2023 (3) TMI 460 - AT - Income Tax

Tribunal upholds deletion of Rs. 7.20 crore addition under Section 68 of I.T. Act, assessee's proofs accepted.

ACIT-1 (1) (1), Mumbai Versus M/s. Adhiraj Constructions Pvt. Ltd. And (Vice-Versa)

The Tribunal confirmed the CIT(A)'s decision to delete the addition of Rs. 7.20 crore under Section 68 of the I.T. Act, as the assessee had proven the ... Addition u/s 68 - accommodation entries of unsecured loans were provided to assessee - discharge of onus - HELD THAT:- There is no dispute that the assessee has discharged its burden placed upon it u/s 68 of the Act by furnishing all relevant documents. As pointed out by Ld CIT(A), the AO has not found fault with those documents. We also noticed that two creditors have responded to the notices issued by the AO u/s 133(6) but the AO has refused to consider them at all. Hence, it appears to us that the AO was swayed by the generalised findings given by the investigation wing and hence did not proceed the matter on the merits of each case. Hence,we have to hold that the AO has made the impugned addition on suspicions, surmises and conjectures only. We have also gone through the decision rendered in the case of M/s Pravir Polymers p Ltd [2022 (4) TMI 1501 - ITAT MUMBAI] and notice that the decision has been rendered in that case on the basis of peculiar facts available therein. In the absence of parity facts, we are of the view that the said decision will not have application to the present case. CIT(A) was justified in deleting the addition - Accordingly, we confirm the order passed by him on this issue. Decided in favour of assessee. Issues Involved:1. Deletion of addition under Section 68 of the I.T. Act.2. Validity of reopening of the assessment.Issue-Wise Detailed Analysis:1. Deletion of Addition under Section 68 of the I.T. Act:The Revenue was aggrieved by the decision of the learned CIT(A) in deleting the addition of Rs. 7.20 crore made by the Assessing Officer (AO) under Section 68 of the I.T. Act. The AO reopened the assessment based on a search and seizure action in the hands of companies controlled by the Gautam Jain Group, which admitted to providing accommodation entries like bogus purchases and sales, unsecured loans, etc. The assessee received funds from three concerns: M/s. Karishma Diamond Pvt. Limited, M/s. Maniratnam Exim Pvt., and M/s. Marine Gems Pvt. Limited, totaling Rs. 7.20 crore. The AO treated these advances as unexplained cash credit under Section 68, relying on the statement given by Mr. Gautam Jain and the note from the Investigation Wing.The assessee contended that the amount was received as an advance for the sale of flats, supported by various documents, including provisional allotment letters, cancellation letters, receipts, bank statements, and project plans. The AO, however, found discrepancies and deemed the documents unreliable, concluding that the advances were bogus.Before the CIT(A), the assessee reiterated its stand, providing further documents to establish the identity, creditworthiness, and genuineness of the transactions. The CIT(A) found that the assessee had discharged its burden under Section 68 by furnishing relevant documents and that the AO had not made adequate inquiries or rebutted the proofs provided by the assessee.The Tribunal upheld the CIT(A)'s decision, noting that the AO had heavily relied on the statement of Mr. Gautam Jain without confronting the assessee with it, which was against the principles of natural justice. The Tribunal found that the AO had failed to disprove the proofs adduced by the assessee and had made the addition based on suspicions and conjectures. The Tribunal confirmed the deletion of the addition of Rs. 7.20 crore, agreeing with the CIT(A) that the assessee had established the identity, creditworthiness, and genuineness of the transactions.2. Validity of Reopening of the Assessment:The assessee challenged the validity of the reopening of the assessment. However, since the Tribunal confirmed the deletion of the addition, the legal issue of reopening became academic in nature. Consequently, the Tribunal did not find it necessary to adjudicate this issue.Conclusion:The appeal of the Revenue and the cross-objection filed by the assessee were dismissed. The Tribunal confirmed the CIT(A)'s order deleting the addition of Rs. 7.20 crore under Section 68 of the I.T. Act and did not address the validity of the reopening of the assessment due to its academic nature. The order was pronounced in the open court on 27.12.2022.