2023 (5) TMI 1042 - AT - Income Tax

Addition u/s 68 - AO received information from ITO, Ward-4(3), Kolkata containing that assessee was advanced unsecured loans and received interest on unsecured loans from fake /shell company - HELD THAT - Here it is a loan transaction, which according to the assessee, these loans have been repaid. Similarly in the first seven pages, CIT(Appeals) has just reproduced the assessment order. There is no cross verification of the evidence at the end of both the revenue authorities. We deem it appropriate to set aside the orders of revenue authorities and restore this issue to the file of AO. AO is directed to either confront the assessee with Shri Sajjan Kumar Garg or do not rely upon his statement while examining the loan transaction of the assessee because the statement was recorded by Investigation Wing. Its veracity has not been tested by any of the authorities on judicial platforms. Information given by the ITO, Ward-4(3), Kolkata is just an information for setting the machinery into motion, it cannot be treated as a gospel truth. The issue has to be examined, therefore, AO is directed to look into all these aspects afresh and read judicate the issue after providing due opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
The judgment involves the confirmation of addition under Section 68 of the Income Tax Act of Rs.20,00,000/- by the ld. CIT(Appeals) for Assessment Year 2015-16 based on unsecured loans received by the assessee from questionable companies.

Issue 1: Addition of Rs.20,00,000/- under Section 68 of the Income Tax Act

The ld. Assessing Officer added Rs.20,00,000/- to the assessee's income, citing unsecured loans received from M/s. Amtek Financial Consultants Pvt. Limited and M/s. Associated Infraprojects Pvt. Limited. The ld. Assessing Officer relied on information suggesting these companies were involved in providing accommodation entries. The assessee submitted documentation, including assessment orders of the creditors, bank statements, and loan repayment evidence, to support the genuineness of the loans. However, the ld. Assessing Officer, referring to a statement by Shri Sajjan Kumar Garg, treated the loan transactions as bogus. The ld. CIT(Appeals) upheld the addition.

Issue 2: Tribunal's Analysis and Decision

The Tribunal carefully reviewed the case, noting that the assessee had taken loans from the mentioned companies, repaid them with interest, and provided relevant documentation. The Tribunal observed that the ld. Assessing Officer had not conducted a thorough enquiry into the genuineness of the loans and had relied on statements without verification. The Tribunal directed the assessee to submit an affidavit explaining the loan arrangements, which was duly filed. Upon analyzing the bank statements and transactions between the companies, the Tribunal found discrepancies and lack of clarity regarding the loan transactions' genuineness. The Tribunal concluded that while the assessee proved the creditor's identity, the genuineness of the transactions remained unverified. Critically, the Tribunal found that the ld. Assessing Officer and the ld. CIT(Appeals) had not adequately examined the evidence or cross-verified the information, leading to the decision to set aside the previous orders and remand the issue to the ld. Assessing Officer for a fresh examination.

Separate Judgment:
The Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for a thorough examination of the loan transactions' genuineness and directing the ld. Assessing Officer to re-adjudicate the issue after providing the assessee with a fair hearing opportunity.