2018 (10) TMI 1681 - AT - Income Tax

Appeal dismissed as Tribunal upholds CIT(A) order on Section 68 additions

A.C.I.T., Circle – 25 (2), Mumbai Versus M/s. H.K. Pujara Builders 11

The Tribunal upheld the order of the Ld. CIT(A) in the case concerning the deletion of additions made under Section 68 of the Income Tax Act. It found ... Addition u/s. 68 - unexplained cash credit - HELD THAT:- Assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68. Even the assessee requested AO for issue of notices u/s. 133(6) to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. All the loans were taken through banking channels and the repayments for the same was also made through banking channels. AO ignored the documentary evidences submitted by the assessee and has exclusively relied on statements of third party in making the addition. In spite of request by the assessee the AO did not provide any cross-examination of the parties who have made the submissions. All these aspects have been considered by the CIT(A) and deleted the addition - Decided in favour of assessee. Issues Involved:1. Deletion of addition made under Section 68 of the Income Tax Act.Detailed Analysis:Issue 1: Deletion of Addition Made Under Section 68 of the Income Tax ActBackground:The Revenue filed an appeal against the order of the Learned Commissioner of Income Tax (Appeals)-37, Mumbai (Ld. CIT(A)) dated 15.11.2016 for the Assessment Year 2007-08. The sole issue in the appeal was the deletion of the addition made under Section 68 of the Income Tax Act.Facts:The Assessing Officer (A.O.) observed that the assessee received unsecured loans of Rs. 50 lakhs from M/s. J.P.K. Trading (I) (P.) Ltd. and Rs. 77.50 lakhs from M/s. New Plant Trading Co. (P.) Ltd. A search and seizure operation in the case of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group revealed that these entities were involved in providing accommodation entries to various companies. Despite the assessee providing bank statements, Income Tax Returns, loan confirmations, and other evidence, the A.O. relied on the statements of Shri Praveen Kumar Jain and Shri Bhanwarlal Jain to conclude that the transactions were non-genuine and added the amounts under Section 68 as unexplained credits.Arguments:- Revenue's Argument: The transactions between the assessee and the companies operated by Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group were mere paper transactions and non-genuine. The A.O. rightly treated the transactions as accommodation entries and made the addition under Section 68.- Assessee's Argument: The assessee provided sufficient evidence to prove the genuineness of the transactions, including loan confirmations, bank statements, and Income Tax Returns of the lenders. The statements by Shri Praveen Kumar Jain and Shri Bhanwarlal Jain were retracted, and the A.O. did not provide cross-examination of these individuals. Previous Tribunal decisions considered the lenders as genuine, supporting the assessee's claim.Tribunal's Analysis:The Tribunal noted that the A.O. relied solely on the statements of third parties without conducting an independent inquiry or providing corroborative evidence. The assessee had discharged the initial onus of proving the genuineness of the transactions by providing comprehensive evidence. The burden then shifted to the Revenue to disprove the assessee's claim, which it failed to do. The transactions were conducted through banking channels, and the A.O. ignored the documentary evidence provided by the assessee.Ld. CIT(A)'s Observations:The Ld. CIT(A) observed that the A.O. did not conduct any independent inquiry and ignored the documentary evidence submitted by the assessee. The A.O. failed to point out any defects in the evidence provided. The Ld. CIT(A) emphasized that merely relying on the statements of third parties without corroborative evidence does not justify treating the transactions as accommodation entries. The Ld. CIT(A) referred to various judicial precedents supporting the assessee's position and concluded that the nature and source of credit were satisfactorily explained.Conclusion:The Tribunal upheld the order of the Ld. CIT(A), finding no infirmity in the deletion of the addition made under Section 68. The Tribunal emphasized that the Revenue failed to disprove the genuineness of the transactions and the creditworthiness of the creditors. The appeal of the Revenue was dismissed.Order:The appeal of the Revenue was dismissed, and the order was pronounced in the open court on the 31st October, 2018.