When assessee had already repaid unsecured loans along with the interest no addition can be made under Section 68 treating them accommodation entries.
In a recent judgment, ITAT Jaipur held that where assessee had already repaid unsecured loans along with the interest no addition can be made under Section 68 of the Income Tax Act.
ABCAUS Case Law Citation:
4701 (2025) (08) abcaus.in ITAT
There was specific information that the assessee firm, in its books had recorded unexplained bogus entries during the relevant Assessment Year. In a search operation a third party in his statement under section 132(4) admitted accommodation entries.
Therefore, the proceedings u/s 147 of the Act were initiated after recording the reasons in writing. Based on that information, the JAO recorded the reasons and issued notice u/s 148 of the IT Act in accordance with the law.
In response to various notices so issued by the faceless unit of the revenue, the assessee submitted the details called for which inter alia included bank statements, copy of ledger of the loan creditors etc.
The assessee contended that the creditworthiness, genuineness of transactions and identity of the loan creditors were proved beyond doubt
The Assessing Officer opned that though the assessee retracted from the statement but the statements recorded under Section 132(4) of the Act have great evidentiary value and it cannot be discarded in a summary and cryptic manner, by simply observing that the assessee retracted from his statement.
The AO for verifying the credit worthiness of the loan creditor, examined the ITR V and observed that the loan creditor had only shown a meagre income during the year and complete ITR, B/s & P&L of both the entities were not submitted by the assessee. Therefore, creditworthiness of both these entities cannot be established.
Based on these observations the AO held that entries were unexplained credits in the books of account of the assessee and hence attracts provisions of Section 68 of the Act.
The Tribunal observed that the AO recorded that the assessee had not furnished concrete documents in support of his claim that the above loan transactions and they were in the nature of accommodation entries. The AO did not specify what other concrete evidence that he want and what is the mistake that had been observed on the above documents so produced by the assessee.
The Tribunal noted that the primary onus which was on assessee to furnish relevant details such as creditworthiness, genuineness and identity of the parties so as to prove that these transactions are not accommodation entries had already been provided. The AO failed to establish that these transactions were accommodative transactions as the assessee had filed confirmation from the parties, bank statement of the loan creditor highlighting the debit entries in the statement and interest received, audited accounts of the loan creditors and therefore, the primary onus casted upon the assessee had been discharged by the assessee by placing on record the evidence of identity of the depositor, source (bank statement of the loan depositors] and genuineness of the loans (filling the confirmation and ITR).
The Tribunal further noted that even though while making the addition the AO considered the interest paid to those depositors as genuine and thereby used dual standard on the same very facts.
The Tribunal further noted that the addition were proposed based on the statement of the assessee that he had provided accommodation entries through his shell companies. However, the very basis for making the statement was retracted and the assessee had placed on record all the evidence that is required to prove the onus casted upon the assessee.
The Bench further noted that in the case of the assessee interest were also paid which were not disallowed by the AO and the assessee had already repaid those unsecured loans along with the interest and therefore the contention of the assessee gets more strength as the assessee repaid those unsecured loans.
The Tribunal held that when loan stands repaid no addition under Section 68 can be made as held by the Hon’ble Gujarat High Court.
Accordingly, the appeal of the assessee was allowed.
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