TaxTMI 
TaxTMI 
2026 (9) TMI 1859
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.... by the ld. AO u/s 68 of the Act in respect of unsecured loans taken by the assessee which were treated as unexplained cash credit u/s 68 of the Income-tax Act, 1961 (the Act). 4. The facts in brief are that the assessee filed the return of income on 20th August, 212, declaring total income at Rs. 31,84 712/-. The case of the assessee was selected for scrutiny and assessment was accordingly framed u/s 143(3) of the Act dated 30.03.2015, assessing the total income at Rs. 39,03,710/-. Thereafter, the case of the assessee was reopened u/s 148 of the Act by issuing notice on 21.03.2018, after the ld. AO received information that the assessee is a beneficiary of bogus accommodation entries. The assessee complied with the said notice by filing the return of income on 24.04.2018, showing the total income at Rs. 31,84,710/-. Thereafter, the statutory notices along with questionnaire were issued and served upon the assessee. The ld. AO noted from the details furnished by the assessee that during the year the total loans received by the assessee in the books of accounts were Rs. 11,62,82,820/-. The ld. AO noted that the assessee raised Rs. 8,02,82,820/- from Innova Tie-Up Pvt. Limited and....
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....ent, loan confirmation and affidavit of the loan creditors before the AO. Thus, the assessee contended that the identity of the lender has been established, genuineness of the transaction has been proved and the creditworthiness of the lender is not in doubt and therefore, no adverse inference should be drawn. The Assessing Officer while completing the assessment by order dated 27-12-2018 under section 147/143(3) of the Act did not accept the explanation offered by the assessee. The Assessing Officer stated that the assessee credited unsecured loans in his books from doubtful sources and the fund was deployed in similar private limited companies involved in circulation of funds to manage flow of funds as needed in various such companies for creating paper wealth. He branded the transactions to be accommodation entries and held them to be not real. With regard to the lender companies which in the opinion of the Assessing Officer were "paper companies/shell companies", the Assessing Officer stated that it has to be seen whether the identity and the creditworthiness of the companies are real, whether the transactions were genuine. The Assessing Officer proceeded to examine the documen....
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.... 1.3 From the assessment order, it has been observed that the Assessing Officer has not rendered any adverse comments on the documents which have been produced by the assessee. Further, it has been observed that the lender companies are income tax assessees, they are regularly filing income tax returns, the loans were advanced through account payee cheque, details of bank accounts and statements were available. Furthermore, the assessee was also able to demonstrate the source of money deposited into his bank accounts, which, in turn, has been used by him for business purpose i.e., payment towards various parties to procure Iron & Steel materials like Tata Metalics, SAIL etc. The assessee has discharged his onus to prove the identity, creditworthiness and genuineness of the lender companies and, thereafter, the onus shifted on the Assessing Officer to disprove the documents furnished by the assessee, which was not done by the Assessing Officer. The Assessing Officer was required to make proper investigation to determine whether the money was really lent by the third party or it has come out of the resources of the assessee himself. Thus, the Assessing Officer has failed to apply h....
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.... the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. 1.6 The assessing officer should record reasons in writing as to why the documents which were filed by the assessee does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, the order passed by the assessing officer is utterly perverse. In this context, reliance is being placed in the case of Principal Commissioner of Income-tax vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)/[2022] 448 ITR 332 (Calcutta)[14-07-2022] where it was held that - "Section 68, read with section 143, of the Income-tax Act, 1961 - Cash credit (Loans and advances) - Assessment year 2015-16 - During scrutiny proceedings, Assessing Officer noted that assessee-company had received certain unsecured loans from various companies out of which 13 were alle....
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....ax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds. 1.8 There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal pri....
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....0/- on 03.10.2012 and credit of Rs. 25,00,000/- on 05.10.2012 was nothing but contra entry. Thus, the actual loan taken by the appellant from M/s Honesty Dealers Pvt Ltd was Rs. 3,61,00,000/-. It is also seen that a sum of Rs. 1,60,00,000/- was transferred to his proprietorship concern M/s Goyal Ispat Udyog and the said concern has repaid the amount of Rs. 1,60,00,000/- in subsequent years. Thus, the entire amount of Rs. 3,61,00,000/- was repaid by the appellant to the loan creditor through banking channel within the financial year 2014-15. During the course of assessment proceedings, the AO had disallowed the total amount of Rs. 8,02,82,820/- and added u/s 68 of the Act. However, perusal of the above ledger copy reveals that actual loan amount taken by the appellant from M/s Innova Tie Up (P) Ltd was Rs. 7,05,00,000/-. During the course of appellate proceedings, the appellant had contended that balance amount of Rs. 97,82,820/- is basically a part of Rs. 99,00,000/- which M/s Goyal Ispat Udyog had paid to M/s Innova Tie Up (P) Ltd for payment of customs duty on behalf of the appellant. The balance amount of Rs. 1,17,180/- was returned back by M/s Innova Tie Up (P) Ltd to ....
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....ell. Further, the creditworthiness of the transaction is proved with the fact that they have been carried through banking channel and sufficient funds were available with loan creditors to explain the amount of loan given. The genuineness of the transaction is proved in the fact that the assessee company is carrying regular business activity and the loan was also repaid at a later date, and income tax return has been filed by the loan creditor. The loan taken had been repaid at a subsequent date. Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries being carried out in the later years. Further, reliance is also placed in the case of Principal Commissioner of Income-tax vs. Bairagra Builders (P.) Ltd. [2024] 164 taxmann.com 162 (Bombay)/[2024] 299 Taxman 460 (Bombay)[18-06-2024] where it has been held that - Section 68 of the Income-tax Act, 1961 - Cash credit (Loans) - Assessment years 2007-08 and 2012-13 - Assessee-company took unsecured loans from two companies - On basis of statement of one PKJ recorded during sear....
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....) Ltd. Ledger Account 6C Elgin Road 1st FI, 1A & 15 Kolkata 1-Apr-2011 to 31-Mar-2013 Date Particulars Debit Credit 00/11/2011 Dr Bank A/C 10,00,000.00 08/11/2011 Dr Bank A/C 20.00,000.00 08/11/2011 Dr Bank A/c 20,00,000.00 14/11/2011 Dr Bank Ale 30,00,000.00 15/11/2011 Dr Bank A/c 21,00,000.00 16/11/2011 Dr Bank A/c 29,00,000.00 10/11/2011 Dr Bank A/c 10,00,000.00 18/11/2011 Dr Bank A/C 10,00,000.00 22/11/2011 Dr Bank A/C 10,00,000.00 31/01/2012 Cr Transfer to Proprietor Ale 1,60,00,000.00 07/03/2012 Dr Bank A/c 2,00,00,000.00 03/10/2012 Cr Bank A/c 26,00,000.00 06/10/2012 Dr Bank A/c 25,00,000.00 09/10/2012 Cr Bank A/C 75.000.00 10/10/2012 Cr Bank A/c 25.00.000.00 11/10/2012 Gr Bank A/C 20,00,000.00 13/12/2012 Cr Bank A/c 10,00,000.00 14/12/2012 Cr Bank A/c 10,00,000.00 17/12/2012 Cr Bank A/c 10,00,000.00 07/01/2013 Or Bank A/c 5,00,000.00 27/02/2013 Dr Bank A/c 1.00.000.00 01/03/2013 Cr Bank A/c 5.00,000.00 04/03/2013 Gr Bank A/c 25,00,000.00 05/02/2013 Cr Bank A/c 25,00,000.00 06/03/2013 Cr Bank A/c 50,00,000.00 10/03/2013 Cr Bank A/c 15,25,000.00 3,06,00,000.00 3,86,00,000.00 Anil Kumar Goyal Honesty Dealers Pvt. Ltd. Ledger....