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2024 Supreme(Online)(ITAT) 3676
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Dr. B. R. R. Kumar, ACJ, Sh. Kul Bharat, J
ITO WARD-24(1) NEW DELHI – Appellant
Versus
SUN INTRASTATE PVT. LTD. NEW DELHI – Respondent
ITA No. 1469/Del/2023 | ITA No. 1470/Del/2023
For the Appellants/Petitioners: Ms. Deepti Chandola, Sr. DR
For the Respondents: Sh. Gautam Jain, Adv., Sh. Lalit Mohan, CA
The reassessment under Section 68 requires the Revenue to prove the illegitimacy of credit entries, while the taxpayer must establish the identity, creditworthiness, and genuineness of transactions, which the taxpayer successfully demonstrated.
Headnote:(A) Income Tax Act, 1961 - Section 68 - Appeals against orders of National Faceless Appeal Centre - The Revenue contested deletion of addition of Rs.31.80 Cr. made under Section 68, alleging failure of the assessee to prove genuineness and creditworthiness of the loan from an entity deemed a shell company. (Para 2)
(B) Burden of proof - The assessee established identity, creditworthiness, and genuineness of the transactions with relevant documentation including bank statements and confirmations, thus fulfilling the onus under Section 68. (Paras 5.6, 11)
(C) Genuineness of transactions - The statement of a former director of the alleged paper company was deemed irrelevant as he was not associated with the company during the relevant time, undermining the Revenue’s assertions. (Paras 12)
Facts of the case:
The Revenue's appeal was predicated on a significant loan transaction which the Assessing Officer considered dubious and leading to an addition under Section 68 for unexplained cash credit. The CIT(A) reversed this finding, determining the assessee had provided adequate evidence supporting the legitimacy of the loan.
Findings of Court:
The Tribunal upheld the CIT(A)'s decision, emphasizing lack of adequate inquiry by the Assessing Officer and the failure to disprove the assessee's documentation supporting the transactions.
Issues: Whether the addition made under Section 68 for unexplained credits is justified given the evidence presented by the assessee, and whether the Assessing Officer conducted adequate investigations.
Ratio Decidendi: The court acknowledged that the mere presumption based on past relationship and financial standing of a loan provider without substantial evidence does not suffice to classify transactions as sham, reasserting the necessity for due diligence in assessing such claims.
Result: Appeals of the Revenue dismissed.
| Table of Content |
|---|
| 1. procedure for appealing tax decisions. (Para 1 , 2) |
| 2. details on transactions with grand realcon. (Para 3 , 4) |
| 3. arguments presented by both parties. (Para 5 , 6) |
| 4. assessment officer's analysis of transactions. (Para 7 , 8) |
| 5. determination on creditworthiness of grand realcon. (Para 10 , 11) |
| 6. final ruling on the appeal. (Para 12 , 13) |
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the Revenue against the orders of National Faceless Appeal Centre (NFAC), Delhi dated 17.03.2023.
2. Since, the issue involved in both the appeals are similar, they were heard together and being adjudicated by a common order. The only difference is in amount involved. In ITA No. 1469/Del/2023 is taken as a lead case. Following grounds have been raised by the Revenue:
“1. The ld. CIT(A) has erred in deleting the addition of Rs.31.80 Cr. made u/s 68 of the Income Tax Act, 1961 wihtout appreciating that the assessee failed to prove the genuineness and creditworthiness of the loan taken from M/s Grand Realcon Pvt. Ltd.”
3. In this case, notice u/s 148 of the Income Tax Act, 1961 has been issued to the assessee on 31.03.2021 against which the assessee filed ITR and filed replies to the notices issued u/s 142(1) of the Act. As per the reasons provided to the assessee on 17.12.2021, the Income Tax department has received information that the assessee had transactions with M/s Grand Realcon Pvt. Ltd. whose Director has given statement on oath accepting that M/s Grand Realcon Pvt. Ltd. is a paper company and no real business is being conducted by the company. On 04.02.2022, objections were filed by the assessee to the reasons recorded and requested the AO to provide copy of statement of Directors which was relied upon for opening of the case u/s 147 of the Act on 16.03.2022. The copy of the statement was provided to the assessee and the assessment proceedings continued culminating into conclusion of assessment proceedings on 29.03.2022 making addition u/s 68 of the amounts received from M/s Grand Realcon Pvt. Ltd.
4. Aggrieved, the assessee filed appeal before the ld. CIT(A) who deleted the addition made by the AO on the grounds that the assessee could provide identity, creditworthiness and genuineness of the party M/s Grand Realcon Pvt. Ltd.
5. Aggrieved, the Revenue filed appeal before the Tribunal. Before us, the ld. DR relied on the order of the Assessing Officer and the ld. AR supported the order of the ld. CIT(A).
6. Heard the arguments of both the parties and perused the material available on record.
7. We have gone through the Assessment Order containing 28 pages and the order of the ld. CIT(A) containing 9 pages. The Assessing Officer sought details from the assessee viz., copy of ledger account of M/s Grand Realcon Pvt. Ltd., copy of bank statement along with bank book evidencing that the amount has been received through proper banking channel. Before the AO, the assessee submitted copy of confirmation of accounts, ITR acknowledgment copy, copy of bank statement and copy of financial statement of M/s Grand Realcon Pvt. Ltd. The Assessing Officer after giving commentary about what constitutes accommodation entries, entry operator, jama kharchi company, beneficiaries held that M/s Grand Realcon Pvt. Ltd. is showing meager capital and meager turnover and hence the company could not have given advances of such huge amounts to the assessee. Further, the AO held that the notices issued u/s 133(6) have not been complied by M/s Grand Realcon Pvt. Ltd. The Assessing Officer has also relied on the statement of Sh. Pradip Dey recorded u/s 131 of the Act on 30.03.2015 by the Investigation Wing of Kolkata.
8. For the sake of ready reference, the relevant part of the order of the Assessing Officer is reproduced as under:
“The assessee company submitted copy of ledger extracts of Grand Realcon Private Limited, for FY 2015-16, Bank Extracts of said transactions, Balance sheet of Grand Realcon Private limited e
