2024 (9) TMI 730 - AT - Income Tax

Unsecured loans taken - unexplained u/s 68 - addition of interest paid on such unsecured loans - HELD THAT - On perusal of the aforementioned statement showed that in the list of companies given the accommodation entries names of Duke Business Pvt. Ltd, Casper Enterprises Pvt. Ltd and Ryan International are mentioned which means that as per the order of the coordinate bench it has been established that these companies were providing accommodation entries through unsecured loans claimed to have been borrowed from these companies by the assessee during the year under consideration as unexplained and rightly added u/s 68. We have no hesitation in confirming the addition made u/s 68 for the captioned Assessment years. The contention that the loans have been re-paid during the year under consideration therefore the set off of the same should also be given to the assessee does not hold any water as it has been established that the impugned loans were nothing but accommodation entries and the repayment is also nothing but return of accommodation entries therefore, the money which has been brought in the garb of unsecured loan is nothing but the unaccounted money of the assessee and the repayment of the same does not make any sense. Addition of interest paid on such loans - Since the loan amount has been treated as unaccounted money of the assessee for payment of interest of such loan amount claimed as unexplained and added by the AO is also confirmed. Decided against assessee.

Summary

Issues:
Appeals against orders related to unsecured loans treated as unexplained under section 68 of the Act and addition of interest paid on such loans.

Analysis:
The appeals involved three separate orders dated 25.07.2023 pertaining to Assessment Years 2010-11, 2011-12, and 2012-13. The common issue in all appeals was the treatment of unsecured loans as unexplained under section 68 of the Act and the addition of interest paid on these loans. The loans in question were taken from different entities in each assessment year, namely Ryan International, Casper Enterprises Pvt. Ltd, and Duke Business Pvt Ltd. The basis for treating these loans as unexplained was information received from DGIT (Investigation), Mumbai, indicating that the entities providing the loans were involved in providing accommodation entries through paper entities. The statement of Shri Pravin Kumar Jain confirmed the operation of a network of paper companies for accommodation entries.

The coordinate bench had previously considered the statement of Shri Pravin Kumar Jain in other cases, highlighting the lack of genuine business activities in the companies providing the loans. The bench concluded that the loans were essentially accommodation entries, leading to unaccounted commission earnings. The orders passed by the Assessing Officer and Ld.CIT(A) were deemed legally valid, and the appeals challenging these orders were dismissed due to the lack of evidence presented by the assessee.

The tribunal confirmed the additions under section 68 of the Act for all assessment years, rejecting the argument that loan repayments should offset the additions. The repayment of the loans was considered a return of accommodation entries, indicating the presence of unaccounted money. Therefore, the additions of both the unexplained loan amounts and the interest paid on them were upheld based on the findings of the coordinate bench.

In conclusion, the tribunal dismissed the appeals of the assessee, affirming the additions related to unsecured loans and interest payments for the assessment years in question.