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2021 (1) TMI 941 - AT - Income TaxAdditions u/s 68 - unsecured loan from the Director - HELD THAT - Since the assessee has only submitted bank statement and return of income of the Director AO came to conclusion that assessee has not proved identity, credit worthiness and genuineness of the transaction. AO himself observed that this unsecured loan is from director of the company and all the transactions are through banking channel. Therefore, identity and credit worthiness is already proved considering the fact that these transactions were carried out throughout the year and it is accepted fact that Mr. Vivek Surana is director of the assessee s company. Genuineness of the transaction, there is no bar in the I. T. Act that assessee cannot deal or take unsecured loan from the director. Disallowance u/s 68 is far fetched and the loan transaction with Director cannot be termed as non-genuine. Therefore, we are inclined to accept the findings of Ld. CIT(A). Accordingly, ground no. 1 is dismissed. Disallowance of trade creditors - assessee could not bring them to AO in person - HELD THAT - We notice that these are trade creditors and also two directors accounts are involved. We considered the findings of the Ld CIT(A) carefully and found that trade creditors M/s Divya Jewels, M/s Jewel Diamond and M/s Kingstar has no business transaction during this assessment year and these are outstanding balances of previous assessment year. Since these are transactions of earlier AY and its settlements were made in the subsequent AY, in our view there is no scope for disallowance u/s 68. Therefore, we are inclined to accept the findings of Ld CIT(A). With regard to M/s Renisha Impex and Varun Gems, it is noticed that these parties are having regular business transactions and without any findings on transactions with them as bogus or accommodation entries, there is no scope for AO to disallow these transactions. Therefore, we are inclined to accept the findings of Ld CIT(A). With regard Mr Girish Agarwal and Poonam Agarwal, these are directors and their accounts shows regular salary payments and tax deductions. Since these are directors, there is issue of identity and genuineness issues. Accordingly, we are inclined to accept the findings of Ld CIT(A) and accordingly grounds raised by revenue is dismissed. Bogus purchases - There is no findings by the AO that these are bogus transaction or findings from any other external agencies that these party is involved in providing accommodation entries to assessee. It is only presumption made by the AO simply because Kalash Enterprises is associated with the Rajendra Jain Group. Unless there is specific finding that these are bogus entries, AO cannot presume and disallow the same. Accordingly, we are inclined to accept the findings of Ld CIT(A). Accordingly, Ground raised by the revenue is dismissed. Appeal filed by the revenue is dismissed.
Issues Involved:
1. Unexplained Cash Credit from Director. 2. Unexplained Cash Credit from Various Parties. 3. Bogus Purchases. Issue-wise Detailed Analysis: 1. Unexplained Cash Credit from Director: The AO observed that the assessee took an unsecured loan from its director, Mr. Vivek Surana, but failed to provide sufficient documents to prove the genuineness of the transaction. The AO treated the loan as unexplained credit under Section 68 of the I.T. Act due to the lack of a balance sheet and confirmation from the director. However, the Ld. CIT(A) found that the assessee had submitted the bank statement and ITR, which satisfied the identity, creditworthiness, and genuineness of the transaction. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the AO's conclusion was incorrect as the identity and creditworthiness were already proved and there was no bar in the I.T. Act against taking unsecured loans from directors. 2. Unexplained Cash Credit from Various Parties: The AO treated the transactions with seven trade creditors as not genuine since most of the parties were untraceable and notices issued under Section 133(6) were not responded to. The Ld. CIT(A) found that the transactions with M/s Divya Jewels, M/s Jewel Diamond, and M/s Kingstar were from previous assessment years and were repaid in AY 2015-16. For M/s Renisha Impex Pvt. Ltd. and Varun Gems, there were regular business transactions, and the AO did not provide evidence to prove these transactions as bogus. The Tribunal agreed with the Ld. CIT(A), stating that the AO failed to substantiate the grounds for the addition and did not examine whether the liabilities ceased to exist. Thus, the addition under Section 68 was not sustained. 3. Bogus Purchases: The AO disallowed 5% of the purchase value from Kalash Enterprises, part of the Rajendra Jain group, suspected of providing accommodation entries. The Ld. CIT(A) noted that the AO made the addition based on suspicion without concrete evidence. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the AO failed to prove the transactions as bogus or that Rajendra Jain made any statement regarding accommodation entries to the assessee. The payment was made through account payee cheques and recorded in regular books of account, and the AO did not reject the assessee's books of accounts. Thus, the addition made on suspicion was not sustained. Conclusion: The Tribunal dismissed the revenue's appeal, agreeing with the Ld. CIT(A)'s findings on all grounds. The Tribunal emphasized the importance of concrete evidence over mere suspicion in making additions under Sections 68 and 69C of the I.T. Act. The order was pronounced beyond the usual 90 days due to the extraordinary circumstances caused by the COVID-19 lockdown, as explained in the Tribunal's detailed reasoning.
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