2020 (4) TMI 265 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 holding that the unsecured loan claimed by the assessee as bogus accommodation entries - HELD THAT - The assessee has furnished the copies of loan confirmations, copy of PAN Card, copy of income tax returns, acknowledgment for the year ending 31.03.2008, copy of Directors Reports, Auditors Report, Audited Financial statements along with Annexure for the year ending 31.03.2008, copy of bank statement showing receipt and payment of loans, copy of ledger account in the books of appellant and copy of bank statements of the appellant showing the receipts and repayment of loan etc. in respect of the parties from whom, it had obtained loans during the year relevant to the assessment year under consideration. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition of ? 5,00,00,000/- on account of unsecured loans.
2. Consideration of information received from DGIT (Inv.) regarding bogus loans from Shri Pravin Kumar Jain Group.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ? 5,00,00,000/- on Account of Unsecured Loans:

The revenue challenged the deletion of the addition of ? 5,00,00,000/- by the CIT (A), arguing that the assessee could not prove the creditworthiness of the lenders or produce them before the Assessing Officer (AO). The assessee's counsel contended that the issue was already decided in favor of the assessee by the ITAT Mumbai for AY 2007-08, and there was no change in the facts of the present case. The Tribunal noted that the assessee had filed its return declaring a total income of ? 1,84,13,090/-, and the AO initially accepted this. However, based on information from the DIT (Inv.), Mumbai, it was found that the assessee received bogus loan entries from parties controlled by Shri Pravin Kumar Jain. The AO then reopened the case and added ? 5,00,00,000/- under Section 68 of the Income Tax Act, 1961, treating the unsecured loans as bogus.

In the first appeal, the CIT (A) deleted the addition, referencing decisions from other cases where reopening of assessments based on statements from third parties was deemed invalid. The CIT (A) emphasized that Section 68 requires a satisfactory explanation for cash credits, and the Supreme Court has held that the unsatisfactoriness of an explanation does not automatically result in deeming the amount as income. The CIT (A) concluded that the identity, genuineness, and creditworthiness of the lenders were established through PAN, banking transactions, and financial statements. The AO failed to consider these submissions adequately.

The Tribunal upheld the CIT (A)'s decision, noting that the assessee had provided sufficient evidence, including loan confirmations, bank statements, and income tax returns of the lenders. The AO did not conduct any independent enquiry and relied solely on third-party statements without corroborative evidence.

2. Consideration of Information Received from DGIT (Inv.) Regarding Bogus Loans:

The revenue argued that the addition was based on information from the DGIT (Inv.) about bogus loans from Shri Pravin Kumar Jain Group. The Tribunal observed that the AO had reopened the assessment based on this information, but the assessee had provided substantial evidence to prove the genuineness of the transactions. The Tribunal noted that the AO did not provide any cross-examination of the parties who made the statements, despite the assessee's request. The Tribunal emphasized that the burden of proof shifted to the revenue once the assessee discharged its initial onus.

The Tribunal referred to its own decision in the assessee's case for AY 2007-08, where it was held that the AO's reliance on third-party statements without independent enquiry or corroborative evidence was insufficient to disprove the assessee's claims. The Tribunal concluded that the CIT (A)'s order was consistent with its own findings in the previous year, and there was no reason to interfere with the CIT (A)'s decision.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT (A)'s order that deleted the addition of ? 5,00,00,000/-. The Tribunal found that the assessee had satisfactorily explained the nature and source of the unsecured loans, and the AO's reliance on third-party statements without independent enquiry was not justified. The Tribunal's decision was based on the principles established in previous cases and the evidence provided by the assessee.