The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has held that the unsecured loans and share application money could not be bogus in the absence of evidence as to identity and creditworthiness of creditors and genuineness of transaction.
The assessment was reopened in the case of the assessee, Inter Globe Finance Ltd on the report of the investigation wing that the assessee had obtained the accommodation entries with the help of a bogus/shell company namely Satyatej Vyapaar Pvt. Ltd. The assessee filed objections against the reopening of the assessment, however the same was dismissed by the Assessing Officer.
Thereafter, the assessment was completed by the Assessing Officer under Section 143(3) of the Income Tax Act read with Section 147 of the Income Tax Act, wherein, the Assessing Officer referred to the statements recorded by the investigation wing on an earlier occasion of three persons during some survey action in the case of some other assessee, wherein, the said persons had admitted of providing accommodation entry through Satyatej Vyapaar Pvt. Ltd. to the assessee company.
The Assessing Officer, therefore, held that the unsecured loans/share application money shown by the assessee to had been received from Satyatej Vyapaar Pvt. Ltd. were bogus and accordingly made the impugned addition into the income of the assessee.
Abhijit Kundu, on behalf of the assessee submitted that the assessee was a non-banking financial company. The business activity of the assessee was taking loan at a lower rate of interest from some parties and disbursing the same at a higher rate of interest to other persons/parties. That the assessee during the year had taken loan from various parties, however, the additions had been made only in the case of one party named above.
He also submitted that additions could not have been made solely on the basis of retracted statements of some persons recorded under Section 133A of the Income Tax Act in some other case, in the absence of corroborative incriminating evidence against the assessee.
He further contended that the satisfaction of the Assessing Officer regarding the escapement of income was a borrowed satisfaction based on the report of the investigation wing and the Assessing Officer did not make any effort to correlate and verify the said information with the assessment record.
P. Jhunjhunwala, appeared on behalf of the revenue.
The two-member Bench of Sanjay Garg, (Judicial Member) and Girish Agrawal, (Accountant Member) observed that the satisfaction/reasons to believe of escapement of income by the Assessing Officer were not based on his own belief after verification of the facts, rather, the Assessing Officer had reopened the assessment on the basis of mere information of investigation wing without correlating and verifying the same with the assessment records.
The Bench dismissed the appeal filed by the revenue holding that the Assessing Officer had not pointed out any defect or infirmity in the evidence and documents furnished by the assessee to prove the identity and creditworthiness of the creditors and genuineness of the transactions.
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