessee had discharged the onus to prove the transactions, and the addition based on unsubstantiated statements was unwarranted.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the additions made by the AO under sections 68 and 69C of the Income Tax Act.