Merely Because The Transactions Are Made Through Banking Channel Does Not Itself Prove The Creditworthiness

The Mumbai ITAT held that merely because the transactions are made through banking channel does not itself prove the creditworthiness of the lender and genuineness of the transaction. The Bench of Prashant Maharishi (Accountant Member) observed that “Subsequent repayment of the accommodation entry naturally does not show that the originally credit is genuine and provider of the credit is creditworthy of the same”. Facts of the case: The assessee, engaged in business of property developers, filed its return declaring NIL return. Even though the return was not picked up for scrutiny, a notice u/s 148 was issued based on the information received from DGIT, Investigation, that the assessee has obtained an accommodation entry. Since the creditworthiness and genuineness of the transaction was not proved, the AO passed the assessment u/s 143(3) read with section 147 by making an addition of Rs. 40,75,000/- u/s 68 of the Act. This addition was confirmed by the CIT(A). Observations of the Tribunal: The Bench found that assessee has produced the bank statement of self and the lender, which duly mentioned the impugned transactions. However, such evidence does not help in either proving the creditworthiness nor the genuineness of the transactions, added the Bench. The Bench called it very unusual that a company gives loan to the assessee from year to year of huge sum and assessee fails to produce that party in each of the year and still gets away from the rigors of section 68. Finding that the Department had carried a nationwide search on accommodation entry providers, the Bench clarified that the Assessee is required to be prove creditworthiness and genuineness of the transaction based on independent evidence. Therefore, the ITAT restored the matter back to the file of AO for adjudication afresh. Counsel for Appellant/ Assessee: Jitendra Singh Counsel for Respondent/ Revenue: R.R. Makwana Case Title: M/s Sankpal Developers vs Income Tax Officer Case Number: ITA No. 280/Mum/2024 Click here to read/ download the Order

Merely Because The Transactions Are Made Through Banking Channel Does Not Itself Prove The Creditworthiness

Pankaj Bajpai

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