Section 68/69C Addition: Once repayment through account-payee cheque is established, burden on Revenue to disprove transaction

The assessee, a real estate LLP engaged in property development, had obtained a loan of Rs. 1 crore from Duke Business Pvt. Ltd. during AY 2012-13. The Assessment Officer reopened the assessment based on the Investigation Wing information, alleging the lender to be part of the Praveen Kumar Jain accommodation-entry group. Despite filing confirmations, bank statements, TDS details, and repayment proofs, the Assessing Officer relied solely on Jain’s statement to treat the loan as a bogus entry. He invoked section 69C and added Rs. 1,03,78,740, including disallowance of interest.

Appeal Before CIT(A): The CIT(A) upheld the additions, reasoning that the assessee had not proved creditworthiness or genuineness of the lender.

Main Issue: Whether additions under sections 68 and 69C could be sustained solely on third-party statements when the assessee had furnished complete documentation, and the Revenue failed to disprove repayment or allow cross-examination.

Tribunal Rules: The Tribunal held that the Assessing Officer failed to verify the evidence submitted and did not confront the assessee with any adverse material, contrary to law laid down by the High Court in H.R. Mehta v. ACIT. The Bench observed that once repayment through account-payee cheques is established, the burden shifts to the Revenue to disprove the transaction.

In the absence of any contrary material and the Assessing Officer’s failure to conduct independent verification, the additions under sections 68 and 69C were deleted in full. The assessee’s appeal was thus partly allowed.

To Read Full Judgment, Download PDF Given Below