2020 (11) TMI 644 - AT - Income Tax

Addition u/s 68 - Unexplained loans taken - notice under section 133(6) not responded by 51 parties - HELD THAT - Revenue has not brought on record anything new material in support of the findings of assessing officer. From the record, it is clear that the loan was not taken during this year and taken during earlier AY and through banking channel. Therefore, we are inclined to accept the findings of the CIT(A) and accordingly ground raised by the revenue are dismissed. With regard to other loans taken by the assessee, we notice from the record that assessee has taken loan during the year and it has submitted the confirmation letters from all the parties during the assessment proceedings, except 2 creditors - AO has not verified the confirmation letters submitted during assessment proceedings and had not mentioned anything about it in assessment order - Further assessing officer has disallowed interest paid by the assessee during the year which includes interest on the loan taken during the year and balance which is interest on loan taken during previous assessment years. We notice that assessee has deducted TDS on the above said interest and remitted the same. Since the assessee has paid the interest after deducting due tax and also assessee has submitted the identity creditworthiness and genuineness of the transaction before assessing officer. This fact was appreciated by the learned CIT(A) and also before us, no new document or any material brought on record by any authority in contrary to the findings of learned CIT(A). Therefore, appeal filed by the revenue is dismissed.

Summary

Issues Involved:
1. Validity of the loan transaction from M/s Samir Enterprises.
2. Disallowance of loan and interest claimed by the assessee.
3. Procedural compliance and timelines for pronouncement of the order.

Issue-wise Detailed Analysis:

1. Validity of the Loan Transaction from M/s Samir Enterprises:
The revenue challenged the genuineness of the loan transaction between the assessee and M/s Samir Enterprises, alleging it to be an accommodation entry. The Assessing Officer (AO) relied on the assessment order of M/s Samir Enterprises, which declared the entity as bogus and not engaged in any business activity. Despite the assessee’s submission of relevant documents and explanations, the AO proceeded with the addition under section 68 of the Income Tax Act, 1961, on a protective basis. The Commissioner of Income Tax (Appeals) [CIT(A)] observed that the AO did not conduct any independent enquiry and solely relied on the assessment order of M/s Samir Enterprises. The CIT(A) accepted the assessee’s evidence, noting that the AO failed to point out any defects in the documentation provided by the assessee. The CIT(A) concluded that without corroborative evidence, the loan transaction could not be deemed accommodation entries. The tribunal upheld the CIT(A)’s findings, noting that the loan was taken in an earlier assessment year through banking channels, thus dismissing the revenue's ground.

2. Disallowance of Loan and Interest Claimed by the Assessee:
The AO disallowed the principal loan amount of ?3,72,42,936 and interest of ?1,44,79,733, citing non-response from several parties to notices issued under section 133(6). The CIT(A) found that the assessee had submitted loan confirmations and relevant details, establishing the identity and creditworthiness of the creditors. The transactions were conducted through banking channels, and tax was deducted at source on the interest paid. The CIT(A) observed that the AO did not address the merits of the submissions made by the assessee and dismissed the AO's findings. The tribunal agreed with the CIT(A), noting that the assessee had provided sufficient documentation and the revenue did not present any new material to counter the CIT(A)’s findings. Consequently, the tribunal dismissed the revenue’s grounds on this issue as well.

3. Procedural Compliance and Timelines for Pronouncement of the Order:
The tribunal addressed the delay in pronouncing the order beyond the 90-day period due to the COVID-19 pandemic and the resultant lockdown. Citing a precedent from the case of JSW Ltd, the tribunal noted that the lockdown constituted an "extraordinary circumstance," justifying the delay. The tribunal emphasized the need to consider ground realities and the unprecedented disruption caused by the pandemic. It referenced guidelines and orders from higher courts, including the Supreme Court and Bombay High Court, which extended procedural timelines due to the lockdown. The tribunal concluded that the delay was justified and proceeded to pronounce the order beyond the 90-day period.

Conclusion:
The tribunal dismissed the revenue's appeal, upholding the CIT(A)’s order that the loan transactions were genuine and the disallowance of loan and interest was not warranted. The procedural delay in pronouncing the order was deemed justified due to the COVID-19 lockdown. The tribunal’s decision was pronounced in accordance with Rule 34(5) of the ITAT Rules.