2017 (6) TMI 63 - AT - Income Tax

Tribunal rules in favor of assessee, deletes addition under Section 68

The Tribunal allowed both appeals, deleting the addition made under Section 68 of the Income Tax Act, 1961, in favor of the assessee. The Tribunal found ... Addition made u/s 68 - proof of identity of the lender, capacity and genuineness of the loan - Held that:- It is noted that addition has been made in the case of assessee broadly on the basis of statement of Shri Harish Sharma, which was retracted by him, supported by an affidavit. However, the assessee has fulfilled the conditions required u/s 68 of the Act. Nothing prevented the Ld. Assessing Officer to record the statement of shares subscribers or other persons and confront the assessee, if something is found against the assessee. The present assessee was never examined by the Assessing Officer with respect to the statement tendered by Shri Harish Sharma or Shri Shirish Shah. The present assessee was never provided the statement of Shri Shirish Shah. Neither any query was raised from these persons with respect to the present assessee. Even it is presumed that M/s Encee Securities Pvt. Ltd. got the money from certain share applicants/some persons, how addition can be made u/s 68 in the hands of the present assessee. It seems that addition has been made of the same amount in difference hands like substantive addition in the hands of M/s Encee Securities Pvt. Ltd. and on protective basis in the hands of the present assessee, which cannot be said to be justified. Totality of facts and the circumstances clearly indicates that at least the addition in the hands of the present assessee cannot survive. Even no question was put to Shri Harish Sharma against Shri Shirish Shah, while recording the statement. Thus, considering the totality of facts, and the material available on record, we don’t find any justification to make the addition u/s 68 of the Act in the hands of the present assessee, therefore, the appeal of the assessee is allowed. Issues Involved:1. Confirmation of addition made under Section 68 of the Income Tax Act, 1961.2. Examination of the genuineness of the loan received from Encee Securities Pvt. Ltd.3. Validity of the statement recorded under duress and its retraction.4. Double addition of the same amount in different hands.Issue-wise Detailed Analysis:1. Confirmation of Addition Made Under Section 68 of the Income Tax Act, 1961:The primary issue was the confirmation of the addition of Rs. 1,77,00,000/- under Section 68 of the Income Tax Act, 1961, which pertains to unexplained cash credits. The assessee argued that the amount was an unsecured loan received from Encee Securities Pvt. Ltd. and not share application money. The assessee submitted loan confirmations, bank statements, and returns of Encee Securities Pvt. Ltd. to prove the genuineness of the loan. The Tribunal noted that the assessee had discharged the onus of proving the identity, capacity, and genuineness of the transaction, fulfilling the requirements under Section 68 of the Act.2. Examination of the Genuineness of the Loan Received from Encee Securities Pvt. Ltd.:The Tribunal examined the genuineness of the loan transaction. The assessee provided audited accounts, loan confirmations, and returns of Encee Securities Pvt. Ltd., which were also available with the Assessing Officer and the Commissioner of Income Tax (Appeal). The Tribunal found that Encee Securities Pvt. Ltd. had confirmed giving the loan to the assessee and that the loan was still live. The Tribunal concluded that the addition could not be made in the hands of the assessee since the loan was genuine and the assessee was not expected to prove the source of the source.3. Validity of the Statement Recorded Under Duress and Its Retraction:The Tribunal analyzed the statement of Shri Harish Sharma, recorded by the Assessing Officer, which was later retracted by him through an affidavit. The statement was claimed to have been recorded under duress and threat. The Tribunal found that the retraction was made within a reasonable time and supported by an affidavit, casting doubt on the authenticity of the statement. Consequently, the Tribunal held that the statement could not be the sole basis for making the addition in the hands of the assessee.4. Double Addition of the Same Amount in Different Hands:The Tribunal observed that the addition of the same amount was made in the hands of both the assessee and Encee Securities Pvt. Ltd., leading to a case of double addition. The Tribunal emphasized that the department must choose in whose hands the addition should be made. Since the loan was received from Encee Securities Pvt. Ltd., the Tribunal concluded that the addition, if any, should be made in the hands of Encee Securities Pvt. Ltd. and not the assessee. The Tribunal reiterated that the assessee had no role in the genuineness of the share application money and merely received the loan.Conclusion:The Tribunal allowed both appeals of the assessee, deleting the addition made under Section 68 of the Income Tax Act, 1961, in both cases. The Tribunal pronounced the order in the open court in the presence of representatives from both sides on 11/04/2017.