DCIT Vs Supreme Holdings And Hospitality (India) Limited (ITAT Mumbai)
Conclusion: Addition made under Section 68 for unexplained cash credit was not valid as assessee had provided sufficient evidence to prove the genuineness of unsecured loans received from various lenders and lenders were reputable entities with a clean track record, and the transactions were conducted through proper banking channels. Mere AO’s suspicion without any concrete evidence was not enough to justify the addition.
Held: In pursuance of search, notice u/s.153A was issued and in response, assessee also filed its return of income. AO noted that assessee had taken loan from four parties during the years under consideration. AO questioned the genuineness of one of the loans, alleging links to entities providing accommodation entries. Despite assessee submitting loan confirmations, bank statements, and tax returns of the lenders, AO treated the loan amount as unexplained cash credit under Section 68. The entire allegation of AO seems to be based on finding that these entities were doing some circular trading and they had defrauded the bank by adopting modus operandi of rotation of funds from one entity to another and misusing the LC facility from these banks. Despite making such allegation in the respective assessment orders of these entities, he had applied the profit rate on the sales declared by these entities to assess their income. Nowhere in their cases any deemed income had been assessed or any finding had been given that they were bogus entities not doing business. Once AO had accepted source of these loans in the case of these parties, then how can he made the addition u/s.68 in the hands of assessee. Further, nowhere in the various statements as referred by AO, there was any whisper about the assessee or any question was asked by the searched parties or the authorised officers that any such person or entity had given any kind of accommodation entry to the assessee or the loan given by these parties were bogus. There might be movement of funds from one company to other and overdrawing the money from the banks through Letter of Credit without any credentials at the time of Bill Discounting or for any other purpose, but nowhere there was any finding of investigation wing or any material found or statement during the search, that some unaccounted money had been given by the assessee company to accommodate any loan entry or there was any cash trail. Neither there was involvement of any kind of entry operator nor were these companies found to providing accommodation entry of loan by taking some temporary cash. Without such information or material, there could not be any presumption that these companies had provided bogus entry of loan or the transaction was not genuine. Thus, the finding of the CIT(A) could not be tinkered with. Accordingly, the additions made u/s.68 was deleted and the order of CIT (A) was confirmed.
