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2024 (3) TMI 422 - AT - Income TaxAddition u/s 68 - onus prove - non-compliance by the lender - Treating the loan transaction as a mere accommodation entry - CIT(A) deleted the additions - HELD THAT:- As both assessee as well as lender have produced tell-tale evidences to support the propriety of loan transaction albeit in the remand proceedings. The loan from Sunmoon has not only carried charge of interest but has also been partly repaid prior to search. Such traversing facts requires to be given due weightage. The lender has confirmed the loan. The capacity of loan has not been doubted by the Revenue Authorities. Thus, when seen on standalone basis, one cannot say that identity, creditworthiness of lender and genuineness of transaction is lacking in any manner to a reasonable person instructed in law. Thus, statutory discretion vested with the AO under Section 68 is fairly required to be exercised in favour of the assessee as rightly held by the CIT(A). We also simultaneously note that the AO himself has legitimized the transactions with different parties appearing under the head ‘Entry’ in the loose paper by accepting the bonafides of transactions qua different entities. The transaction with Sunmoon was disputed in isolation on the grounds of non-compliance by the lender. As loose paper found in the course of search do not constitute incriminating material belonging to the assessee per se. As noted, the AO himself has found the other transactions mentioned in the loose paper to be correct and worthy of acceptance. The only transaction qua Sunmoon has been questioned, that too, owing to non responsive lender in the course of original proceedings. As a corollary, the provision of Section 68 has been applied dehors any incriminating material found in the course of search. Such course of action is not permissible in law in the light of Abhisar Buildwell (2023 (4) TMI 1056 - SUPREME COURT] The statement made by the Director of the assessee is required to be read down owing to its retraction. In such circumstances existing the present case, it is difficult to accept the stand of the Revenue that loan from Sunmoon is a mere accommodation entry where it has been demonstrated that the assessee has incurred interest cost as well as displayed his intention to make repayment thereof. Decided against revenue. Unaccounted sales - AO has made estimated addition being 1% of the total sales holding it to be unaccounted sales on the basis of statement of the Director in the course of search proceedings - CIT(A) has referred to several decisions to hold that there is no scope of extrapolation in the search assessment based solely on assumptions and surmises in the absence of any tangible material qua the relevant assessment year - HELD THAT:- We have perused the process of reasoning adopted by the CIT(A) carefully and see no reason to depart therefrom. As observed in several judicial precedents, the additions based on extrapolation of material relating to different other years is not permissible in a search assessment. We thus see no error in the conclusion drawn by CIT(A). The action of the CIT(A) reversing the adhoc additions made by AO without any tangible material qua A.Y. 2013-14 in question is justified on facts as well as in law and thus does not call for any interference. The appeal of the Revenue on this point thus does not hold any water.
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