2019 (2) TMI 718 - AT - Income Tax

Addition u/s. 68 - unexplained cash credit as the assessee failed to prove the identity creditworthiness and genuineness of the said loan - Held that - It is clear that the assessee has discharged its onus. From the balance sheet of the lender it is noted that it has substantial sources including turnover of 182 crores. The lender has also deducted TDS on the loan amount given. Furthermore all the transactions are through banking channel. In these circumstances the case law of M/S. RUSHAB ENTERPRISES VERSUS ASSTT. COMMISSIONER OF INCOME TAX 24(3) MUMBAI AND OTHERS 2015 (5) TMI 81 - BOMBAY HIGH COURT referred by the ld.CIT(A) in his order as reproduced above is fully applicable. The loan in this case satisfies the criteria of loan taken in the regular course of business and the Revenue has not brought on record any cogent evidence to treat the same as bogus. In these circumstances we do not find any infirmity in the order of the ld. CIT(A). - Decided against revenue

Summary

Issues:
Appeal against deletion of addition of unexplained cash credit under section 68 of the Income Tax Act for the assessment year 2013-14.

Analysis:
1. The Revenue appealed against the deletion of an addition of ?1,18,49,567 under section 68 of the Income Tax Act concerning unexplained cash credit. The Revenue contended that the assessee failed to prove the identity, creditworthiness, and genuineness of the loan received.

2. The Revenue argued that the lender, M/s Arihant Exports, was listed as a hawala entry provider linked to Rajendra Jain's group, known for providing accommodation entries of unsecured loans. The Revenue emphasized that the AO's focus on Rajendra Jain's group's modus operandi was justified, and the addition under section 68 was warranted.

3. The ld. CIT(A) observed that the assessee provided documentary evidence, including loan confirmation, PAN of the lender, bank statements, and affidavits, establishing the identity, genuineness, and creditworthiness of the transaction. The lender's creditworthiness was supported by its turnover and TDS compliance, and all transactions were conducted through banking channels.

4. The ld. CIT(A) referenced a similar case decided by the Hon'ble Bombay High Court, emphasizing that loans taken in the regular course of business, with proper documentation and compliance, should not be treated as bogus. The ld. CIT(A) concluded that the nature and source of credit were explained, and the addition under section 68 was unwarranted.

5. The Tribunal upheld the ld. CIT(A)'s decision, noting that the AO's conclusion of the loan transaction being bogus was solely based on the Rajendra Jain group's investigation without independent verification. The Tribunal found that the assessee had fulfilled its burden of proof with detailed documentation and compliance, and the loan was legitimate, as evidenced by the lender's financial standing and TDS deductions.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of ?1,18,49,567 under section 68 of the Income Tax Act for the assessment year 2013-14.