2022 (9) TMI 770 - AT - Income Tax

Addition u/s 68 - treating genuine unsecured loans as accommodation entry/unexplained cash credit - Reopening of assessment initiated against assessee - onus to prove - HELD THAT - It is well settled that onus is on the assessee to prove the identity and creditworthiness of the creditor and genuineness of the transaction. In the present case, the very fact that M/s Navkar Diamonds, was owned and controlled by Shri Bhanwarlal Jain and his sons, which are held to be an accommodation entry provider in their own case, cast doubt on the genuineness of the transaction. Further, financial position of M/s Navkar Diamonds, as noted above, also raise doubts about the creditworthiness of the lender. Even during the hearing before us, no evidence has been brought on record to controvert any of the information received from the investigation wing of the income tax department, on the basis of which the reassessment proceedings were initiated in the case of the assessee. We find no infirmity in the impugned order passed by the learned CIT(A). Further, no evidence has been brought on record to show that plea of the assessee, as raised was denied by the Revenue. As a result, grounds No. 1 and 6, raised in assessee‟s appeal, are dismissed.

Issues Involved:
1. Addition of Rs. 25,00,000 under section 68 of the Income Tax Act, 1961.
2. Genuineness, identity, and creditworthiness of the loan transaction.
3. Dependency on the findings of the Investigation Wing, Mumbai.
4. Opportunity for cross-examination of Shri Bhanwarlal Jain.
5. Payment of interest on the loan and TDS compliance.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 25,00,000 under section 68 of the Income Tax Act, 1961:
The primary issue in the appeal revolves around the addition of Rs. 25,00,000 made under section 68 of the Income Tax Act. The Assessing Officer (AO) concluded that the assessee failed to prove the genuineness and creditworthiness of the transaction. The AO noted that M/s Navkar Diamonds did not provide sufficient details except for the bank statement and acknowledgment return, leading to the conclusion that the party was involved in providing accommodation entries. This addition was confirmed by the learned Commissioner of Income Tax (Appeals) [CIT(A)], and the appeal against this addition was dismissed by the Tribunal.

2. Genuineness, Identity, and Creditworthiness of the Loan Transaction:
The AO emphasized that the onus is on the assessee to prove the genuineness, identity, and creditworthiness of the loan transaction. Despite opportunities, the assessee failed to produce M/s Navkar Diamonds or provide complete details such as books of accounts, sale bills, purchase bills, and bank statements. The AO's findings indicated that mere payment through account payee cheques is not sufficient to establish the genuineness of the transactions. The Tribunal upheld this view, noting that the financial position of M/s Navkar Diamonds and its control by Shri Bhanwarlal Jain cast doubts on the transaction's genuineness.

3. Dependency on the Findings of the Investigation Wing, Mumbai:
The reassessment proceedings were initiated based on information from the Investigation Wing regarding the assessee being a beneficiary of accommodation entries provided by companies managed by the Bhanwarlal Jain group. The AO relied on this information and the lack of satisfactory response from M/s Navkar Diamonds to conclude that the loan transaction was not genuine. The Tribunal found no evidence to contradict the information received from the Investigation Wing, thus supporting the AO's reliance on these findings.

4. Opportunity for Cross-Examination of Shri Bhanwarlal Jain:
The assessee contended that the addition was made based on the statement of Shri Bhanwarlal Jain without providing an opportunity for cross-examination. However, the Tribunal noted that the AO had made independent inquiries and issued notices under section 133(6) to M/s Navkar Diamonds. The failure of M/s Navkar Diamonds to provide complete details and the assessee's inability to produce the party or further evidence weakened the assessee's argument. The Tribunal did not find any denial of the assessee's plea for cross-examination by the Revenue.

5. Payment of Interest on the Loan and TDS Compliance:
The assessee argued that the loan was genuine, as interest was paid on it, and TDS was deducted and deposited with the Central Government. However, the Tribunal held that the payment of interest and TDS compliance alone do not establish the genuineness and creditworthiness of the loan transaction. The Tribunal found that the financial position of M/s Navkar Diamonds and its control by the Bhanwarlal Jain group raised doubts about the transaction's authenticity.

Conclusion:
The Tribunal dismissed the appeal by the assessee, upholding the addition of Rs. 25,00,000 under section 68 of the Income Tax Act. The Tribunal found no infirmity in the order passed by the learned CIT(A) and concluded that the assessee failed to prove the genuineness, identity, and creditworthiness of the loan transaction. The Tribunal also noted that the assessee did not provide sufficient evidence to contradict the findings of the Investigation Wing or to support the claim for cross-examination of Shri Bhanwarlal Jain.

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