Dy. CIT v. Marathan Fiscal (P) Ltd.

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The Tax Publishers2019 TaxPub(DT) 5900 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68 Section 131(1) Section 133(6)

Where assessee had discharged its 'onus' than AO without making enquiry under section 131 and 133(6) and in the absence of the corroborative evidence was not justified in treating the loans received by assessee as unexplained cash credit under section 68.

Income from undisclosed sources - Addition under section 68 - Alleged unexplained loan - Assessee discharged its onus

Assessee-company was engaged in the business of a builder and developer. AO in the course of the assessment proceedings observed that on the basis of information that assessee as a beneficiary had taken accommodation entries of bogus unsecured loans from various dummy concerns. It was noticed by the AO that C R. Shah had in his statement recorded in the course of the survey action admitted that the unsecured loans taken from P.K. Jain were in the nature of accommodation entries. In order to fortify the authenticity of the loan transactions, assessee placed on record supporting documentary evidence. However, AO declined to accept the authenticity of the unsecured loans. AO holding a conviction that the identity and creditworthiness of the aforesaid lenders and also the genuineness of the transactions, had remained unproved, therefore, the said alleged unexplained loan was added under section 68. CIT(A) deleted the addition.Held: Merely on the basis of admission an assessee cannot be saddled with additions unless and until some corroborative evidence was found in support of such admission. CIT(A) had rightly concluded that in the absence of any corroborative material, the AO could not have proceeded with and made additions on the basis of the retracted statement of P.K. Jain. AO, instead of placing on record any documentary evidence which would disprove the authenticity of the loan transactions under consideration, had focused primarily on the facts and the modus operandi of functioning of P.K. Jain. The AO relying upon two aspects viz., (i) that, the director of the assessee-company in its statement recorded in the course of the survey proceedings had admitted that it had raised bogus unsecured loans, and (ii) that, the lender concerns were managed and controlled by P.K. Jain, an infamous acommodation entry provider, held the loans as unexplained cash credits under section 68. CIT(A) observed that the AO had not brought on record any adverse material to rebut the credibility of the corporate entities from which loans were raised by the assessee. No adverse inferences could have been drawn by the AO without making any inquiry by issuing notices under section 133(6) or summons under section 131. AO in the absence of the corroborative evidence was not justified in treating the loans received by the assessee before them as unexplained cash credit under section 68.

Relied:Mahesh Ohri v. Asstt. CIT [ITA No. 4109 of 2009, dated 8-3-2013) (Del) : 2013 TaxPub(DT) 1402 (Del-Trib), Paul Mathews & Sons v. CIT (2003) 263 ITR 101 (Ker) : 2003 TaxPub(DT) 1040 (ker-HC), CIT v. S. Khader Khan Son (2013) 352 ITR 480 (SC) : 2012 TaxPub(DT) 3088 (SC), CIT v. Dhingra Metal Works (2010) 328 ITR 384 (Del) : 2010 TaxPub(DT) 2294 (Del-HC), Pullangode Rubber Product Company Ltd. v. State of Kerala (1973) 91 ITR 18 (SC) : 1973 TaxPub(DT) 89 (SC), CIT v. Sunil Aggarwal (2015) 379 ITR 367 (Del) : 2016 TaxPub(DT) 0279 (Del-HC), Tribhuvandas Bhimji Zaveri, ITA No. 2250 & 2251/Mum/2013, dated 4-11-2015, Andaman Timber Industries v. CCE (2015) 281 CTR 241 (SC) : 2015 TaxPub(DT) 5186 (SC), CIT-8 v. Orchid Industries (P) ltd. (2017) 397 ITR 136 (Bom) : 2017 TaxPub(Dt) 1911 (Bom-HC), Pr. CIT v. Skylark Build ITA No. 616 of 2016, dt. 24-10-2018) : 2019 TaxPub(DT) 565 (Bom-HC), Dy. CIT-CC-7(2) v. Manba Finance Ltd. ITA Nos. 1448, 1449 & 1467/Mum/2017, dated 5-10-2018] : 2019 TaxPub(DT) 1321 (Mum-Trib). Distinguished:Pavankumar Sanghavi v. ITO, Ward 3(1)(2), Vadodara (2017) 165 ITD 260 (Ahd-Trib) : 2017 TaxPub(DT) 1389 (Ahd-Trib).

REFERRED : Dy. CIT v. Manba Finance Ltd. (ITA No.1448, 1449 & 1467/Mum/2017, dated 5-10-2018 (Mum) : 2019 TaxPub(DT) 1321 (Mum-Trib), Dy. CIT v. Shreedham Builders [ITA No. 5589/Mum/2017, dated 22-6-2018) (Mum) : 2018 TaxPub(DT) 3839 (Mum-Trib), Dy. CIT v. Jainam Investments [ITA No. 6099/Mum/2016, dated 10-8-2018], Dy. CIT v. Bairagra Builders Pvt. Ltd. [ITA No. 4691 & 4692/Mum/2015, dated 14-9-2017, ITO v. Anant Shelters (P) Ltd. (2012) 20 Taxman.com153 (Mum) : 2012 TaxPub(DT) 2257 (Mum-Trib), Asstt. CIT v. Shree A.S. Motiwala (2019), TIOL 676 (Mum) : 2019 TaxPub(DT) 2701 (Mum-Trib), ITO v. Neelkanth Finbuild Ltd. (2015) 61 Taxman.com 132 (Del) : 2015 TaxPub(DT) 1366 (Del-Trib), CIT v. Orchid Industries (P) Ltd. (2017) 397 ITR 136 (Bom) : 2017 TaxPub(DT) 1911 (Bom-HC), Pr. CIT v. Skylak Build [ITA No. 616 of 2016, dt. 24-10-2018) : 2019 TaxPub(DT) 0565 (Bom-HC) and Gladiolus Properties and Inc. Pvt. Ltd. [ITA No. 2924/Mum/2017, dated 16-5-2019] : 2019 TaxPub(DT) 4030 (Mum-Trib).