2023 (7) TMI 1433 - AT - Income Tax

Bogus loan received - as per revenue unsecured loan is nothing but accommodation entry - onus to prove - Assessee relied merely on the statement recorded during survey u/s 133A as later on retracted as well as for non-production of lender party - only burden of proof remaining on assessee is to show is that the lender company had creditworthiness/capacity to lend the loan of Rs 50Lakhs to assessee in the relevant assessment year i.e. AY. 2013-14. HELD THAT - Assessee had filed the relevant documents to discharge the burden casted upon it, the AO has brushed aside all the relevant materials filed before him and relied merely on the statement recorded during survey u/s 133A as well as for non-production of lender party in order to fasten the addition u/s 68 of the Act. It is noted that statement given by Shri Sanjay Choudhary has been retracted on 07.12.2013 which facts is discernible from affidavit found placed wherein he asserted that he was retracting the statement given to survey team on 03.10.2013 u/s 133A of the Act i.e. within four (4) day . From a perusal of the contents of the affidavit reveals that he (Shri Sanjay Choudhary) has alleged coercion on the part of the survey team to give statement as dictated by them, and that he was forced to sign on pages wherein statements were recorded without reading out the contents of writing (statement). It is noted that the basis for adverse inference against the assessee (statement recorded by survey team) has been retracted. It is trite law that survey statement cannot be the sole basis for drawing adverse inference against the assessee as held in the case of Khader Khan 2013 (6) TMI 305 - SC ORDER wherein it was held that section 133A of the Act does not empower any income-tax authorities to examine any person on oath, hence any such statement does not have any evidentiary value and any admission made during survey cannot by itself be made the basis for addition. Therefore, the reliance placed by AO on retracted survey statement cannot be accepted to draw adverse inference against the assessee. Since the assessee had discharged the burden of proof to prove the nature source of the credit (loan from M/s. Nazar) by adducing relevant documents to prove the identity capacity and genuineness of the loan to the assessee and the AO could not find any infirmity in the documents, the action of the Ld. CIT (A) to confirm addition u/s 68 of the Act cannot be accepted and moreover, it is noted that the assessee has repaid loan amount of Rs. 50 Lakhs in next assessment year i.e. AY. 2014-15. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against addition of Rs. 50 Lakhs on account of alleged bogus loan received.

Analysis:
The assessee appealed against the addition of Rs. 50 Lakhs as a bogus loan. The AO received information that the assessee received unsecured loans from alleged entry operators. The assessee provided documents to prove the loan's nature and source, but the AO treated it as unexplained credit under section 68 of the Income Tax Act. The CIT (A) confirmed this action, doubting the lender's creditworthiness due to their meagre profit. The assessee proved the loan's identity, creditworthiness, and genuineness with bank statements, company data, and other documents. The lender had enough funds to lend Rs. 50 Lakhs. The AO relied on a retracted survey statement, which cannot be the sole basis for adverse inference. The burden of proof shifted to the revenue, but they failed to impeach the credit source. The Tribunal allowed the appeal, stating that the addition under section 68 was not justified.

This judgment highlights the importance of proving the identity, genuineness, and creditworthiness of a creditor to explain cash credits. It emphasizes that the assessee needs to explain the source of the credit, not the source of the source. The decision clarifies that once the assessee meets the burden of proof, the revenue must provide evidence to challenge the credit source. The Tribunal's decision in this case emphasizes the need for a thorough assessment of the evidence provided by the assessee and the revenue before making additions under section 68 of the Income Tax Act.