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2018 (8) TMI 271 - AT - Income TaxAddition of bogus loan entries - Held that - AO did not seek any further explanation or detail from the assessee. He solely relied upon the investigation wing enquiry regarding the Bhanwarilal group. Commissioner of Income Tax (Appeals) in this regard has correctly made the observation that the assessee having given all the necessary details and has discharged its onus, it was incumbent upon the assessing officer to make further enquiry if he was not convinced by the submissions of the assessee. We find that assessing officer has displayed total lack of application of mind by not even issuing a notice to the loan creditors. We find that it is settled law that while making any disallowance/addition, AO needs to make due enquiry. In this case, the Assessing Officer has not made any enquiry whatsoever. As noted hereinabove, the assessee has given all the documentary evidences including confirmatory letters, bank statements and financial statements of the creditors. AO has not found any error therein. It has been held in number of cases that when the assessee has given all the necessary details of the loan creditors, including the identity, creditworthiness and genuineness of the transaction, the onus upon the assessee is discharged. Thus the assessee has discharged its onus. The Assessing Officer has not rebutted any of the submission of the assessee and the documentary evidence in this regard. - Decided against revenue
Issues Involved:
1. Whether the assessee availed bogus loan entries amounting to ?3,35,00,000/-. 2. Whether the Assessing Officer (AO) erred by solely relying on the investigation wing's findings without conducting independent verification. 3. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was correct in deleting the addition made by the AO. Detailed Analysis: 1. Bogus Loan Entries: The primary issue was whether the assessee had availed bogus loan entries totaling ?3,35,00,000/- during the financial year 2011-12 from entities associated with the Bhanwarlal Jain group, which was alleged to be in the business of providing accommodation entries. The AO concluded that these loans were bogus based on the investigation wing's findings following a search and seizure operation on the Bhanwarlal Jain group. 2. Lack of Independent Verification by AO: The assessee argued that the AO had not conducted any independent verification and solely relied on the investigation wing's findings. The assessee provided several pieces of evidence, including PAN details, income tax returns, confirmatory letters, audited financial statements, and bank statements of the creditors, to prove the genuineness of the loans. The AO, however, did not seek any further information or make any additional inquiries. The CIT(A) noted that the AO's approach violated principles of natural justice as the assessee was not confronted with the material relied upon by the AO. 3. Deletion of Addition by CIT(A): The CIT(A) elaborately dealt with the issue and concluded that the assessee had discharged its onus by providing all relevant material to prove the identity, creditworthiness, and genuineness of the transactions. The CIT(A) referred to several case laws to support the observation that the burden of proof had shifted to the Revenue once the assessee provided satisfactory explanations and evidence. The CIT(A) found that the AO did not provide any cogent material to show that the loans were unexplained and failed to make due inquiries. Consequently, the CIT(A) deleted the addition of ?3,35,00,000/-. Judgment: The Tribunal upheld the CIT(A)'s order, noting that the assessee had provided all necessary details and evidence to prove the genuineness of the loans. The AO's failure to conduct any independent inquiry and solely relying on the investigation wing's findings was criticized. The Tribunal emphasized that the AO needs to make due inquiries and cannot make additions based on suspicion without adequate evidence. The appeal by the Revenue was dismissed, and the order of the CIT(A) was upheld. Conclusion: The Tribunal concluded that the assessee had satisfactorily explained the loan transactions, and the AO's addition of ?3,35,00,000/- as unexplained credit was not justified. The appeal by the Revenue was dismissed, and the CIT(A)'s order was upheld.
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