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2023 (3) TMI 512 - AT - Income TaxAddition u/s 68 - unsecured loan received by the assessee - assessee submitted before the assessing officer that the transactions mentioned in the table above are not related to the purchases , but are related to the loans taken from the above said parties and also furnished copies of confirmation letters, copies of income tax return filed by the above said parties, audited balance sheet of the above mentioned parties and copies of the ledger account of the assessee as appearing in the books of the above said parties in order discharge the responsibility placed upon it u/s 68 - HELD THAT - Assessee has furnished all the details required for the purpose of discharging the initial onus placed upon it u/s 68 of the Act. Once the initial onus is placed upon the assessee, then the burden to disprove the same would shift to the shoulders of the assessing officer. We noticed that the AO has issued notices u/s 133(6) of the Act to the above said parties and they have also responded to the notices by furnishing the details that were called for. Though the AO has stated that the inspector of income tax could not find above said parties in the addresses given by them, the details of any of his report was not given to the assessee nor its explanation was called for. Hence no credence could be given to the so called report given by the Inspector. At the end, the AO has only placed reliance on the statements given by Praveen Kumar Jain and two others and those statements were also not confronted with the assessee. CIT(A) has passed a detailed order while deleting the addition made by the AO - Decided against revenue.
Issues Involved:
1. Validity of the addition made under Section 68 of the Income Tax Act. 2. Validity of the reopening of assessment under Section 148 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Validity of the Addition Made under Section 68 of the Income Tax Act: The Revenue challenged the deletion of an addition of Rs. 4.11 crores made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, concerning unsecured loans received by the assessee. The AO's addition was based on information from the Sales Tax Department indicating that the assessee had availed accommodation entries from hawala dealers. The AO issued notices under Section 133(6) to verify the genuineness of the transactions, but the notices were returned unserved. The AO relied on statements from individuals associated with the hawala dealers to conclude that the loans were bogus, leading to the addition under Section 68 and disallowance of interest expenditure. In the appellate proceedings, the learned CIT(A) deleted the addition, noting that the assessee had furnished all necessary documents, including confirmation letters, income tax returns, audited balance sheets, and ledger accounts of the creditors. The CIT(A) observed that the AO did not provide the assessee with an opportunity to cross-examine the individuals whose statements were relied upon, nor did the AO disprove the documents submitted by the assessee. The CIT(A) cited various case laws, emphasizing that the burden of proof shifts to the AO once the assessee has discharged its initial onus under Section 68. The Tribunal upheld the CIT(A)'s decision, noting that the AO's reliance on third-party statements without providing cross-examination opportunities and without corroborative evidence was unjustified. The Tribunal referenced several judicial precedents, including the Supreme Court's rulings, which established that mere suspicion or unsubstantiated statements could not form the basis for additions under Section 68. The Tribunal concluded that the CIT(A) was justified in deleting the addition and disallowance of interest. 2. Validity of the Reopening of Assessment under Section 148 of the Income Tax Act: The AO reopened the assessment under Section 148 based on information from the Sales Tax Department about hawala dealers providing bogus accommodation entries. The assessee was provided with the reasons for reopening and filed objections, which the AO disposed of. During the hearing, the assessee's representative raised legal contentions challenging the validity of the reopening under Rule 27 of the Appellate Tribunal Rules. However, since the Tribunal confirmed the deletion of the addition on merits, it deemed it unnecessary to address the legal contentions regarding the reopening, considering them academic in nature. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of Rs. 4.11 crores and the disallowance of interest expenditure. The Tribunal emphasized that the AO's reliance on unsubstantiated third-party statements and failure to provide cross-examination opportunities rendered the addition under Section 68 unsustainable. The Tribunal did not address the legal contentions regarding the validity of the reopening of the assessment, as the primary issue was resolved on merits.
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