2021 (11) TMI 1209 - AT - Income Tax

ITAT allows appeal against bogus cash credit additions made without proper enquiry or independent verification

The ITAT Mumbai allowed the assessee's appeal against addition of loans treated as bogus cash credits. The AO made additions solely based on information ... Addition towards the loan received treated as bogus loan - addition loans as bogus cash credit has been done solely on the basis of information received from Investigation wing regarding the search in case of Praveen Jain and bogus companies being operated by him - HELD THAT:- Assessee has duly submitted the loan confirmation and bank statement - AO has not even bothered to issued notice to the concerned parties. He has put the onus of providing the ITR of these parties to the assessee. In our considered opinion, this is a failure on the part of AO to discharge the duty cast upon him. It is not the case that AO is not having the name and address of the parties. These are all corporate entities. When the loans were through banking channel and confirmation was produced by the assessee. The onus was upon the AO to properly enquire and bring on record cogent evidence to sustain the addition. Simply on the basis of search and seizure made at other place, addition cannot be made in the hands of the assessee without any enquiry by the AO himself. There is no independent enquiry by AO and no opportunity has been afforded to the assessee to controvert the statements of parties, which have been relied by the AO. Appeal by the assessee stands allowed. Issues:Addition of Rs. 1,80,00,000 towards a loan treated as bogus, Failure to follow due process of law.Analysis:The appeal pertains to the addition of Rs. 1,80,00,000 towards a loan treated as bogus by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals). The assessee, a Real Estate Developer, filed the return of income for A.Y. 2013-14 on 31/03/2015 declaring total income as NIL. The case was reopened based on information received from the Director of Income Tax (Investigation). The assessment was completed at an income of Rs. 1,80,00,000 based on findings of search action at the premises of another individual. The AO did not make any enquiry from the concerned parties but relied on statements and evidence collected during the search. The Commissioner of Income Tax (Appeals) confirmed the addition without the assessee's compliance or submissions during the appellate proceedings. The ITAT noted the lack of enquiry by the AO and the absence of opportunity for the assessee to counter the statements relied upon. Citing a precedent, the ITAT emphasized the necessity of independent enquiry before making additions solely based on information from another authority. Consequently, the ITAT set aside the lower authorities' orders and decided the issue in favor of the assessee, allowing the appeal.The key contention was the addition of the loan amount as a bogus cash credit without proper enquiry by the Assessing Officer. The assessee had submitted loan confirmations and bank statements, but the AO did not issue notices to the concerned parties and rejected the documentary evidence. The ITAT criticized the AO for not discharging the duty to conduct a thorough enquiry, especially when loans were through banking channels and confirmations were provided. The ITAT highlighted the failure of the AO to gather cogent evidence to support the addition and emphasized the importance of independent enquiry before making such additions. Drawing from a similar case precedent, the ITAT stressed the need for due opportunity for the assessee to counter statements relied upon and concluded in favor of the assessee due to the lack of independent enquiry and denial of opportunity to rebut the evidence.In conclusion, the ITAT allowed the appeal, overturning the addition of the loan amount as bogus. The decision was based on the failure of the AO to conduct an independent enquiry, not affording the assessee an opportunity to counter the evidence relied upon, and the necessity of following due process of law before making additions based on information from other authorities. The ITAT emphasized the importance of proper enquiry and providing the assessee with a fair chance to present their case before confirming such additions.