INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained unsecured loans -

Addition under section 68 in this case had been made by AO on the ground that some of the corporate entities were found to have been controlled and operated by P. J. who was one of the leading entry operators. For the other corporate entities, it was found that the assessee had obtained loan from these companies which was arranged by RD, who on survey had admitted to be arranging bogus accommodation entries. These findings had come out as a result of survey against the assessee's premises. It was noted by the AO that in the revenue's action against PJ, he had admitted to have arranged bogus accommodation entries. The AO had noted in detail his modus operandi. As regards RD, it was noted that survey action under section 133A was conducted in his case and he was found to have arranged the accommodation entries. AO in this regard had doubted the creditworthiness of the corporate entities on the ground that they taken loans and share capital and share premium from other corporate entities. The CIT(A), however, deleted the addition.Held: By giving the confirmation, return of income, the detail of PAN, copy of balance sheet and profit & loss account and copy of its bank statement, the assessee had duly discharged its onus. AO had not found default in these documents. Without making any enquiry, the AO cannot presume that the funds obtained by these corporate entities are bogus or they are assessee's own funds being circulated. AO had not brought on record any cogent, adverse material to rebut the credibility of the corporat entity from whom loan had been taken. These corporate entities were found by the AO to have acquired funds by borrowals and acceptance of share capital and share premium. This by itself cannot lead to presumption that these sources are bogus without any enquiry. In these circumstances, DR's request that this issue be again remitted to the file of the AO to make further necessary enquiries cannot be entertained. These corporate entities were found by the AO to have acquired funds by borrowals and acceptance of share capital and share premium. This by itself cannot lead to presumption that these sources are bogus without any enquiry. The assessee had discharged its onus. AO had not brought on required cogent material to rebut the documentary evidence submitted by the assessee nor he made any enquiry. The identity, creditworthiness, genuineness of the transaction had been proved by the assessee and the onus cast upon the assessee had been discharged. Hence, the order of the CIT(A) was upheld. The disallowance of interest on that account had been rightly deleted by the CIT(A).

Relied:CIT v. Gagandeep Infrastructure (P) Ltd. (2017) 394 ITR 680 (Bom) : 2017 TaxPub(DT) 1238 (Bom-HC), CIT v. Gangeshwari Metal (P) Ltd. (2014) 361 ITR 10 (Delhi) : 2013 TaxPub(DT) 1319 (Del-HC), CIT v. Dilip Chimanlal Gandhi (I.T.A. No. 7079/Mum/2016, Order dt. 1-8-2018), CIT v. Varinder Rawley (2014) 366 ITR 232 (P&H) : 2014 TaxPub(DT) 3818(P&H), CIT v. Sachitel Communications (P) ltd. (2014) 227 Taxman 219 (Matg), Asstt. CIT v. Tristar Jewellery Exports (P) ltd. ITA/7593/MUM/2011 (Mum-Trib) and CIT v. Smt. Sangamitra Bharali (2014) 361 ITR 481 (Gau) : 2014 TaxPub(DT) 433 (Gau-HC). Distinguished:Fidelity Business Services India (P) Ltd. ITA No. 512/2017, dt. 23-7-2018.

REFERRED : Andaman Timber Industries v. CCE (2015) 281 CTR 241 (SC) : 2015 TaxPub(DT) 5186 (SC), Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) : 1980 TaxPub(DT) 1130 (SC), Ponkunnam Traders v. Addl. ITO & Anr. (1972) 83 ITR 508 (Ker) : 1972 TaxPub(DT) 100 (Ker-HC), ACIT v. Tristar Jewellery Exports (P) Ltd. ITA/7593/MUM/2011 (Mum-Trib), CIT v. Smt. Sangamitra Bharali (2014) 361 ITR 481 (Gau) 2014 TaxPub(DT) 422 (Gau-HC), CIT v. Varinder Rawley (2014) 366 ITR 232 (P&H) : 2014 TaxPub(DT) 3818 (P&H-HC), CIT v. Sachitel Communications (P) Ltd. (2014) 227 Taxman 219 (Mag) (Trib), CIT v. Jaikumar Bakliwal (2014) 366 ITR 217 (Raj) : 2014 TaxPub(DT) 1890 (Raj-HC), Nemichand Kothari v. CIT (2003) 264 ITR 254 (Gau) : 2003 TaxPub(DT) 1401 (Gau-HC), Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), CIT v. Smt. Sanghamitra Bharali (2014) 361 ITR 481 (Gau) : 2014 TaxPub(DT) 422 (Gau-HC), CIT v. Shalimar Buildwell (P) Ltd. (2014) 220 Taxman 138 (All) : 2014 TaxPub(DT) 469 (All-HC), CIT v. A. Lalpuria Construction (P) Ltd. (2013) 215 Taxman 12 (Mag)(Raj), Agrotech (P) Ltd. v. ITO (Hyderabad) ITA/437/HYD/2016, Rushabh Enterprises v. Asstt. CIT W.P. No. 167 of 2015, Reliance Corporation v. ITO ITA/1069 to 1071/MUM/2017 (Mum-Trib), Asstt. CIT v. Shri. Vashu Bhagnani ITA/5648/MUM/2016 (Mum-Trib) and Jitendra M. Kitawat ITA/7049 & 7050/MUM/2016 (Mum-Trib).

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