2023 (7) TMI 1494 - AT - Income Tax

Loan addition under Section 68 cancelled after assessee proves creditor identity and transaction genuineness despite AO's rejection

Shri Darshan K Vakharia Versus Income Tax Officer Ward 2 (1), Mumbai.

Shri Darshan K Vakharia Versus Income Tax Officer Ward 2 (1), Mumbai. - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of reopening of assessment under Section 147/148 of the Income Tax Act.3. Addition of interest payments as unexplained expenditure under Section 68 of the Income Tax Act.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The Assessee filed the appeal with a delay of 23 days, attributing the delay to the death of the father-in-law of the individual responsible for filing. The Tribunal found the reason for the delay to be genuine and bona fide, and thus condoned the delay, allowing the appeal to proceed.2. Validity of Reopening of Assessment Under Section 147/148:The reopening of the assessment for the assessment years 2012-13 and 2013-14 was based on information received from the DDIT (Investigation) indicating that the Assessee had received bogus accommodation entries from entities controlled by Mr. Vipul Vidur Bhatt. The Commissioner upheld the reopening, stating that the information from the Investigation Wing constituted tangible material sufficient for assuming jurisdiction under Section 147. The Tribunal, however, noted that the reopening was based on a general statement from a third party without providing the Assessee an opportunity for cross-examination or access to the statement, which is a procedural lapse. The Tribunal emphasized that suspicion alone cannot justify an assessment, and there must be substantive evidence.3. Addition of Interest Payments as Unexplained Expenditure Under Section 68:The Assessee had taken loans from M/s. Santoshima Tradelinks Ltd and Vasudev Rawal HUF in the financial year 2010-11 and paid interest on these loans in the subsequent years. The Assessing Officer added the interest payments as unexplained expenditure under Section 68, citing the entities as bogus based on Mr. Vipul Vidur Bhatt's statement. The Commissioner affirmed this addition. However, the Tribunal found that the Assessee had provided sufficient evidence to substantiate the genuineness of the transactions, including loan confirmations, tax returns, and bank statements. Furthermore, the Assessee had deducted TDS on the interest payments, reinforcing the legitimacy of the transactions. The Tribunal concluded that there was no real cash credit during the assessment year in question, and therefore, the provisions of Section 68 were not applicable. Consequently, the Tribunal deleted the addition of Rs. 3,00,000/- for AY 2012-13 and Rs. 2,40,000/- for AY 2013-14, allowing the appeal in favor of the Assessee.In summary, the Tribunal allowed the appeal by condoning the delay, questioning the procedural validity of the reopening of the assessment, and deleting the additions made under Section 68, citing insufficient evidence and procedural lapses in the assessment process.