2020 (9) TMI 232 - AT - Income Tax

Addition u/s 68 - allegation that assessee failed to prove the credit worthiness - HELD THAT - For the impugned A.Ys under appeal, transactions with Pabla Leasing and Finance Pvt. Ltd have been questioned by the AO on the ground that the assessee has failed to establish the credit worthiness. We are of the opinion that since the credit worthiness of this company has been accepted in the case of flagship company of the appellant, we do not find any merit in this finding of the lower authorities. On perusal of the confirmation of ledger account of Pabla Leasing and Finance Pvt. Ltd., we find that the loan has been repaid on 19.01.2013, which is much earlier than the date of search, which is 26.08.2015. Statement of Shri Virender Triparti, Managing Director of Pabla Leasing and Finance Pvt. Ltd was recorded under section 131 of the Act on 22.12.2017 and the same is exhibited at pages 109 to 111 of the paper book. There remains no doubt that the assessee has successfully discharged its onus cast upon it by the provisions of section 68 - No merit in the allegation of the lower authorities that Pabla Leasing and Finance Pvt. Ltd is only a paper company providing accommodation entries to the Nimbus India Ltd group of companies. Tribunal in the case of flagship company Nimbus India Limited, and further drawing support from the statement of the Managing Director of Pabla Leasing and Finance Pvt., Ltd, we are of the considered view that the assessee has successfully discharged the onus and, therefore, the additions made u/s 68 deserve to be deleted. - Decided in favour of assessee.

Summary

Issues:
- Disputed loan from M/s Pabla Leasing and Finance Pvt. Ltd treated as unexplained cash credit under section 68 of the Act.
- Assessment based on search and seizure operation under section 132 of the Act.
- Failure to prove the capacity of the creditor and credit worthiness of the transaction.
- Comparison with a similar case involving Pabla Leasing and Finance Pvt. Ltd.
- Repayment of the loan before the date of search.
- Statement of the Managing Director of Pabla Leasing and Finance Pvt. Ltd under section 131 of the Act.

Analysis:
1. The appeals were filed against the order of the CIT(A) regarding the loan received from M/s Pabla Leasing and Finance Pvt. Ltd, treated as unexplained cash credit under section 68 of the Act for A.Ys 2013-14 and 2014-15.
2. A search and seizure operation under section 132 of the Act was conducted on the premises of the assessee, revealing the business activities of the group involved in the sale of flats in specific areas.
3. The Assessing Officer, based on an enquiry report, concluded that Pabla Leasing and Finance Pvt. Ltd provided accommodation entries to the group of companies, leading to the addition under section 68 of the Act.
4. The Tribunal's decision in a similar case involving Pabla Leasing and Finance Pvt. Ltd highlighted the importance of proving identity, genuineness, and credit worthiness, which was accepted in that case.
5. The loan in question was repaid before the search date, indicating a legitimate transaction timeline.
6. The statement of the Managing Director of Pabla Leasing and Finance Pvt. Ltd confirmed the loan transactions with specific details on the source of funds and repayment, supporting the legitimacy of the transactions.
7. The Tribunal, considering the evidence and the previous decision, concluded that the assessee had successfully proven the legitimacy of the transactions, leading to the deletion of the additions under section 68 of the Act in favor of the assessee.