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Facts
The assessee, a property developer, had an assessment for A.Y. 2014-15. A notice under Section 148 was issued based on information that the assessee obtained an accommodation entry of ₹40,75,000/- from M/s Nazar Impex Pvt. Ltd. The Assessing Officer added this amount to the assessee's income under Section 68 as unexplained cash credit, which was confirmed by the CIT(A).
Held
The Tribunal noted that while the assessee provided documents like PAN, IT Return, confirmation, and bank statements, they failed to produce the lender for examination to prove identity, capacity, and genuineness. The Tribunal distinguished the facts from a prior year's appeal where a similar addition was deleted, emphasizing that the assessee has a duty to independently prove the creditworthiness and genuineness of the transaction.
Key Issues
Whether the addition of ₹40,75,000/- as unexplained cash credit under Section 68 of the Act is justified, given the assessee's failure to produce the lender for examination.
Sections Cited
143(3), 147, 148, 68, 132, 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Sankpal Developers (assessee / appellant) against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] for A.Y. 2014-15, dated 27th December, 2013, wherein the appeal filed by the assessee against the assessment order under Section 143(3) read with section 147 of the Act dated 17th December, 2018, passed by the Income Tax Officer, Ward-25(1)(1), Mumbai, was dismissed.
“1. On the facts and circumstances of the case, the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the "NFAC"] erred in passing the order dated 27th December, 2023 upholding the action of the Income Tax Officer, Ward - 25(1)(1), Mumbai [hereinafter referred to as "Ld. A.O.'] in passing the assessment order dated 17th December 2018 under section 143(3) read with section 147 of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] determining total income of the Appellant at Rs.40,75,000/- as against Nil returned income. The Appellant strongly objects to the impugned order passed by NFAC as the same is illegal, arbitrary and perverse on the following amongst other grounds which are urged without prejudice to one another: -
Treating the unsecured loan as unexplained cash credit under section 68 of the Act unjustified- Rs.40,75,000/- i. The NFAC fell in error of law in upholding the action of the Ld. A.O. in treating the unsecured loan amounting to Rs.40,75,000/- borrowed from Nazar Impex Pvt. Ltd as unexplained cash credit under section 68 without appreciating that provision of section 68 of the Act is not applicable in the Appellant's case. Hence, the addition made by Ld. A.O. is bad in law and the same may be deleted. iii. The NFAC further failed to appreciate that the loan was borrowed in the normal course of business activity through banking channel and the same was repaid also through banking channel. Hence, treating the unsecured loan amounting to Rs.40,75,000/- borrowed from Nazer Impex Pvt. Ltd as unexplained cash credit under section 68 of the Act is unjustified and the same may be deleted. iv. The NFAC further failed to appreciate that the Ld. A.O. has made the addition relying on the statements of certain parties obtained during the search and seizure action carried out under section 132 of the Act on the said parties, without providing the appellant an opportunity to cross examine them. Thus the impugned addition of Rs.40,75,000/- is made against the gross violations of principals of natural justice and the same may be deleted.
The assessee preferred the appeal before the learned CIT (A), wherein the addition was confirmed for the reason that assessee failed to substantiate the creditworthiness of the lender and genuineness of the transactions. He further held that M/s Nazar Impex Pvt. Ltd. has a meager profit of ₹2.83 lacs and net worth only ₹17 lacs which did not correspond to the amount of loan of ₹40,75,000/- given to the assessee. The assessee aggrieved with that and is in appeal before us.
The learned Authorized Representative submitted on identical facts in earlier year the addition of ₹50 lacs was made on account of bogus loan in the hands of the assessee, In for A.Y. 2013-14, dated 14th July, 2023, the SMC bench has deleted the addition by allowing the appeal of the assessee. Therefore, the issue is squarely covered in favor of the assessee.
The learned Departmental Representative vehemently supported the orders of the lower authorities. It was submitted that assessee is found to have obtained loan from the bogus accommodation entry provider from Mr. Rajendra Jain, an accommodation entry provider of ₹40,75,000/- for which the assessee has failed to prove the genuineness and creditworthiness of the transactions. It was submitted that the order of SMC bench stated by the learned Authorized Representative goes against the assessee for the simple reason that in the last year same
We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused the order of the SMC in for A.Y. 2013-14 dated 14th July, 2023, in case of the assessee, wherein the addition was made in the hands of the assessee under Section 68 of the Act of ₹50 lacs on account of accommodation entries from M/s Nazar Impex Pvt. Ltd. entity operated by accommodation entry provider Mr. Rajendra Jain, was deleted. The facts in this case shows that when assessee was questioned about obtaining the loan of ₹40,75,000/- from M/s Nazar Impex Pvt. Ltd.
We have carefully considered the order of the SMC dated 14th July, 2023, in this case also in paragraph no.3, it was recorded that assessee was directed to produce the party but assessee did not. The co-ordinate Bench was specifically of the view that assessee has produced the bank statement of the lender and bank statement of the assessee. We find that if cheque of Rs.40,75,000/- has been obtained by the assessee naturally, such transactions will appear in the bank statement of the lender as well as the bank statement of the assessee. This evidence does
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 09.07. 2024.