2021 (7) TMI 82 - AT - Income Tax

Addition u/s 68 - unsecured loan - CIT- A deleted the addition - HELD THAT - We find that the assessee has taken unsecured loans which were found to be receipt from bogus entry operators. Findings in the case of search and seizure amply proved that the receipt was from a company which was benami concern of the bogus entry operator. AO has rejected the documents submitted by the assessee in support of the claim of the genuineness of the loan in view of the extensive findings in the case of search and seizure operation. Finding of the AO inter alia was that what is apparent is not correct and in substance the transaction is bogus. In the present case as we have noted above there is no elaborate exercised by CIT(A) to examine as noted above, rather learned CIT(A) has simply accepted papers submitted by assessee without any comment about the examination thereof. It is settled law that powers of learned CIT(A) are co-terminus with that of the AO. If Assessing Officer had not done some further examination required it is incumbent upon learned CIT(A) to consider that himself. As in the case Shri Kapurchand Shrimal vs.CIT 1981 (8) TMI 2 - SUPREME COURT where with reference to first appellate authority s order it was observed that it is the duty of the appellate authority to correct the errors in the orders of the authority below. In this view of the matter, in our considered opinion order of learned CIT(A) is not at all sustainable. - Revenue s appeal is allowed for statistical purposes.

Issues Involved:
1. Deletion of addition of ?1,50,00,000/- made under Section 68 of the Income Tax Act, 1961 on account of unsecured loan.
2. Deletion of addition of ?1,11,167/- on account of interest expenditure paid on bogus unsecured loan.
3. Deletion of addition of ?2,55,000/- on account of commission for the sham transaction.

Issue-Wise Detailed Analysis:

1. Deletion of Addition of ?1,50,00,000/- Under Section 68:
The Assessing Officer (AO) received information that the assessee had obtained an accommodation entry of ?1,50,00,000/- from M/s Prabhav Industries Ltd., a company operated by Shirish Chandrakant Shah, a known bogus entry operator. The AO concluded that the identity, creditworthiness, and genuineness of the transaction were not established. The AO relied on various judicial pronouncements to support the addition under Section 68, asserting that mere routing of funds through banking channels does not establish genuineness.

The assessee argued that the loan was genuine, supported by documents such as loan confirmation, bank statements, certificate of incorporation, audited accounts, and TDS returns. The CIT(A) deleted the addition, relying on case laws related to share capital and share premium, holding that the identity, creditworthiness, and genuineness of the transaction were established.

However, the Tribunal found that the CIT(A) did not adequately address the AO's findings or the relevant case laws cited. The Tribunal noted that the AO's findings from the search and seizure operation indicated that the transaction was not genuine. The Tribunal remitted the issue back to the CIT(A) for a fresh examination, emphasizing the need to consider all aspects and the AO's observations.

2. Deletion of Addition of ?1,11,167/- on Account of Interest Expenditure:
The AO disallowed the interest expenditure of ?1,11,167/- corresponding to the bogus unsecured loan of ?1,50,00,000/-. The CIT(A) deleted this addition, following the same rationale as for the principal amount, relying on the genuineness of the loan transaction.

The Tribunal, however, noted that the CIT(A) did not address the AO's findings or the judicial precedents cited. Given the remand of the principal loan issue, the Tribunal also directed the CIT(A) to re-examine the interest expenditure disallowance in light of the fresh examination of the loan's genuineness.

3. Deletion of Addition of ?2,55,000/- on Account of Commission:
The AO disallowed a commission payment of ?2,55,000/- (1.5% of ?1,50,00,000/-), asserting it was related to the sham transaction of the unsecured loan. The CIT(A) deleted this addition, again relying on the genuineness of the loan transaction.

The Tribunal found that the CIT(A) did not adequately address the AO's detailed findings and the judicial precedents. As with the other issues, the Tribunal remitted this issue back to the CIT(A) for a fresh examination, emphasizing the need to consider all relevant aspects and the AO's observations.

Conclusion:
The Tribunal found that the CIT(A) did not adequately address the AO's detailed findings or the relevant judicial precedents. The Tribunal remitted all issues back to the CIT(A) for a fresh examination, directing the CIT(A) to consider all aspects, including the AO's observations and the judicial precedents cited. The Tribunal emphasized that the CIT(A) should provide a detailed and reasoned order after re-examining the issues. The appeal by the Revenue was allowed for statistical purposes.

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