INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of unsecured loan - AO relied on third party statement recorded by investigation wing--No opportunity of cross examination afforded to assessee--Assessee proved identity, creditworthiness and genuineness

AO based on statement recorded by Investigation Wing during search in case of various group entities treated loan amount received by assessee as unexplained credit under section 68 and made addition. Held: AO hinging upon statement of various persons and during entire course of the assessment proceedings, not even once in any notice or questionnaire, whispered about recording of such statements or his proposal to rely upon such statements. Merely because the persons whose statements were recorded were associates or employees of assessee-company, the statutory requirement of confronting assessee with such statements could not have been dispensed with and AO was duty bound to provide an opportunity to assessee to comment upon statement of such persons and to cross-examine of them. But, AO remained silent and did not even apprise assessee that statements of directors of these companies had already been recorded by Investigation Wing, whereas assessee, on the other hand, by furnishing plethora of evidences such as copy of certificate of incorporation, Memorandum and Articles of Association, acknowledgment of IT Return, copy of Master data download from the official website of MCA, particulars of directors of all the lender companies, their ledger accounts in the books of the assessee-company and vice-versa, confirmation letters duly given by lender companies, relevant bank statements of the lender companies and as also of the assessee-company demonstating that all the transactions had taken place through banking channels only, copies of audited financial statements of lender companies, assessment orders passed in cases of the lender companies and as also statement showing details of the taxable income and tax paid by lender companies in the last eight years proved identity and creditworthiness of lenders and genuineness of loan transaction. Accordingly, AO was not justified in making addition of loan amount under section 68.

Relied:Kumar Nirman and Nivesh (P) Ltd. v. Asstt. CIT 2020 (3) TMI 340 (Karn-HC) : 2020 TaxPub(DT) 1563 (Karn-HC), Asstt. CIT v. EI Dorado Biotech (P) Ltd. (2020) 60 CCH 233 (Ahd-Trib), CIT v. Metachem Industries (2000) 245 ITR 160 (M.P) : 2000 TaxPub(DT) 822 (MP-HC), Nemichand Kothari v. CIT (2003) 264 ITR 254 (Gau-HC) : 2003 TaxPub(DT) 1401 (Gau-HC),CIT v. Mehrotra Brothers (2004) 270 ITR 157 (MP) : 2004 TaxPub(DT) 443 (MP-HC),Ashok Pal Daga v. CIT (1996) 220 ITR 452 (MP) : 1996 TaxPub(DT) 812 (MP-HC), Dy.CIT v. Rohini Builders (2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC), CIT v. STL Extrusions (P) Ltd. (2011) 333 ITR 269 (MP-HC) : 2011 TaxPub(DT) 574 (MP-HC), CIT v. Devi Prasad Khandelwal & Company Ltd. (1971) 81 ITR 460 (Bom.) : 1971 TaxPub(DT) 124 (Bom-HC), CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Orient Trading Co. Ltd. v. CIT (1963) 49 ITR 723 (Bom) : 1963 TaxPub(DT) 0279 (Bom-HC), CIT v. Taj Borewell (2007) 291 ITR 232 (Mad.) : 2007 TaxPub(DT) 1133 (Mad-HC), Addl. CIT v. Bahri Brothers (P) Ltd. (1985) 154 ITR 244 (Pat) : 1985 TaxPub(DT) 445 (Pat-HC), CIT v. Hanuman Agarwal (1985) 151 ITR 150 (Pat-HC) : 1985 TaxPub(DT) 208 (Pat-HC), Jalan Timbers v. CIT (1997) 223 ITR 11 (Gau) : 1997 TaxPub(DT) 608 (Gau-HC), CIT v. Dalmia Resorts International (2007) 290 ITR 508 (Del) : 2007 TaxPub(DT) 0127 (Del-HC), Lalitha Jewellery Mart (P) Ltd. v. DCIT (2017) 399 ITR 425 (Mad) : 2017 TaxPub(DT) 4095 (Mad-HC), CIT v. Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj) : 2014 TaxPub(DT) 1890 (Raj-HC), CIT v. E.S. Jose (2014) 220 Taxman 32 (Ker) : 2014 TaxPub(DT) 0062 (Ker-HC), CIT v. Kamdhenu Steel & Alloys Ltd. & Ors. (2014) 361 ITR 220 (Del) : 2012 TaxPub(DT) 1644 (Del-HC), Gaurav Triyugi Singh v. ITO 2020 (1) TMI 1153 (Bom-HC) : 2020 TaxPub(DT) 662 (Bom-HC), Kumar Nirman and Nivesh (P) Ltd. v. Asstt. CIT 2020 TaxPub(DT) 1563 (Karn-HC), Asstt. CIT v. . Jay Enterprise 2019 (4) TMI 1811 ((Rajkot), Pr.CIT v. Jay Enterprise 2020 (1) TMI 657 (GujHC) : 2020 TaxPub(DT) 370 (Guj-HC), ITO v. Riddhi Siddhi Corporation 2017 (2) TMI 1129 (Ahd-Trib),ITO v. RE N Raga Media (P) Ltd. 2019 (6) TMI 651 (Mum-Trib) : 2019 TaxPub(DT) 4495 (Mum-Trib),Mahipal Ishwarlal Sottany v. ITO 2019 (10) TMI 1161 (Ahd-Trib) : 2019 TaxPub(DT) 7231 (Ahd-Trib), ITO v. Celebrity Lifespace (P) Ltd. 2019 (12) TMI 1157 (Mum-Trib) : 2019 TaxPub(DT) 8382 (Mum-Trib), Dy. CIT v. Chetan R. Shah (HUF) 2020 (1) TMI 1239 (Mum-Trib), ITO v. MJD Financial Services (P) Ltd. 2020 (10) TMI 651 (Mum-Trib) : 2020 TaxPub(DT) 4298 (Mum-Trib), Dy. CIT v. Manba Finance Ltd. 2020 (1) TMI 645 (Mum-Trib) : 2020 TaxPub(DT) 4908 (Mum-Trib), Asstt. CIT v. Mittal Appliances Ltd. (2016) 27 ITJ 120 (Ind-Trib), Asstt. CIT v. Shree Sai Vihar (2016) 28 ITJ 158 (Raipur-Trib), ITO v. Vaibhav Cotton (P) Ltd. (2012) 19 ITJ 113 (Ind-Trib) : (2012) 19 ITJ 113 (Ind-Trib) : 2013 TaxPub(DT) 47 (Ind-Trib), Sumati Kumar Kasliwal, Shri Parth Kasliwal, Smt. Sharda Kasliwal, M/s. Nishant Finance (P) Ltd., Shri Manoj Kasliwal and M/s. Pumarth Infrastructure (P) Ltd. v. ACIT (Central)-1, Indore 2019 (5) TMI 338 (ITAT-Indore) : 2019 TaxPub(DT) 3179 (Ind-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12 to 2016-17

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