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Facts
During a search, it was revealed that the assessee received accommodation entries in the form of loans and share premium from entities operated by an entry operator. The Assessing Officer (AO) treated these as unexplained cash credits under Section 68 of the Income Tax Act, 1961.
Held
The CIT(A) deleted the addition, holding that the loans were from earlier years. However, the Tribunal noted that Rs. 1,00,000 was received during the assessment year in question. The Tribunal found that the genuineness and timing of these loans needed further verification.
Key Issues
Whether the CIT(A) erred in deleting the addition made on account of unexplained cash credits under Section 68 of the Income Tax Act, 1961, without appreciating the assessee's failure to provide satisfactory explanations regarding the identity, creditworthiness, sources, and genuineness of the transactions.
Sections Cited
68, 132, 148
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Income Tax Appellate Tribunal, MUMBAI BENCH “H (SMC
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal by the Revenue is directed against order dated 29.03.2024 passed by the Ld. Additional/ Joint Commissioner of Income-tax (Appeals), Thiruvanantpuram [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following ground:
"Whether on facts and in the circumstances of the case and in law, the "Whether on facts and in the circumstances of the case and in law, the Whether on facts and in the circumstances of the case and in law, the learned AddI./JCIT (A) erred learned AddI./JCIT (A) erred in deletion the addition made on account in deletion the addition made on account unsecured loan as unexplained cash credits u/s 68 of the Income tax unsecured loan as unexplained cash credits u/s 68 of the Income tax unsecured loan as unexplained cash credits u/s 68 of the Income tax Act, 1961 without appreciating the fact that the assessee had failed to Act, 1961 without appreciating the fact that the assessee had failed to Act, 1961 without appreciating the fact that the assessee had failed to furnish furnish furnish satisfactory satisfactory explanation satisfactory explanation explanation with with regard with regard regard to to to the the the identity, identity, identity, creditworthiness of the parties with regard to the identity of the ess of the parties with regard to the identity of the ess of the parties with regard to the identity of the parties, sources thereof and genuineness of the transactions. parties, sources thereof and genuineness of the transactions." parties, sources thereof and genuineness of the transactions."
Briefly stated, facts of the case are that Briefly stated, facts of the case are that during the course of during the course of search action u/s 132 of Income search action u/s 132 of Income-tax Act, 1961 ( In short ‘the Act’) tax Act, 1961 ( In short ‘the Act’) carried out at the premises of Shri Vipul ied out at the premises of Shri Vipul Vidur Vidur Bhatt and his associates, Shri Bhatt admitted that he was an entry operator Shri Bhatt admitted that he was an entry operator Shri Bhatt admitted that he was an entry operator involved in providing bogus entries in the form of share capital and involved in providing bogus entries in the form of share capital and involved in providing bogus entries in the form of share capital and share premium etc. The Dy. Director of Income share premium etc. The Dy. Director of Income-tax (Inv.), Mumbai, tax (Inv.), Mumbai, who carried out search, informed the Assessing Officer that the who carried out search, informed the Assessing Officer that who carried out search, informed the Assessing Officer that assessee obtained accommodation entries from entities operated assessee obtained accommodation entries from entities operated assessee obtained accommodation entries from entities operated and managed by Shri Shri Vipul Vidur Bhatt. On perusal of the Vipul Vidur Bhatt. On perusal of the information, the Assessing Officer found that assessee is one of the information, the Assessing Officer found that assessee is one of the information, the Assessing Officer found that assessee is one of the beneficiary obtained accommodation entries neficiary obtained accommodation entries in financial year 2011 financial year 2011- 12 i.e. corresponding to assessment year under consideration, i.e. corresponding to assessment year under consideration, from i.e. corresponding to assessment year under consideration, following entities which were claimed to be managed by Shri Vipul following entities which were claimed to be managed by Shri Vipul following entities which were claimed to be managed by Shri Vipul Bhat :
Name of Bogus Name of Beneficiary Name of Beneficiary PAN F.Y. Amount Entities M/s Acute M/s Shipra Developers Pvt. M/s Shipra Developers Pvt. AAICS7124E 2011-12 2011 700,000/- Consultancy Ltd. Ltd. Lunkad Textiles M/s Shipra Developers Pvt. M/s Shipra Developers Pvt. AAICS7124E 2011-12 2011 611,688/- Pvt. Ltd. Ltd. P Saji Textiles M/s Shipra Developers Pvt. M/s Shipra Developers Pvt. AAICS7124E 2011-12 2011 511,200/- Ltd. Ltd. Total 18,22,888/- 2.1 In view of the information, the Assessing Officer recorded In view of the information, the Assessing Officer recorded In view of the information, the Assessing Officer recorded reasons to believe that income escaped assessment and accordingly reasons to believe that income escaped assessment and accordingly reasons to believe that income escaped assessment and accordingly he issued notice u/s 148 he issued notice u/s 148 Act dated 02.03.2017. dated 02.03.2017. During reassessment proceedings, the as reassessment proceedings, the assessee submitted ledger account sessee submitted ledger account of the abovementioned parties along with the return of income, of the abovementioned parties along with the return of income, of the abovementioned parties along with the return of income, balance sheet and profit and loss account etc. The Assessing Officer balance sheet and profit and loss account etc. The Assessing Officer balance sheet and profit and loss account etc. The Assessing Officer has reproduced a copy of the ledger accounts of said three parties has reproduced a copy of the ledger accounts of said three parties has reproduced a copy of the ledger accounts of said three parties which were received by hi which were received by him from the Dy. Director of the Income m from the Dy. Director of the Income-tax (Inv.). After discussing the Assessing Officer made addition of (Inv.). After discussing the Assessing Officer made addition of (Inv.). After discussing the Assessing Officer made addition of Rs.18,22,888/- as unexplained cash credit u/s 68 of the Act. as unexplained cash credit u/s 68 of the Act. as unexplained cash credit u/s 68 of the Act.
On further appeal, the Ld. CIT(A) deleted the addition for the On further appeal, the Ld. CIT(A) deleted the addition for the On further appeal, the Ld. CIT(A) deleted the addition for the reason that assessee t reason that assessee took those loans in earlier years prior to earlier years prior to assessment year under consideration under consideration and therefore, no addition and therefore, no addition could be made in the year under consideration u/s 68 of the Act. could be made in the year under consideration u/s 68 of the Act. could be made in the year under consideration u/s 68 of the Act.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. Before us, the Ld. counsel for the relevant material on record. Before us, the Ld. counsel for the relevant material on record. Before us, the Ld. counsel for the assessee submitted that all the loans in dispute assessee submitted that all the loans in dispute were appearing as were appearing as opening balance in ledger account of those parties ledger account of those parties ledger account of those parties, therefore, the Ld. CIT(A) has validly deleted the addition. The Ld. Departmental Ld. CIT(A) has validly deleted the addition. The Ld. Departmental Ld. CIT(A) has validly deleted the addition. The Ld. Departmental Representative (DR) on the other hand objected and submitted that Representative (DR) on the other hand objected and submitted that Representative (DR) on the other hand objected and submitted that in case of one of the party namely M/s Lunked Textiles Pvt. Ltd. in case of one of the party namely M/s Lunked Textiles Pvt. Ltd. in case of one of the party namely M/s Lunked Textiles Pvt. Ltd. there is a receipt of Rs.1,00,000/ there is a receipt of Rs.1,00,000/- during the year und during the year under consideration and therefore, the Ld. CIT(A) has deleted the addition consideration and therefore, the Ld. CIT(A) has deleted the addition consideration and therefore, the Ld. CIT(A) has deleted the addition without verifying the financial statement along with balance sheet without verifying the financial statement along with balance sheet without verifying the financial statement along with balance sheet of the assessee for the relevant year. He submitted that issue in of the assessee for the relevant year. He submitted that issue in of the assessee for the relevant year. He submitted that issue in dispute may accordingly be required dispute may accordingly be required to send to the file of the AO for file of the AO for verification of the books of accounts of the assessee. On verification verification of the books of accounts of the assessee. On verification verification of the books of accounts of the assessee. On verification of the ledger account of M/s Lunked Textiles Pvt. Ltd. appearing in of the ledger account of M/s Lunked Textiles Pvt. Ltd. appearing in of the ledger account of M/s Lunked Textiles Pvt. Ltd. appearing in the impugned assessment order, w the impugned assessment order, we agree with contention of the Ld. contention of the Ld. DR that in case of M/s Lunked T DR that in case of M/s Lunked Textiles Pvt. Ltd. Rs. 1,00,000/ extiles Pvt. Ltd. Rs. 1,00,000/- is received in the year under consideration received in the year under consideration, which the Ld. CIT(A) has which the Ld. CIT(A) has wrongly treated as received in earlier year wrongly treated as received in earlier year. In such circumstances . In such circumstances veracity of opening balance of other two loans also need verification veracity of opening balance of other two loans also need verification veracity of opening balance of other two loans also need verification from the books o from the books of account coupled with audited financial f account coupled with audited financial statements prepared thereon. In the facts and circumstances of the statements prepared thereon. In the facts and circumstances of the statements prepared thereon. In the facts and circumstances of the case and in the interest of justice, case and in the interest of justice, we feel it appropriate to restore we feel it appropriate to restore the issue of addition u/s 68 of the Act addition u/s 68 of the Act to the file of the Assessing to the file of the Assessing Officer for verification for verification whether the loans were taken during the year whether the loans were taken during the year under consideration under consideration and if that is so, he shall examine the if that is so, he shall examine the genuineness of loans genuineness of loans in accordance with law. The ground of the in accordance with law. The ground of the appeal of the Revenue is accordingly partly allowed for statistical appeal of the Revenue is accordingly partly allowed for statistical appeal of the Revenue is accordingly partly allowed for statistical purposes.
In the result, the appeal of the Revenue is partly allowed for In the result, the appeal of the Revenue is partly allowed for In the result, the appeal of the Revenue is partly allowed for statistical purposes.