In a recent ruling, the Mumbai bench of the Income Tax Appellatte Tribunal ( ITAT ) allowed the appeal filed by the assessee and deleted the addition made by AO under Section 68 of the Income Tax Act 1961, as it was solely based on the third-party evidence, without considering the submissions made by the assessee.
In this case, the assessee is involved in manufacturing and filed its Income Tax Return for the assessment year ( AY ) 2012-13 on 2-09-2012 disclosing a total income of Rs. 1,21,67,790.
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The Assessing Officer ( AO ) reopened assessment under Section 148 of the Income Tax Act, 1961. AO, after going through the facts of the seizure operations at Shri Vipul Vidur Bhatt Group entities, found that the group is engaged in providing accommodation entries in the nature of bogus unsecured loans and the assessee has obtained aggregate unsecured loans of Rs. 1,05,12,704 from two parties.
Although explanations were filed by the assessee, in pursuant to the show cause notice issued by the AO, and observed that the assessee has not satisfied the ingredients under Section 68 of the act and made the addition of Rs. 1,05,12,704/- and also disallowed the claim of interest paid on unsecured loans under Section 37 of the Income Tax Act of Rs. 5,69,622.
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The Commissioner of Income Tax Appeals [ CIT(A) ] upheld the validity of the reassessment, confirmed the action of the AO and dismissed the appeal filed by the assessee.
The counsel on behalf of the assessee contended that the CIT(A) erred in upholding the addition under Section 68 and disallowance of interest under Section 37, despite the assessee providing detailed documentation, including confirmations from loan creditors and relevant financial records.
The counsel on behalf of the department supported the order of the CIT(A).
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The ITAT bench observed that AO has clearly ignored the information submitted by the assessee and unilaterally made an addition under Section 68 of the Income Tax Act, solely on the basis of a statement provided by a third party, discrediting the evidence furnished by the assessee. The bench was of the opinion that the statement of Shri Vipul Vidur Bhatt cannot be used as reliable evidence.
The bench, comprising Girish Agarwal ( Accountant Member ) and Pavan Kumar Gadale ( Judicial Member ) allowed the appeal filed by the assessee.
The assessee was represented by Mr. Karan Jain and revenue by Mr. Ganesh Rakh.
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