In a recent case, the Kolkata Bench of The Income Tax Appellate Tribunal ( ITAT ) has held that mere suspicion cannot be a ground for issuance of notice under section 148 of the Income Tax Act, 1961.It was viewed that when the assessee has fulfilled all the three ingredients i.e., identity and creditworthiness of the loan creditors and the genuineness of the transaction by producing documentary evidence then the unsecured loan stands explained.
Keshav Shroff, the assessee being an individual filed his return of income for the relevant assessment year on 30.03.2017 at a returned income of Rs. 2,40,896/-. Return was processed, the case was reopened under section 147 of the Act and a notice under section 148 of the Act was issued to the assessee.
The case was reopened on the allegation that unsecured loan received from the loan creditor M/s. Fast Speed Realcon Pvt. Ltd. by the assessee was bogus based on the statement given by one Mukesh Banka.
The case of the assessee is that the assessee filed submission before the AO by submitting the copy of the loan confirmation, audited balance sheet, ITR acknowledgement, source of funds and the bank statement for the loan creditors, the AO has not considered the submission and simply on the basis of information from the Investigation Wing and statement of Mukesh Banka added the entire loan as unexplained cash credit under section 68 of the Act.
On appeal before the CIT(A) which was rejected. Counsel for the assessee challenges the impugned order of the CIT(A) and the order of the AO on various grounds but his main contention is that CIT(A) has erred in confirming the reopening of the assessment only based on the statement of third party, ignoring the entire material filed by the assessee to substantiate his case.
The assessment was reopened for the reasons that information received from the Investigation Wing, Kolkata that the appellant has received Rs. 15,00,063/- as the beneficiary during FY 201516 from the companies managed and controlled by Sh. Mukesh Banka. It is a definite case of the assessee and he has repeatedly submitted before the AO and the CIT(A) that he does not know any Mukesh Banka.
The appellant has submitted copies of all those documents including the bank statement of the alleged loan provided/accommodation entry provider in support of transaction related to alleged loan claimed by the appellant. But he discarded the same by mere assumption and surmises thereby saying that these documents are mere masks to hide the real nature of the transaction. The CIT(A) discarded those documents without verification and genuineness of the documents and he doubted the same.
Counsel for the assessee argued that when the assessee has fulfilled all the three ingredients i.e., identity and creditworthiness of the loan creditors and the genuineness of the transaction by producing documentary evidence on record such as Copy of A/c of the lender for the succeeding financial year showing repayment of loan through banking channel thus the unsecured loan stands explained
A two-member bench of Dr Manish Borad, Accountant Member & Pradip Kumar Choubey, Judicial Member viewed that mere suspicion cannot be a ground for issuance of notice. Further ,observed that there is nothing in the record brought by the AO to establish any connection of the assessee with Mukesh Banka, there is no transaction made by and with Mukesh Banka as the statement of bank account details reveals. The ITAT allowed the appeal of the assessee.
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