2021 (7) TMI 488 - AT - Income Tax

Tribunal Upholds Deletion of Additions under Income Tax Act

The Tribunal upheld the deletion of additions made under Section 68 of the Income Tax Act and the consequential disallowance of interest. The assessee ... Addition u/s. 68 - bogus loans obtained by the assessee and consequential disallowance of interest thereon on such loans - CIT-A deleted the addition - HELD THAT:- As decided in own case Tribunal considering various materials placed on record held that the assessee has discharged initial burden by filing various documents to prove identity, genuineness and creditworthiness of the parties. The Tribunal held that the Assessing Officer was erred in making addition towards unexplained cash credits u/s. 68 of the Act and deleted the addition including the disallowance of consequential interest thereon. We do not find any good reason to interfere and reverse the findings of the Ld.CIT(A), especially when the facts being identical to the A.Y. 2012-13, A.Y. 2013-14 and A.Y.2014-15 wherein the Tribunal deleted the addition made u/s. 68 of the Act which order has been followed by the Ld.CIT(A). Thus, we do not find any infirmity in the order passed by the Ld.CIT(A). Grounds raised by the revenue are dismissed. Issues Involved:1. Deletion of addition under Section 68 of the Income Tax Act for alleged bogus loans.2. Consequential disallowance of interest on the alleged bogus loans.Detailed Analysis:Issue 1: Deletion of Addition under Section 68 of the Income Tax Act for Alleged Bogus LoansThe primary issue in these appeals is the deletion of additions made under Section 68 of the Income Tax Act, 1961, concerning alleged bogus loans obtained by the assessee. The Assessing Officer (AO) reopened the assessments under Section 147 based on information from the DGIT(Inv.), Mumbai, indicating that the assessee had taken accommodation entries in the form of loans from various parties managed by the Bhanwarlal Jain Group. The AO concluded that these transactions were bogus accommodation entries and brought them to tax as unexplained cash credits under Section 68.On appeal, the Learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)] followed the order of the Tribunal in the assessee's own case for previous assessment years (2012-13, 2013-14, and 2014-15) and deleted the additions made under Section 68. The Tribunal had held that the assessee had discharged the initial burden by filing various documents to prove the identity, genuineness, and creditworthiness of the parties. The AO was found to have erred in making additions towards unexplained cash credits under Section 68.The Tribunal observed that the AO did not bring any contrary evidence to disprove the claim of the assessee. The sole basis for the AO's addition was the statement of Bhanwarlal Jain, which was later retracted. The Tribunal emphasized that mere suspicion or presumption was insufficient for making additions under Section 68. The assessee had provided necessary documents, including PAN details, bank statements, and confirmations from loan creditors, proving the transactions' genuineness.Issue 2: Consequential Disallowance of Interest on the Alleged Bogus LoansThe AO also disallowed the interest paid on these alleged bogus loans. The Ld.CIT(A) and the Tribunal, following the principle that once the loans are treated as genuine, the interest paid on such loans should also be allowed. The Tribunal noted that the assessee had paid interest through proper banking channels and deducted applicable TDS as per the law. The AO's disallowance was based on the presumption that the loans were bogus, which was not substantiated by any concrete evidence.Judicial Precedents and Tribunal's ObservationsThe Tribunal relied on various judicial precedents, including the Supreme Court's decision in CIT vs. Lovely Exports Pvt Ltd, which held that if the share application money is received from alleged bogus shareholders whose names are given to the AO, the department can proceed against them but cannot regard it as undisclosed income of the assessee company. Similar principles were applied in the present case, where the identity, genuineness, and creditworthiness of the loan creditors were established.The Tribunal also considered several other judgments from High Courts and ITAT benches, which consistently held that once the assessee discharges the initial burden of proving the identity and genuineness of transactions, the onus shifts to the AO to prove otherwise. The AO's reliance on the retracted statement of Bhanwarlal Jain without further inquiry was insufficient to justify the additions.ConclusionThe Tribunal upheld the Ld.CIT(A)'s order deleting the additions made under Section 68 and the consequential disallowance of interest. The appeals filed by the revenue were dismissed, affirming that the assessee had adequately proved the genuineness of the transactions and the identity and creditworthiness of the loan creditors. The AO's additions were based on presumptions and lacked substantial evidence, leading to their deletion by the appellate authorities.