ASST CIT 18(3), MUMBAI vs. RAKESH KUMAR JAIN, MUMBAI

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ITA 739/MUM/2017Status: DisposedITAT Mumbai24 September 2018AY 2007-084 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, finding the loans to be genuine based on the documentary evidence provided by the assessee. The AO's reliance on a retracted statement was deemed insufficient.

What were the facts?

The Revenue appealed against the deletion of disallowances made under Section 68 for unsecured loans and related interest. The assessee provided confirmations, bank statements, IT returns, and proof of repayment with TDS for the loans.

What were the issues?

Whether the unsecured loans and interest paid thereon were genuine, and if the assessee had provided sufficient evidence to prove their genuineness.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, D Bench, Mumbai

Before: Shri R.C. Sharma & Shri Ram Lal Negi

For Appellant: Shri Chaitanya S. Anjaria
For Respondent: Shri Prateek Jain
Hearing: 17.09.2018Pronounced: 24.09.2018

O R D E R Per R.C. Sharma, AM These appeals filed by the Revenue are directed against the order of the CIT(A)-29, Mumbai dated 16.11.2016 for assessment years 2007-08 and 2008-09 in the matter of order passed under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter “the Act”).

2.

In both the appeals the Revenue is aggrieved for deleting the disallowance made under Section 68 of the Act in respect of unsecured loans.

3.

We have heard the rival contentions and found that the addition made by AO under Section 68 of the Act in the A.Y.2007-08 was deleted by the CIT(A) after observing as under: - 2 Shri Rakesh Kumar Jain 4.3. The submissions of the Ld. Counsel have been carefully considered. The Ld. Counsel has tried to prove the genuineness of the loan transactions by proving the identity, credit .worthiness of the creditor and genuineness of the transaction. Identity has been proved by way of producing confirmation from the parties furnishing their bank'-account statement and also filing their income tax returns copy and final statements. "Also, furnishing of income-tax returns and affidavit-prove the identity of the creditors. The financial statements and bank statements prove the genuineness of the transactions and the credit worthiness of the creditor. If the AO disbelieves the evidences furnished by the appellant, he should have issued summons to the parties. He has not done that,' He did not given any concrete reason for disbelieving the information and the evidence furnished by the appellant. He placed his entire reliance on the statement of Shri. Bhanwarial Jain which has been retracted by him. Further, Shri. Bhanwarial Jain has no where admitted in. the statement that he provided entries for loans. He merely admitted that he provides accommodation entries for purchases. Neither Shri. Bhanwarlal Jain nor the loan creditors have mentioned the name of the appellant to whom the accommodation entry for loan has been given. The addition made by the AO appears to be merely on the basis of suspicion and presumption. The loan of Rs.50 lakhs taken by the appellant on 8.5.2007- was by cheque which has been repaid by him on 23.4.2007 also by cheque. Interest on the said loan Has been paid to the lender after deducting the tax. Copy of the bank statement of alleged parties reflecting the receipt and repayment of loan and payment of interest and Form No.l6A as evidence for TDS have been furnished by the appellant. The loan of Rs.10 lakhs from Parvati Exports has been received on 23.08.2005 by cheque and repaid on 5.5.2007also by cheque. Interest has been paid to the 'ender after deducting TDS and copy of form No.ISA evidenced the tax deducted is also filed and is a part of the record. All these evidences cannot be discredited merely relying on the statement given by Shri. Bhanwarial Jain which has also been retracted by him. In view of the above, the loans received by the appellant and repaid 'subsequently are held to be genuine. The addition made by the AO is directed to be deleted. These grounds of appeal are allowed.

1.

4. Similarly addition of Rs.4,07,890/- made on account of interest has been deleted by CIT(A) after having following observation:-

“The appellant has received loans of Rs.50,00,000/- from M/s. Kothan & Co. and Rs.10,00,000/- from M/s. Parvati Exports during A.Y.2007-08. He has paid interest on these loans to these two parties. The AO has in the A.Y.2007- 08 disallowed the loan amounts treating them as accommodation entries and consequently disallowed the interest claim too. As already discussed vide 3 Shri Rakesh Kumar Jain para 4.3 mentioned supra, the loans taken from M/s. Kothari & Co has been repaid on 23.04.2007 and the loan taken from M/s. Parvati Exports has been repaid on 5.5.2007. Interest has been paid through cheque and TDS also has been made. Form No.16A have been furnished. For the reasons discussed in the preceding paras, the same are held to be genuine. In view of the facts discussed above, the interest paid on these loans are also to be held as genuine. The AO is directed to delete the addition made. This ground of appeal is therefore allowed.”

5. The detailed finding recorded by the CIT(A) has not been controverted by ld. DR by bringing any positive material on record. Accordingly, we do not find any cogent reason to interfere in the findings of CIT(A). Similarly in A.Y. 2008-09 the addition of Rs.50 lakhs made by the AO under Section 68 of the Act was deleted by the CIT(A) after recording his finding at para 5.1, which reads as under: - “5.1 The appellant has received loan of Rs.50,00,000/- from M/s. Mouli Gems during A.Y. 2008-09. He has paid interest of Rs.2,09,051/- on this loan to this party for the A.Y. 2008-09. The AO has disallowed the loan amount treating it as accommodation entry and consequently disallowed the interest claim too. As already discussed vide para 4.3, mentioned supra, the loan taken from M/s. Mouli Gems, has been repaid on 3.2.2011. Interest, has been paid through cheque and TDS also has been made. Form No.16A has been furnished. For the reasons discussed in the preceding paras, the loan is held to be genuine. In view of the facts discussed above, the interest paid on this loan is also to be held as genuine. As the loan has been held to be genuine, the interest on the same for which, proof of payment has been submitted with documentary evidences is also held to be genuine. Therefore, the AO is directed to delete the addition made. This ground of appeal is therefore allowed.”

6. The detailed findings recorded by the CIT(A) has not been controverted by the learned D.R. Moreover, we found that tax effect in the appeal filed for A.Y. 2008-09 is below Rs.20,00,000/-. Keeping in view the CBDT Circular No. 3/2018 dated 11.07.2018, we do not find any cogent reason for filing the appeal by the Department.

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