2015 (6) TMI 485 - AT - Income Tax

Addition under section 68 - CIT(A) deleted the addition - Held that - As could be seen from the confirmation from the director of the lender company confirmed that lender has advanced loan of ₹ 50,00,000/- to the assessee through RTGS, out of which ₹ 25,00,000/- was repaid through demand draft by the assessee and they are assessed to income-tax department and PAN details were also provided. In the confirmation new address of the lender was also provided. The lender company also provided its bank account establishing that loan was transferred through RTGS. All these go to show that lender has advanced monies through RTGS to the assessee and the assessee in fact repaid half of the loan to the lender company. It is not in dispute that assessee has not provided confirmations in the course of assessment proceedings. In fact, Assessing Officer has given a finding that assessee also provided confirmation letters from the creditors including M/s. Aditicon Services India Pvt. Ltd. This confirmation letter was not placed before the lower authorities where the lender has given new address. Therefore, subject to verification of the Assessing Officer, as to whether the lender is operating from the said address and this confirmation letter is given by one of the directors of the lender, we uphold the order of the CIT (Appeals) treating the loan transactions as genuine, the identity of the creditor is proved and creditworthiness of the assessee is established as the transaction was routed through banking channels. - Decided partly in favour of revenue for statistical purposes.

Summary

Issues:
1. Addition under section 68 of the Act - genuineness, creditworthiness, and existence of loan creditors.
2. Assessment of loan transaction between the assessee and M/s. Aditicon Services India Pvt. Ltd.
3. Appeal by Revenue against deletion of addition made by Commissioner of Income Tax (Appeals).
4. Verification of identity, creditworthiness, and genuineness of the loan transaction.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11, specifically challenging the deletion of the addition made under section 68 of the Act. The Assessing Officer had added Rs. 50,00,000 as unexplained credit under section 68 due to lack of proof regarding the genuineness, creditworthiness, and existence of the loan creditors. The lender, M/s. Aditicon Services India Pvt. Ltd., was alleged to be non-existent at the provided address, and no directors were produced by the assessee. The Departmental Representative argued that the company did not file returns or annual statements, questioning its credibility.

The Counsel for the assessee contended that the loan transaction of Rs. 50,00,000 was genuine as it was routed through RTGS for property purchase, supported by bank statements of both parties. The lender confirmed the loan and provided a new address, refuting claims of non-existence. The Commissioner of Income Tax (Appeals) accepted the submissions, emphasizing the transaction's legitimacy through banking channels and the repayment of half the loan amount. The identity, creditworthiness, and genuineness of the loan were deemed proven, leading to the deletion of the addition.

Upon review, the Tribunal upheld the Commissioner's decision, acknowledging the lender's confirmation letter, RTGS transfer details, and PAN information provided, indicating the genuine nature of the loan transaction. The Tribunal highlighted the importance of transactions through banking channels and upheld the order treating the loan as genuine, with the identity of the creditor established and the creditworthiness of the assessee confirmed. The appeal by the Revenue was partly allowed for statistical purposes, affirming the authenticity of the loan transaction.

In conclusion, the judgment centered on the verification of the loan transaction's legitimacy, emphasizing the significance of proving identity, creditworthiness, and genuineness, especially in cases involving unexplained credits under section 68 of the Act. The Tribunal's decision rested on the evidence presented, including confirmation letters, bank statements, and RTGS transfers, ultimately supporting the assessee's position and ruling in favor of the deletion of the addition made by the Assessing Officer.