The Tax Publishers2020 TaxPub(DT) 4919 (Mum-Trib)


Section 68

Assessment order passed in case of alleged entry operator could not lead to addition of loan amount received by assessee from that entity under section 68.

Income from undisclosed sources - Addition under section 68 - Receipt of unsecured loan from group company alleged as entry operator -

There was a survey operation at the premises of M/s SS Enterprises, which was a group concern of assessee. During the course of survey, some incriminating documents were impounded which were basically related to cash transactions by group concerns. Further, AO noticed that assessee had taken loans and advances to the extent of Rs. 71 lakhs from M/s SS Enterprises. When assessee was asked to explain as to why loan transaction could not be treated as bogus, assessee submitted that it was not a fresh loan but this loan was taken in earlier assessment year, through banking channel and assessee had paid relevant interest to the party and also this loan was settled in subsequent assessment year through banking channel only. AO rejected submissions of asserssee and proceeded to make addition under section 68 by observing that M/s. SS Enterprises was not doing any business and just providing accommodation entries and with reference to assessment order passed in M/s. SS Enterprises' case in which AO disallowed all the purchases declared by M/s. SS Enterprises in their books, therefore, AO relying on the above assessment order disallowed loan along with interest expenditure claimed in the instant assessment order on protective basis. Held: AO merely relied on assessment order under section 143(3) of M/s. SS Enterprises. in which the respective AO had disallowed bogus purcahses, however, this would not make loan transaction, in question, as accommodation entries in absence of any corroborative evidence and outcome of assessment order in case of M/s. SS Enterprises and the conclusions drawn therein could not be applied ipso facto to all other cases. Also, AO observed that protective assessment cannot be independent of substantive assessment and protective assessment was always successive to substantive assessment. Also, AO rejected submissions of assessee even though assessee had submitted that loan was taken from M/s. SS Enterprises in earlier assessment year and also submitted relevant documents in support of the transaction. In view of all this addition made by AO could not be sustained, especially when AO had not brought on record any new material in support of his findings.

Followed:JSW Ltd ITA Nos. 6264 & 6103/Mum/2018 dated 14-5-2020 : 2020 TaxPub(DT) 2142 (Mum-Trib).


FAVOUR : In assessee's favour.

A.Y. : 2012-13


Rule 34(5)(c)


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