2019 (2) TMI 895 - AT - Income Tax

Addition u/s 68 - unproved loans shown by the assessee in the light of the lender s admission made u/s. 132(4) that the lending entity was only involved in providing accommodation entries - Held that - As decided in assessee s own case AO had primarily made the additions by believing and relying upon the admission of Bhawarlal Jain by ignoring the fact that nowhere in the statement of Bhawarlal Jain or any of his associates recorded u/s 132(4) of the Act had admitted that any of their concerns had ever given accommodation entries by way of unsecured loans to the assessee. From the documentary records, we also noticed that actually, the assessee had already discharged the onus caste upon him to prove the identity, creditworthiness and genuineness of transactions. Even Ld. CIT(A) had discussed in detail that the documents submitted by the assessee and their co-relation with the onus, which stands discharged by the assessee. But on the contrary, the AO had not brought on record any evidence to controvert or rebut the claim of the assessee and even no findings were recorded by the AO to the effect that the evidences produced by the assessee were untrustworthy or lack credibility. On the repeated request made by the assessee to furnish copies of print outs of date of transactions pertaining to the assessee and relevant to A.Ys.2012-13 and 2013-14. Apart from that the AO was also asked to furnish any other evidence in his possession in regard to the unsecured loans procured by the assessee from various entities of Shri Bhanwarlal Jain Group. But the AO did not supply the same. Apart from that the AO had also failed to provide copy of party-wise ledger account of the assessee containing details of corresponding cash received against loans on various dates and commission charged by Bhanwarlal Jain thereon. Therefore in such circumstances, the AO had no valid basis for treating the unsecured loans as accommodation entries . There is nothing on the record to show that the assessee admitted at any point of time to have procured accommodation entries of loans. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of ?8.75 Crore under Section 68 of the Income Tax Act.
2. Deletion of addition of ?19,05,042/- claimed as interest payment on the unproved loans.
3. Deletion of addition of ?7,15,000/- under Section 69C towards commission payment for obtaining loan entries.

Detailed Analysis:

Issue 1: Deletion of Addition of ?8.75 Crore under Section 68
The primary issue was whether the CIT(A) was justified in deleting the addition of ?8.75 Crore made under Section 68 on account of unproved loans. The assessee had received unsecured loans from various entities, including those belonging to the Bhanwarlal Jain Group, which were alleged to be accommodation entries. The AO added the amount as income, treating the loans as bogus based on the admission by Bhanwarlal Jain that his group provided accommodation entries.

The CIT(A) found that the assessee had discharged the initial burden under Section 68 by proving the identity, creditworthiness, and genuineness of the transactions. The AO failed to provide incriminating material or allow the assessee to cross-examine the witnesses, violating principles of natural justice. The Tribunal upheld the CIT(A)'s decision, stating that the AO did not conduct further inquiries to disprove the evidence provided by the assessee.

Issue 2: Deletion of Addition of ?19,05,042/- Claimed as Interest Payment
The second issue was whether the CIT(A) was justified in deleting the addition of ?19,05,042/- claimed as interest payment on the unproved loans. Since the primary addition of ?8.75 Crore was deleted, the interest disallowance was also liable to be deleted. The Tribunal confirmed the CIT(A)'s order in this regard.

Issue 3: Deletion of Addition of ?7,15,000/- under Section 69C
The third issue concerned the deletion of ?7,15,000/- added under Section 69C towards commission payment for obtaining loan entries. The AO had estimated the commission expenses based on the prevalent business practice. The CIT(A) deleted this addition, and the Tribunal upheld the decision, noting that the addition was an offshoot of the primary addition under Section 68, which had already been deleted.

Conclusion:
The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order to delete the additions made under Sections 68, 69C, and the interest disallowance. The Tribunal emphasized the importance of natural justice, the need for the AO to provide incriminating materials to the assessee, and the necessity of allowing cross-examination of witnesses. The decision was consistent with previous judgments in the assessee's own case for earlier assessment years.