Revenue fails to prove bogus loans under section 68 without incriminating material from search operations

ITAT Guwahati dismissed revenue's appeal regarding additions under section 68 for bogus unsecured loans from shell companies for assessment years 2014-15 and 2015-16. The court held that since these were completed assessment years at the time of search on 29/01/2021, additions could only be made if incriminating material was found during search. The Assessing Officer failed to refer to any incriminating material and relied solely on audited balance sheet information and post-search enquiries. Following Supreme Court precedent in Abhisar Buildwell, CIT(A) correctly deleted the additions as no incriminating evidence was discovered during search operations.

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Issues involved:
The issues involved in this case are related to additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961 for unexplained cash credits received from shell/paper companies as unsecured loans and interest expenses claimed on bogus unsecured loans for Assessment Years 2014-15 and 2015-16.

Assessment Year 2014-15:
The Revenue appealed against the deletion of additions made under section 68 for unexplained cash credits and interest expenses claimed on bogus unsecured loans. The Assessee argued that the additions were not based on any incriminating material found during a search, and therefore, the additions were rightly deleted by the CIT(A). The Tribunal agreed with the Assessee, citing the Supreme Court's judgment in a similar case, emphasizing that additions for completed/unabated assessment years can only be made based on incriminating material found during a search. Since no such material was found, the Tribunal upheld the CIT(A)'s decision to delete the additions.

Assessment Year 2015-16:
Similar to the previous assessment year, the Revenue challenged the deletion of additions made under section 68 for unexplained cash credits and interest expenses on bogus unsecured loans. The Assessee contended that the additions were not supported by any incriminating material found during the search. The Tribunal, following the principles established by the Supreme Court, ruled in favor of the Assessee, stating that additions for completed/unabated assessment years must be based on incriminating material. As no such material was found, the Tribunal upheld the CIT(A)'s decision to delete the additions.

Conclusion:
In both Assessment Years 2014-15 and 2015-16, the Tribunal dismissed the Revenue's appeals and upheld the CIT(A)'s decision to delete the additions made by the Assessing Officer. The Tribunal emphasized the necessity of incriminating material to support additions for completed/unabated assessment years, as per the provisions of the Income Tax Act. Therefore, the appeals for both assessment years were dismissed by the Tribunal on 7th March, 2024.

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