2022 (12) TMI 433 - AT - Income Tax

Tribunal upholds additions for unexplained cash credit, re-assessment proceedings, and interest charges.

The Tribunal dismissed all six appeals filed by the appellant for the assessment years 2007-08 to 2012-13, upholding the additions made towards ... Reopening of assessment u/s 147 - Addition u/s 68 - beneficiary of accommodation entries - loans and advances credited in the books of the appellant company - genuineness of transactions of purchase of shares - appellant deliberately withheld the information from the AO as well as the CIT(A) which is within exclusive knowledge of appellant - HELD THAT:- the appellant had failed to discharge the onus casts upon him to prove the genuineness of the transactions, identity of the creditors and creditworthiness of the creditors/investors who should have financial capacity to make the advance in question to the satisfaction of the Assessing Officer. Therefore, the ratio of the decision of the Hon’ble Supreme Court in the case of NRA Iron & Steel (P.) Ltd. [2019 (3) TMI 323 - SUPREME COURT] is squarely applicable to the facts of the present case. The appellant deliberately withheld the information from the Assessing Officer as well as the ld. CIT(A) which is within exclusive knowledge of appellant to establish the genuineness of transactions of purchase of shares of that company. Following the decision in the case of Hon’ble Supreme Court in the case of Friends Trading Co. [2022 (9) TMI 1076 - SUPREME COURT] with other several decisions, additions confirmed Issues Involved:1. Legality of the additions made towards unexplained cash credit under Section 69A of the Income Tax Act.2. Validity of the re-assessment proceedings under Section 148 of the Income Tax Act.3. Justification of the interest charged under Sections 234A/B of the Income Tax Act.Detailed Analysis:1. Legality of the Additions Made Towards Unexplained Cash Credit Under Section 69A of the Income Tax Act:The appellant, engaged in the business of Builders, Promoters, and Real Estate, did not file returns for the assessment years 2007-08 to 2012-13. The Assessing Officer (AO) received information from the DIT (Inv.)-II, Mumbai, indicating that the appellant was a beneficiary of accommodation entries of bogus unsecured loans and advances provided by Bhawarlal Jain Group. The AO issued a notice under Section 148 and took the case for scrutiny assessment. Despite several notices, the appellant failed to provide satisfactory evidence to prove the genuineness of the transactions, identity of creditors, and creditworthiness of investors. Consequently, the AO brought the accommodation entries to tax under Section 144 read with Section 147.The appellant contested the additions before the CIT(A), arguing that the loans were obtained through crossed account payee cheques and supported by confirmation letters. However, the CIT(A) dismissed the appeal, relying on the doctrine of human probabilities and the decisions of the Hon'ble Calcutta High Court, which emphasized that mere receipt of loans by crossed account payee cheques does not prove the genuineness of the credit.Upon further appeal, the Tribunal upheld the CIT(A)'s decision, emphasizing that the appellant failed to discharge the onus of proving the genuineness of transactions, identity of creditors, and creditworthiness of investors. The Tribunal cited the Hon'ble Supreme Court's decision in PCIT vs. NRA Iron & Steel (P.) Ltd., which outlined the principles for proving the genuineness of transactions under Section 68. The Tribunal also referred to the Hon'ble Delhi High Court's decision in PCIT vs. NDR Promoters (P.) Ltd., and the Hon'ble Madras High Court's decisions in PCIT vs. SRM Systems and Software (P.) Ltd., and CIT vs. Midas Golden Distilleries (P.) Ltd., which supported the AO's stance in similar cases.2. Validity of the Re-assessment Proceedings Under Section 148 of the Income Tax Act:The appellant argued that the reopening of the assessment was based on borrowed satisfaction and lacked the Assessing Officer's application of mind. The Tribunal, however, found that the information received from the DIT (Inv.)-II, Mumbai, constituted tangible information enabling the AO to form a belief that income had escaped assessment. The Tribunal cited the Hon'ble Gujarat High Court's decision in Amar Jewellers Ltd. vs. ACIT, the Hon'ble Bombay High Court's decision in Hrikant Phulchand Bhakkad (HUF) vs. JCIT, and the Hon'ble Supreme Court's decision in ACIT vs. Rajesh Jhaveri Stock Brokers (P.) Ltd., which validated the re-assessment proceedings based on credible information. Therefore, the Tribunal dismissed the additional ground of appeal regarding the invalidity of the re-assessment.3. Justification of the Interest Charged Under Sections 234A/B of the Income Tax Act:The appellant contested the interest charged under Sections 234A/B, arguing that it was consequent to the wrong addition. Since the Tribunal upheld the additions made by the AO, it implicitly supported the interest charged under Sections 234A/B as a consequence of the confirmed additions.Conclusion:The Tribunal dismissed all six appeals filed by the appellant for the assessment years 2007-08 to 2012-13, upholding the additions made towards unexplained cash credit under Section 69A, validating the re-assessment proceedings under Section 148, and justifying the interest charged under Sections 234A/B. The Tribunal emphasized the appellant's failure to discharge the onus of proving the genuineness of transactions and the applicability of the principle that fraud vitiates everything, rendering the transactions void ab initio.