Deposits cannot be treated as Bogus merely because of common Directors

PCIT And Another Vs Anshika Consultants Pvt. Ltd (Allahabad High Court)

The case of PCIT And Another vs. Anshika Consultants Pvt. Ltd before the Allahabad High Court deals with the treatment of deposits received by the assessee and whether they can be deemed as bogus solely due to common directors in two companies. Here’s a breakdown of the judgment:

The Income Tax Appellate Tribunal, Delhi Bench ‘A’, New Delhi, in its order dated 13.09.2023 in Income Tax Appeal No. 35/Del/2022 for A.Y. 2015-16, partially allowed the appeal, dismissing the appeal of the revenue regarding alleged unexplained credits under Section 68 of the Income Tax Act, 1961 (the Act).

The revenue filed the present appeal against the Tribunal’s order, raising several questions of law:

1. Whether the Tribunal erred in law by deleting the addition made on account of bogus unsecured loans received by the assessee, despite the assessee’s failure to establish the sources of the receipts?
2. Whether the Tribunal erred in law by failing to acknowledge the primary onus of proving the genuineness of transactions, as well as the identity and creditworthiness of the lender, lying on the assessee?
3. Whether the Tribunal erred in law by deleting the additions made on account of bogus unsecured loans, despite the assessee’s failure to explain their sources?
4. Whether the Tribunal erred in law by disregarding the amendments to Section 68 brought by the Finance Act, 2012, considering that most lender entities accrued the majority of their net worth in the form of shareholdings of related entities with common directors?

The Assessing Officer disallowed certain loan amounts received by the assessee from three corporate entities and added them to the assessee’s income as undisclosed investment. However, the CIT (Appeals) ruled in favor of the assessee, leading to the revenue’s appeal to the Tribunal.