2018 (8) TMI 1776 - AT - Income Tax

Revenue's Appeal Dismissed on Accommodation Entries & Interest - CIT(A) Upholds Assessee's Position

ACIT- 19 (3), Mumbai Versus Rajesh M Shah (HUF)

ACIT- 19 (3), Mumbai Versus Rajesh M Shah (HUF) - TMI Issues Involved:1. Accommodation entries genuineness.2. Interest on loans through accommodation entries.3. Consideration of Supreme Court decisions.4. Restoration of AO's order.Detailed Analysis:Issue 1: Accommodation Entries GenuinenessThe revenue challenged the Ld. CIT(A)'s decision, asserting that the accommodation entries in the names of Marvin Enterprises, Meenakshi Exports, Meenakshi Diamonds Pvt. Ltd., and Mukti Exports were genuine despite being proven as accommodation entries during a search by the Investigation Wing. The assessee provided comprehensive documentation to prove the genuineness of the loan entries, including PAN details, addresses, income-tax returns, confirmatory letters, audited financial accounts, bank statements, details of interest paid, and TDS deducted and paid. The Ld. CIT(A) concluded that the assessee had satisfactorily discharged the burden of proof, shifting the onus to the AO, who failed to make further inquiries or specify additional required materials. Consequently, the addition of Rs. 3,83,10,000 was deleted.Issue 2: Interest on Loans Through Accommodation EntriesThe revenue also contested the genuineness of the interest on the loans taken through accommodation entries. Since the loans were treated as genuine, the interest debited to the profit and loss account amounting to Rs. 21,30,894 was also considered legitimate. The Ld. CIT(A) deleted the disallowance of interest based on the same facts and legal position.Issue 3: Consideration of Supreme Court DecisionsThe revenue argued that the Ld. CIT(A) erred by not considering the Supreme Court decisions in Roshan Di Hatti vs. CIT, Kale Khan Mohammed Hanif vs. CIT, and Sreelekha Banerjee & Ors vs. CIT. However, the Ld. CIT(A) focused on the evidence provided by the assessee, which satisfactorily explained the loan transactions. The AO's failure to conduct further inquiries or provide additional requirements weakened the revenue's position.Issue 4: Restoration of AO's OrderThe revenue sought to set aside the Ld. CIT(A)'s order and restore the AO's decision. However, the Ld. CIT(A)'s findings were based on thorough documentation and the assessee's satisfactory discharge of the burden of proof. The AO's reliance on inadequate evidence and failure to make further inquiries led to the dismissal of the revenue's grounds.Conclusion:The appeal filed by the revenue was dismissed. The Ld. CIT(A)'s decision to treat the loans and the associated interest as genuine was upheld, as the assessee provided comprehensive evidence, and the AO failed to conduct further necessary inquiries. The revenue's grounds for challenging the Ld. CIT(A)'s order were found to be unsubstantiated, resulting in the dismissal of the appeal.