TaxTMI 
TaxTMI 
2026 (4) TMI 1616
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....-?" Ground No. 2 "Whether on the facts and circumstances of the ease and in law, the Ld CIT(A) justified in deleting the addition made on account of unexplained cash credit u/s 68 on account of receipt of loan from M/s Aasman Mangement Services Pvt. Ltd F amounting to Rs 11.00,16.395/- despite the findings given by the AO that the assessee failed to prove the creditworthiness of the lender and genuineness of the transaction?"" 2. The brief facts of the case are that, the assessee was engaged in the business of retailing in consumer electronics, IT Equipments, Mobiles, personal electronic items and allied accessories. For the relevant AY, assessee filed e-return on 31.03.2018, declaring total loss of Rs. (- 54,15,955/-). The return was processed under section 143(1)(a) of the Act on 28.12.2018. Later, the case of assessee was selected for scrutiny under CASS for complete scrutiny. Statutory notices under section 143(2) and 142(1) of the Act were issued along with questionnaire through ITBA portal. The ld. AR of the assessee submitted requisite details from time to time. After going through the material available on ITBA portal, the ld. AO has raised the issue regarding l....
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....ved that AMSPL had equal credits in its bank account immediately prior to advancing loan to the appellant, which means that the loan was advanced by the holding company to its subsidiary out of borrowed fund. The AO also observed that the returned income of the holding company for the year was Rs. 8,050/-, inferring thereby that the amount of loan was disproportionate to the income of the holding company. The AO found that the loan was reflected in the Balance Sheet of the appellant but at the same time, the AO was unable to detect the loan from the ITR of AMSPL. The AO concluded that the appellant having failed to prove creditworthiness of AMSPL, the loan was not genuine and he applied the provisions of section 68 of the Act. The grievance of the appellant, as appearing from the first ground of appeal is that a very short time was allowed by way of the draft assessment order and reply to correspondence dated 11.02.2021 was sought by 15.02.2021. The appellant had replied within the due time but had also made a request for a personal hearing but the AO passed the order on the very next day i.e.16.02.2021, which according to the appellant is a breach of natural justice. ....
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....n made by the AO u/s 68 of the Act. Section 68 of the Act is as follows: 68. Cash Credits.- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The Supreme Court in the matter of Principal Commissioner of Income Tax (Central-1) Vs. NRA Iron and Steel Private Limited [(2019) 15 SCC 529] has laid down the parameters and the issues which arises for determination whether the respondent assessee has discharged the primary onus to establish the genuineness of the transaction required under Section 68 of the Act, 1961. It primarily laid down that the initial onus is on the assessee to establish proof of identity of the creditors; capacity of creditors to advance money; and genuineness of transaction. The Court at para 9.3 & 9.5 has reiterated the principle laid down by the Court, which are reproduced hereinbelow: 9.3. As per settled law, the initial on....
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....tion 68. The AO mentioned as follows: 'Reply of the assessee was received on 15.02.2021 which is not found to be satisfactory.' The AO has not elaborated as to why he found the submission of the appellant to be unsatisfactory. He made no enquiry in respect of AMSPL either from the AO of AMSPL or independently by way of section 133(6) or section 131 of the Act. Even if there was a discrepancy in the ITR of AMSPL, it was required to be sorted out from the records of AMSPL. If there was a doubt about the loan obtained by AMSPL, the issue could have been investigated to ascertain if there was a trail which leads to the conclusion that appellant's own money has been routed through a circuit and received back in the form of an accommodation entry with the robe of unsecured loan by a holding company to its subsidiary. The AO has made the addition on the issue of creditworthiness of AMSPL but has arrived at no finding that the money received by AMSPL by way of loan was also an accommodation entry. An addition can be made by invoking a legal provision but the provision must be backed up by solid fact finding which is definitely missing in this case. Where law does....
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....der has shown a very meager income in its ITR and even the financials of the lending company does not inspire to establish its creditworthiness, therefore the decision of ld. CIT(A) making comments about the conduct of ld. AO in not making independent enquiries or any finding qua the accommodation entry, etc. was not a logical findings rather ld. CIT(A) was under obligation to take necessary steps to find out whether the transaction of loan received by the assessee falls within the category of violations under section 68 or not, therefore on merits, the findings of ld. CIT(A) are unsustainable and liable to be set-aside. 6. Per contra, the ld. Counsel of the assessee submitted that the order of ld. CIT(A), which is challenged by the revenue is a reasonable and justified order wherein it is clearly observed that the funds are advanced by the holding company to its subsidiary company. The returned income of the lender company was only Rs. 8,050/- which cannot be the point of inference to decide the creditworthiness of the lender company. It is also found by the ld. AO that the alleged loan was reflected in the balance-sheet of the lender Company, however the ld. AO was unable to d....
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.... Annexure 4d" 8. It is submitted that all the primary documents requisite to satisfy the condition of section 68 of the Act are furnished before the ld. AO. The ld. AO issued the draft assessment order on 11.02.2021, wherein the addition of loan and advance for Rs. 11,00,16,395/- was proposed, to which the assessee refuted, with clear submission that the assessee company is a wholly owned subsidiary of AMSPL and the loans were obtained from the holding company to settle the outstanding balance of cash credit from HDFC Bank amounting to Rs. 6,18,48,938/- and trade payables amounting to Rs. 71,12,12,410/-. It is also clarified that the entire amount was received through banking channels. The ld. AR also drew our attention to the balance-sheet of assessee company at page no. 47 of the Paper Book showing increase in long term borrowings, as well as reduction in the current liabilities, trade payables and short-term borrowings, which were cleared of during the year under consideration. The ld. AR further drew our attention to bank statement of AMSPL showing various transactions through RTGS to the assessee company for providing of unsecured loan during the year. It is also shown that....
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....see had discharged the primary onus to establish the genuineness of transaction required under section 68 of the Act and the assessee primarily laid down the proof of identity of creditors, capacity of creditors to advance money and genuineness of transactions. Ld. CIT(A) referred to certain case laws relied upon by the assessee. The ld. CIT(A) also observed that if the ld. AO had some doubts about the loan obtained by 'AMSPL', the issue could have been investigated to ascertain if there was a trail which leads to the conclusion that assessee's own money has been routed through a Circuit and received back in the form of accommodation entry. 12. The ld. CIT(A) more particularly stressed to the failures on the part of ld. AO, that he had not even mentioned in the assessment order name of party from whom the deposit has come in the bank account of AMSPL. No enquiry by the ld. AO was the main focus of the ld. CIT(A) to delete the addition. It is also observed by the ld. CIT(A) that there was a re-payment of Rs. 23,00,000/- during the year which the ld. AO overlooked while making the addition. Such observation of the ld. CIT(A) led him to decide the issue in favour of the assessee by....