2024 (1) TMI 1189 - AT - Income Tax

Addition u/s 68 - accommodation entries receipts - onus to prove - notices u/s 133 (6) issued to the companies but assessee could not produce the Directors/Principal Officers of the said companies - information was received by AO from the Investigation Wing of the Department that the assessee is beneficiary of taking accommodation entries in the garb of share application money/share capital from entry providers - HELD THAT - All the documentary evidences were duly provided to the AO. AO did not offer any examination of these documents and did not mention even a single adverse point in the financials of these companies. His whole exercise was based upon his claim that section 133 (6) notice was returned unserved. It was not at all the case that these companies were not having PAN or they were not filing income-tax returns. CIT (A) has mentioned that AO has issued summons u/s 131 of the Act to the Directors of the company but no such mention was there in the order of the AO. From the examination of the financials, balance sheet and bank statement, it is noted that transactions were through banking channel and these companies have sufficient financial reserves to provide the credits/ loans to the assessee company. Thus when all the details were provided and no adverse feature was noted therein, assessee has discharged the onus cast upon it. The authorities below have based these adverse orders only by making general observation and repeating that assessee did not produce the directors of these companies. Thus as assessee has discharged its onus, hence orders of authorities below are set aside. Since addition under section 68 of the Act has been directed to be deleted, the addition for commission does not survive and the same is also directed to be deleted - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 1,45,00,000/- under Section 68 of the Income Tax Act, 1961.
2. Addition of Rs. 4,35,000/- under Section 69C of the Income Tax Act, 1961.

Summary:

Issue 1: Addition under Section 68 of the Income Tax Act, 1961
The assessee filed a return of income declaring a loss of Rs. 27,360/-. The Assessing Officer (AO) received information from the Investigation Wing that the assessee had taken accommodation entries of Rs. 35,00,000/- from entry providers in the names of two entities and Rs. 1,10,00,000/- from four other entities. The AO asked the assessee to furnish details of these transactions. Despite the assessee filing all relevant documents, the AO was not convinced and treated the transactions as liable to be added under Section 68 of the Act due to the non-production of Directors/Principal Officers of the said companies. The AO added the entire amount of Rs. 1,45,00,000/- to the income of the assessee under Section 68.

Upon appeal, the CIT (A) confirmed the AO's order, observing that the assessee failed to satisfy the three conditions of identity, creditworthiness, and genuineness of transactions. The CIT (A) noted that no reply was received in response to Section 133 (6) notices and that the assessee did not comply with the request to produce the Directors for examination.

The Tribunal found that the assessee had submitted all necessary documents, including balance sheets and financial statements, and that no adverse inference was noted by the authorities. The Tribunal held that the assessee had discharged its onus and that the addition under Section 68 was based on general observations without specific adverse findings. The Tribunal referred to several case laws, including Pr. CIT vs. Laxman Industrial Resources Ltd. and CIT vs. Orchid Industries Pvt. Ltd., which supported the assessee's position.

Issue 2: Addition under Section 69C of the Income Tax Act, 1961
The AO also added Rs. 4,35,000/- under Section 69C of the Act, representing a 3% commission for arranging bogus transactions. Since the Tribunal directed the deletion of the addition under Section 68, the addition for commission under Section 69C also did not survive and was directed to be deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the orders of the authorities below and directing the deletion of the additions under Sections 68 and 69C of the Income Tax Act, 1961. The order was pronounced in the open court on January 25, 2024.