DCIT Vs Meridian Chem Bond Private Limited (ITAT Pune)
Does Proving the Three Main Ingredients by Assessee U/S 68 Shift the Burden of Proof On AO?
Assessee is a company that duly files its return of income. The Revenue carried a search in case of another group concern & it was discovered that it was engaged in the business of providing accommodation entries by way of bogus sales/ purchases/ loans & advances. Assessee was found to be one of the beneficiaries of these transactions. Hence, AO reopened the assessment by issuing notice u/s 148. Loans taken from the searched group were assessed as unexplained cash credit u/s 68 in the hands of assessee. Interest expenditure on the same was assessed as unexplained expenditure. Further, purchase of diamonds from a concern relating to the group was treated as bogus in nature & an estimated profit on the same was assessed to tax.
CIT(A) deleted the additions made by AO on the grounds that Section 68 requires assessee to prove the nature & source of credits found in the books of accounts, to the satisfaction of AO. Assessee submitted that it had discharged its onus by proving three main ingredients, namely, identity of the creditors, creditworthiness & genuineness of the transactions. Assessee had submitted the following: confirmation of accounts, income tax returns, bank statements showing loan transactions, audited balance sheet and P&L A/c, payment of interest to creditors after subjecting the amount to TDS & details of repayment of loans. CIT(A) held that there was no inconsistency in receipt of loans & the source could not be doubted. Additionally, AO could not gather enough evidence to prove that transactions with the said group were bogus & fictitious. Once assessee has proved the three main ingredients to delete such additions, onus was now on the Revenue to prove otherwise. Since Revenue failed to do so, CIT(A) deleted the additions made by AO & the same was upheld by Tribunal on further appeal by Revenue.
