2019 (11) TMI 748 - AT - Income Tax

Validity of reopening of assessment - non-genuine unsecured loans - HELD THAT - The authorities below have simply brushed aside the documents furnished by the assessee, which inter-alia, includes confirmation from the lending parties, copy of bank statement of the assessee, copy of acknowledgement of return of income of lenders, etc. furnished by the assessee during the assessment proceedings. The authorities below have made addition merely on the basis of statement of Bhanwarilal Jain without there being any corroborative evidence. Even the said statement was retracted by Bhanwarlal Jain. In our considered view, the addition on account of unsecured loans from M/s. Navkar Diamond is unsustainable. As regards unsecured loans from M/s. Surya Diam is concerned, the assessee has filed confirmation from the lender, the same is at page-20 of the paper book. The assessee has also filed copy of audited accounts of the said firm at pages 22 to 26 of the paper book. The name of the assessee appears in the books of M/s. Surya Diam in Schedule-D of Balace Sheet as on 31/03/2012 under the head Loans and Advances . We observe that unsecured loans from M/s. Surya Diam is on the same footing as loan from M/s. Rose Impex, the Tribunal has deleted the addition vide order dated 20/04/2018 (supra). The relevant extract of the finding of Tribunal has already been reproduced above. On account of parity of transactions, the finding given by the Co-ordinate bench would mutandis mutatis apply in the present set of transactions as well. The ground No.1 of appeal stands allowed and the findings of CIT(A) on this issue are set-aside.

Summary

Issues Involved:
1. Validity of reopening of assessment.
2. Addition on account of alleged non-genuine unsecured loans from M/s. Navkar Diamond and M/s. Surya Diam.
3. Reliance on the statement of Shri Bhanwarlal Jain.
4. Consideration of documentary evidence provided by the assessee.

Detailed Analysis:

1. Validity of Reopening of Assessment:
The assessee challenged the reopening of the assessment on the grounds that the reasons recorded for reopening were borrowed and not based on the satisfaction of the Assessing Officer (AO). It was argued that similar reasons for reopening were recorded in the assessment year 2010-11, and the Tribunal had allowed the appeal of the assessee on merits for that year. The Tribunal noted that the reassessment proceedings for the assessment year 2012-13 were initiated on the grounds that the assessee had taken accommodation entries on account of unsecured loans from entities of the Bhanwarlal Jain group. However, since the additions on merits were deleted, the issue of reopening became academic and was not adjudicated.

2. Addition on Account of Alleged Non-Genuine Unsecured Loans:
The AO made an addition of ?64,00,000/- on account of alleged non-genuine unsecured loans from M/s. Navkar Diamond and M/s. Surya Diam. The CIT(A) upheld the findings of the AO, confirming the addition by holding that the alleged unsecured loans were not genuine and were accommodation entries. The Tribunal, however, found that the assessee had furnished sufficient documentary evidence, including confirmations from the lenders, bank statements, and copies of income tax returns of the lenders, to prove the genuineness of the loan transactions. The Tribunal observed that the authorities below had not considered these documents and had made the addition merely on the basis of the statement of Bhanwarlal Jain, which had been retracted.

3. Reliance on the Statement of Shri Bhanwarlal Jain:
The addition was primarily based on the statement of Shri Bhanwarlal Jain recorded under sections 132(4) and 131 of the Income Tax Act, 1961. The Tribunal noted that Bhanwarlal Jain had retracted his statement and had filed a retraction affidavit. The Tribunal emphasized that the authorities below had placed undue reliance on the retracted statement without appreciating the documentary evidence furnished by the assessee. The Tribunal held that the addition on account of unsecured loans from M/s. Navkar Diamond and M/s. Surya Diam was unsustainable as it was based solely on the retracted statement without any corroborative evidence.

4. Consideration of Documentary Evidence Provided by the Assessee:
The assessee had provided various documents, including confirmations from the lenders, bank statements evidencing receipt and repayment of loans, copies of income tax returns of the lenders, and audited accounts of the lenders. The Tribunal found that these documents remained unrebutted and demonstrated the genuineness of the loan transactions. Specifically, the Tribunal noted that the loan from M/s. Navkar Diamond was repaid through banking channels in the subsequent assessment year, and the loan from M/s. Surya Diam was reflected in the books of the lender. The Tribunal concluded that the assessee had discharged the burden of proof placed upon it under section 68 of the Act and that the authorities below had erred in making the addition without considering the documentary evidence.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the findings of the CIT(A) and deleting the addition of ?64,00,000/- on account of alleged non-genuine unsecured loans from M/s. Navkar Diamond and M/s. Surya Diam. The Tribunal emphasized the importance of considering documentary evidence and not relying solely on retracted statements. The issue of reopening of assessment was rendered academic and was not adjudicated. The appeal was allowed in the terms aforesaid, and the order was pronounced on 31st October 2019.