2014 (5) TMI 1222 - AT - Income Tax

Tax Tribunal upholds deletion of Rs. 15,00,000 addition under Section 68 IT Act. Assessee's evidence deemed sufficient.

The ITO, Ward-11 (4), Ahmedabad Versus Babulal Ramprasad Agarwal HUF

The ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 15,00,000 under Section 68 of the IT Act. The court found that the assessee had ... Addition u/s 68 - Unsecured loan - onus to prove - addition on statement of one Sri Ramdinesh Ranjit Sharma. HELD THAT:- in the case of Amit Kumar S. Agarwal [2013 (1) TMI 1041 - ITAT AHMEDABAD] almost on identical situation the provisions of Section 68 were invoked and the AO had made the addition. In that case as well the proceedings were initiated on the basis of the statement of Sri Ramdinesh Ranjit Sharma. That statement was recorded consequences upon a survey conducted on Sri Lalit S. Sharma, as discussed by the AO in the appeal in hand. In short, we can conclude that on identical facts and circumstances when a view has been taken in assessee’s favour then there is no occasion to depart from that view but to follow the same. Moreover, we have noted that the assessee has duly discharged his primary onus of placing on record the confirmation letters, PAN details, cheque details, bank transactions through which the loans taken. The assessee has informed that those parties were existing tax payers. Importantly, it has also been informed that the interest was paid to those parties by the assessee and the TDS was deducted. Further the loans were repaid in a subsequent years through City Bank transaction. Under the totality of the facts and circumstances of the case, we therefore uphold the view of learned CIT(A) and dismiss this ground of the Revenue. Issues Involved:1. Deletion of the addition of Rs. 15,00,000/- made by the AO on account of unsecured loan under Section 68 of the IT Act.2. The validity of the statement of Shri Ramdinesh Sharma recorded during the survey proceedings.3. The corroborative evidence found during the survey.4. The opportunity for cross-examination of Shri Ramdinesh Sharma.Issue-wise Detailed Analysis:1. Deletion of the Addition of Rs. 15,00,000/- under Section 68 of the IT Act:The primary issue in this case revolves around the addition of Rs. 15,00,000/- made by the AO under Section 68 of the IT Act, which pertains to unsecured loans. The AO noted that the assessee had shown unsecured loans from five different parties and demanded confirmation and relevant documents. Despite the assessee providing PAN details, bank statements, and confirmation letters, the AO was not convinced and added the loan amount back to the income, citing that the loans were accommodation entries managed by Shri Ramdinesh Sharma.The CIT(A) deleted the addition, reasoning that the assessee had discharged the primary onus by providing necessary confirmations, PAN numbers, and evidence of transactions through banking channels. The CIT(A) also noted that the AO failed to provide the opportunity for cross-examination of Shri Ramdinesh Sharma, whose statement was heavily relied upon by the AO.2. Validity of the Statement of Shri Ramdinesh Sharma:The statement of Shri Ramdinesh Sharma, recorded during the survey, was a pivotal piece of evidence for the AO. Shri Sharma admitted to managing the business affairs and bank accounts of the parties from whom the assessee had taken the unsecured loan, and he claimed to have provided accommodation entries. However, the CIT(A) and later the ITAT found that this statement alone was insufficient to justify the addition under Section 68. It was emphasized that the statement was recorded during a survey and not during any proceedings against the assessee, thus lacking evidentiary value as per established legal precedents.3. Corroborative Evidence Found During the Survey:The AO also relied on corroborative evidence found during the survey, which included impounded materials showing the assessee's name as a recipient of loans from the parties managed by Shri Ramdinesh Sharma. The CIT(A) and ITAT, however, found that the assessee had provided substantial evidence to establish the genuineness of the loans, including confirmation letters, PAN details, and evidence of repayment through banking channels. The ITAT noted that the assessee had paid interest on these loans and deducted TDS, further supporting the genuineness of the transactions.4. Opportunity for Cross-examination of Shri Ramdinesh Sharma:A significant procedural lapse noted by the CIT(A) was the AO's failure to produce Shri Ramdinesh Sharma for cross-examination, despite the assessee's request. The ITAT upheld this view, emphasizing that the assessee was denied a fair opportunity to challenge the statement that formed the basis of the addition. The ITAT referenced a Supreme Court decision, which underscored the necessity of granting an opportunity for cross-examination to ensure a fair assessment process.Conclusion:The ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 15,00,000/-, agreeing that the assessee had sufficiently discharged the primary onus under Section 68 by providing necessary confirmations and evidence. The reliance on the statement of Shri Ramdinesh Sharma, recorded during a survey, was deemed insufficient without corroborative evidence directly implicating the assessee. The procedural lapse in denying the assessee the opportunity for cross-examination further weakened the AO's case. Consequently, the appeal of the Revenue was dismissed, and the deletion of the addition was confirmed.