2014 (7) TMI 334 - AT - Income Tax

Addition u/s 68 of the Act Unsecured loan - Creditworthiness of the transactions not proves Held that - CIT(A) was rightly of the view that the addition has noted that before AO, Shri Ronak Trivedi the partner of Kesha Developers has informed that he was not filling his return of income and neither could he inform about the source of loan of ₹ 31,00,000/- extended to the Assessee - Kesha construction was left with very meager balances after lending the amount to the Assessee and Kesha Developer was not found existing in the PAN Data Base of the Income-tax Department - Kesha Construction and the Assessee firm were having same set as partners - nothing has been brought on record by the Assessee to contradict the findings of AO and CIT(A) thus, there was no reason to interfere with the order of CIT(A) Decided against Assessee.

Summary

Issues:
Appeal against order of CIT(A)-XV for A.Y. 2007-08 - Addition of Rs. 31,00,000 under section 68 of the Act.

Detailed Analysis:
1. The Assessee, engaged in the business of Developers Contractors, Building Organizers, filed its return for A.Y. 2007-08 declaring total income of Nil. The assessment under section 143(3) resulted in the determination of total income at Rs. 31,00,000, leading to an appeal before CIT(A) and subsequently before the ITAT.

2. Grounds raised by the Assessee primarily challenged the addition of Rs. 31,00,000 under section 68 of the Act, questioning the creditworthiness of the lender and the source of unsecured loans received. The appeal was based on the contention that the lender's source of income was not verified adequately.

3. During assessment proceedings, it was found that the Assessee had taken unsecured loans from various parties. The Assessee failed to substantiate the claim by providing confirmations, proof of identity, and creditworthiness of the transactions. The A.O concluded that the creditworthiness of the lender was not established under section 68 of the Act, adding the unsecured loan as income.

4. The CIT(A) upheld the A.O's order, emphasizing that the lender and the Assessee firm had the same partners, indicating a lack of genuineness in the transaction. The CIT(A) noted discrepancies in the banking transactions and the lack of creditworthiness of the creditor, leading to the confirmation of the addition under section 68.

5. The ITAT, after considering the arguments, upheld the CIT(A)'s decision, stating that the Assessee failed to provide any evidence to counter the findings regarding the creditworthiness of the lender and the authenticity of the transaction. As a result, the appeal was dismissed, affirming the addition of Rs. 31,00,000 under section 68 of the Act.

This detailed analysis outlines the progression of the case, from the initial assessment to the final decision by the ITAT, focusing on the key issue of the addition under section 68 of the Act and the lack of substantiation by the Assessee to challenge the findings of the authorities.