2019 (4) TMI 692 - AT - Income Tax

Addition u/s 68 - unsecured loans and interest thereon - as alleged assessee failed to prove the identity, creditworthiness and genuineness - CIT-A deleted the addition - HELD THAT - During the course of assessment proceedings upon being called upon by the AO the prove the transactions, the assessee filed the copies of the confirmation, affidavits of the parties, their IT returns, balance sheets and bank statements evidencing all the transactions with the assessee. Even notices issued to these five parties under section 133(6) were duly responded by the lenders with all requisite details evidencing the transactions. CIT(A) considering all these aspects and various judicial decisions came to the conclusion that assessee has proved all the three ingredients as envisaged under section 68 of the Act and deleted the addition by reversing the order of AO. After considering the facts on record vis- -vis the order of the CIT(A), we are of the considered view that in the present case there is no scope for doubting these transactions as assessee has proved beyond doubt the identity of the parties, capacity and creditworthiness of the parties and genuineness of the transactions. - Decided against revenue

Summary

Issues Involved:
1. Deletion of addition of ?63,44,882/- on account of unsecured loans and interest thereon.
2. Proving the identity, creditworthiness, and genuineness of the transactions.

Issue-Wise Detailed Analysis:

1. Deletion of Addition of ?63,44,882/- on Account of Unsecured Loans and Interest Thereon:

The Revenue appealed against the CIT(A)'s order dated 27.02.2017, which deleted the addition of ?63,44,882/- made by the AO. The AO had added this amount as unexplained cash credit under Section 68 of the Income Tax Act, 1961, based on information from the DGIT, Investigation Wing, Mumbai, collected during a search operation on the Bhanwarlal Jain Group. The AO concluded that the loans from five parties were bogus, as these parties were allegedly involved in providing accommodation entries without conducting real business. Despite the assessee's submission of various evidences, including confirmations, IT returns, balance sheets, and bank statements, the AO treated the loans as unexplained cash credits.

2. Proving the Identity, Creditworthiness, and Genuineness of the Transactions:

During the appellate proceedings, the CIT(A) examined the details provided by the assessee, such as loan confirmations, PAN numbers, IT returns, bank statements, and affidavits from the lenders. The CIT(A) referred to the principles laid out in the case of ITO vs. Anant Shelters Pvt. Ltd., which emphasized that the initial burden lies on the assessee to establish the identity, creditworthiness, and genuineness of the transactions. The CIT(A) noted that the assessee had provided sufficient evidence to prove the identity and creditworthiness of the lenders and the genuineness of the transactions.

The CIT(A) observed that the AO had issued notices under Section 133(6) to the lenders, who responded with the required details. However, the AO did not discuss the results of these inquiries in the assessment order. The CIT(A) concluded that the AO's focus on the modus operandi of the Bhanwarlal Jain Group was misplaced, as the AO needed to establish that the transactions of the appellant were not genuine. The CIT(A) also referred to the Bombay High Court's decision in the case of M/s Rushabh Enterprises, which held that loans taken from concerns related to the Bhanwarlal Jain Group should not be doubted if they were made through banking channels and interest was paid with TDS deducted.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had proved beyond doubt the identity, capacity, and creditworthiness of the parties and the genuineness of the transactions. The Tribunal dismissed the Revenue's appeal, affirming that the addition under Section 68 could not be sustained.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that deleted the addition of ?63,44,882/-. The Tribunal agreed that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transactions, and there was no scope for doubting these transactions. The order was pronounced in the open court on 05.02.2019.