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2023 (6) TMI 434 - AT - Income TaxAddition u/s 68 - proof of identity and creditworthiness of the creditor as well as genuineness of the transaction - as per the post search investigation carried out in case of Third Party, it was found that the said entity has availed bogus purchase bills from some other entities controlled by Shri Dinesh Jain and since, the source of fund is itself doubtful due to the creditor indulging in bogus purchase, the unsecured loan cannot be treated as genuine - CIT-A deleted addition - HELD THAT - AO has observed that enquiry conducted could find only four creditors available in the given addresses, however, that does not conclusively prove that the rest of the trade creditors are non-existing. When the creditor has stated that unsecured loan was funded out of the sale proceeds available with it and there are outstanding trade creditors, without any contrary material brought on record by the AO, such statement cannot be rejected merely on conjectures and surmises. More so, when the assessee had furnished all documentary evidence relating to the creditor not only to prove the identity and creditworthiness of the creditor but genuineness of the transaction. We do not find any reason to interfere with the decision of learned first appellate authority in deleting the addition made u/s. 68 and the interest paid on the unsecured loan. Grounds are dismissed. Assessment u/s 153A - Addition u/s 68 - whether incriminating material found in search? - HELD THAT - We do not find that the AO has made reference to any seized/incriminating material while making the additions u/s. 68 - In so far as the documents recovered from i-phone of Chanchal Taneja, Commissioner (Appeals) has recorded a finding that it cannot be considered as incriminating material. Nothing has been brought before us to controvert the factual finding of ld. Commissioner (Appeals) that the additions are not based on any incriminating material found as a result of search. In a recent decision rendered in case of bhisar Buildwell (P.) Ltd. Ors. 2023 (4) TMI 1056 - SUPREME COURT has affirmed the view expressed by Hon ble jurisdictional High Court in case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made under section 68 of the Income-tax Act, 1961. 2. Disallowance of interest expenditure on such addition. 3. Whether the additions were based on any incriminating material found as a result of search and seizure operation. Issue 1: Deletion of Addition under Section 68 The dispute in ITA No. 3963/Del/2019 pertains to the deletion of an addition made under section 68 of the Income-tax Act, 1961, concerning an unsecured loan of Rs. 10 crores received by the assessee from M/s. Shashi Foods India Pvt. Ltd. The Assessing Officer (AO) treated this loan as unexplained cash credit due to doubts about the creditor's creditworthiness and the genuineness of the transaction, based on findings from a search and seizure operation. The AO noted that the creditor had availed bogus purchase bills, casting doubt on the source of funds. However, the Commissioner of Income-tax (Appeals) found that the creditor confirmed the loan transaction during both the search and assessment proceedings, provided the source of funds, and conducted the transaction through banking channels. The Commissioner (Appeals) concluded that the assessee had discharged its liability to prove the identity and creditworthiness of the creditor and the genuineness of the transaction, thereby deleting the addition. Issue 2: Disallowance of Interest ExpenditureThe AO also disallowed the interest paid on the unsecured loan, which was subsequently deleted by the Commissioner (Appeals) for the same reasons mentioned above. The Commissioner (Appeals) held that once the loan was established as genuine, the interest paid on such loan could not be disallowed. Issue 3: Incriminating MaterialIn ITA No. 3962/Del/2019, the assessee had availed unsecured loans from two entities, and the AO treated these loans as non-genuine based on similar reasoning as the previous case. However, the Commissioner (Appeals) found that the additions were not based on any incriminating material found during the search and seizure operation. Relying on the decision of the Hon'ble Delhi High Court in CIT vs. Kabul Chawla, the Commissioner (Appeals) deleted the additions. The Tribunal upheld this decision, noting that the AO did not reference any seized/incriminating material while making the additions. Conclusion:Both appeals by the Revenue were dismissed, upholding the decisions of the Commissioner (Appeals) to delete the additions made under section 68 and the disallowance of interest expenditure, as well as the finding that the additions were not based on any incriminating material found during the search and seizure operation.
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