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2012 (11) TMI 98 - AT - Income TaxAddition under section 68 of the IT Act - unsecured loans - identity and credit worthiness of the loan creditors and the genuineness of the transactions - loan advanced by HUF Held that - assessee has produced the above loan creditors before the AO with sufficient details like Acknowledgments of income tax Returns, copies of profit and loss accounts, balance sheets, confirmation letters, bank statements etc. and since their statement have been recorded by AO u/s. 131 and all of them have confirmed to have given the loans, assessee has discharged the burden cast on him in terms of section 68 of the Income Tax Act addition deleted Regarding loans from mother of the Director Held that - She is an Income tax assessee and derives income from grocery shop and sale of buffaloes and holds around 100 Acres of agricultural land. - Merely because the profit is being determined u/s. 44AF or that the lady does not have any bank account for which she advanced the loan by demand draft to avoid the rigours of provision of section 269SS, the same cannot be a ground to disbelieve the loan amount addition deleted Regarding loan from Director alleged that amount obtained by him from Smt. Priti Mishra does not inspire confidence because she had no sufficient cash balance on those days Held that - Amount advanced by Smt. Priti Mishra has been accepted by the CIT(A). Merely because her income is assessed u/s.44AD, the same cannot be a ground to disbelieve the loan obtained from Smt. Priti Mishra by Sri A.K. Mishra who has advanced as loan to the assessee company - in the instant case could have been made in the hands of Sri A.K. Mishra but definitely not in the hands of the assessee company addition deleted Regarding loan from Sri A.K. Mishra (HUF) - HUF is assessed to tax and the copy of the acknowledgement of income tax Return, computation of income, balance sheet etc. were filed before the AO Held that - Creditor has shown profit of Rs. 60,630/- as indirect income and Rs. 89,820 as profit from Mangalam construction - After considering the opening capital and income during the year and the personal drawings during the year the HUF is left with sufficient funds to advance loan of Rs. 1 lakh during the year addition deleted Regarding loan from Sri Vishnu Mohan Sangle Held that - Loan creditor was not produced before him for his verification. Therefore, the identity of the person remains to be verified - direct the AO to give an opportunity to the assessee to produce the above loan creditor and satisfy the credit worthiness of the loan creditor - appeal filed by the assessee is allowed for statistical purposes. Regarding loans from mother of the Director Held that - She is an Income tax assessee and derives income from grocery shop and sale of buffaloes and holds around 100 Acres of agricultural land. She has also filed an affidavit stating that she is filing return of income since assessment year 1994-1995. The affidavit filed by the loan creditor has not been proved to be false or incorrect. Merely because the profit is being determined u/s. 44AF or that the lady does not have any bank account for which she advanced the loan by demand draft to avoid the rigours of provision of section 269SS, the same cannot be a ground to disbelieve the loan amount addition deleted Regarding loan from Director alleged that amount obtained by him from Smt. Priti Mishra does not inspire confidence because she had no sufficient cash balance on those days Held that - Amount advanced by Smt. Priti Mishra has been accepted by the CIT(A). Merely because her income is assessed u/s.44AD, the same cannot be a ground to disbelieve the loan obtained from Smt. Priti Mishra by Sri A.K. Mishra who has advanced as loan to the assessee company - in the instant case could have been made in the hands of Sri A.K. Mishra but definitely not in the hands of the assessee company addition deleted Regarding loan from Sri A.K. Mishra (HUF) - HUF is assessed to tax and the copy of the acknowledgement of income tax Return, computation of income, balance sheet etc. were filed before the AO Held that - Creditor has shown profit of Rs. 60,630/- as indirect income and Rs. 89,820 as profit from Mangalam construction - After considering the opening capital and income during the year and the personal drawings during the year the HUF is left with sufficient funds to advance loan of Rs. 1 lakh during the year addition deleted Regarding loan from Sri Vishnu Mohan Sangle Held that - Loan creditor was not produced before him for his verification. Therefore, the identity of the person remains to be verified - direct the AO to give an opportunity to the assessee to produce the above loan creditor and satisfy the credit worthiness of the loan creditor - appeal filed by the assessee is allowed for statistical purposes.
Issues Involved:
1. Sustaining addition of Rs. 23,24,680/- out of Rs. 49,39,680/- made by the AO under section 68 of the IT Act. 2. Identity and creditworthiness of loan creditors and genuineness of the transactions. Issue-wise Detailed Analysis: 1. Sustaining Addition of Rs. 23,24,680/-: The assessee challenged the order of the CIT(A) for sustaining the addition of Rs. 23,24,680/- out of Rs. 49,39,680/- made by the AO under section 68 of the IT Act. The AO had noted that the assessee availed unsecured loans amounting to Rs. 49,30,680/- from various persons and asked the assessee to produce these persons along with supporting evidence to prove the identity and creditworthiness of the loan creditors and the genuineness of the transactions. The assessee produced some of the creditors, but the AO observed that there were cash deposits in the bank accounts of these persons immediately before issuing DD/Cheques towards the loans, and in some cases, no supporting evidence for agricultural income was filed. The AO held that the assessee failed to substantiate the unsecured loans and added the loans as unexplained cash credit under section 68. 2. Identity and Creditworthiness of Loan Creditors and Genuineness of Transactions: The assessee argued that all creditors were identified, and some were filing their returns in the same building. The CIT(A) called for a remand report from the AO and deleted additions amounting to Rs. 26,06,000/- but sustained the addition of Rs. 23,24,680/- for certain creditors due to lack of satisfactory evidence regarding their creditworthiness and the genuineness of the transactions. Detailed Analysis of Specific Creditors: - Smt. Anita Singh (Rs. 4,95,000/-): The CIT(A) upheld the addition as the bank account extracts were not provided to verify the source of the loan. The assessee argued that the AO never asked for the bank account and cited the decision of the Hon'ble Supreme Court in the case of CIT Vs. Orissa Corporation Pvt. Ltd., which held that the burden shifts to the revenue once the assessee provides sufficient details. - Mr. Rohit Dubey (Rs. 4,90,000/-): The CIT(A) upheld the addition due to cash deposits in the bank account immediately before issuing cheques. The assessee argued that the creditor confirmed the loan and provided necessary documents. - Mrs. Ram Murti Devi Mishra (Rs. 1,90,000/-): The CIT(A) upheld the addition due to lack of a bank account and the improbability of advancing such a loan from meager capital. The assessee argued that the creditor had sufficient land holdings and income sources. - Mr. Ram Deo Awasthi and Mr. Ram Avtar Shukla (Rs. 90,000/- each): The CIT(A) upheld the additions due to discrepancies in the amounts shown as received and outstanding. The assessee argued that the creditors confirmed the loans and provided necessary documents. - V. M. Sangle (Rs. 2,00,000/-): The CIT(A) upheld the addition as the creditor was not produced before the AO. The assessee argued that the creditor was an income tax assessee and provided necessary documents. - Virangana Mishra (Rs. 40,000/-): The CIT(A) upheld the addition due to lack of financial capacity. The assessee argued that the creditor confirmed the loan and provided necessary documents. - Chandrahas Mishra (Rs. 95,000/-): The CIT(A) upheld the addition due to discrepancies in the amounts shown as received and outstanding. The assessee argued that the creditor confirmed the loan and provided necessary documents. - Anil Kumar Mishra (HUF) (Rs. 1,00,000/-): The CIT(A) upheld the addition due to lack of satisfactory explanation for cash deposits. The assessee argued that the HUF had sufficient funds and provided necessary documents. - Anil Kumar Mishra (Rs. 27,09,680/-): The CIT(A) sustained Rs. 5,34,680/- due to lack of confidence in the source of funds from Smt. Priti Mishra. The assessee argued that the creditor had sufficient funds and provided necessary documents. Conclusion: The Tribunal held that the assessee had discharged the burden cast on him in terms of section 68 by providing sufficient details and producing the loan creditors before the AO. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the additions, except for the loan from Sri Vishnu Mohan Sangle, for which the AO was directed to give an opportunity to the assessee to produce the creditor and satisfy the creditworthiness. The appeal filed by the assessee was allowed for statistical purposes.
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