2016 (1) TMI 1020 - AT - Income Tax

Addition u/s 68 - Held that - Transactions were all made through account payee cheques through banking channels and creditors are identifiable and the loans were mainly obtained from them to deposit the TDS amount into government account in the course of carrying on the business. The loans were repaid through banking channels. Counsel submits that at that point of time the assessee could not produce creditors confirmations before the Assessing Officer . He pleads for one more opportunity for submission of confirmations before the Assessing Officer. Taking the totality of the facts and circumstances of the case into consideration, we are of the view that since the transactions are made through account payee cheques, the identity of the creditors cannot be doubted. However, the burden is on the assessee to produce creditors confirmations and to explain the sources of loans. In the interest of justice, we are inclined to give one more opportunity to the assessee to establish the identity, credit worthiness and genuineness of the transactions. Thus, we set aside the impugned order and restore the issue back to the file of the Assessing Officer and the assessee shall prove the identity, creditworthiness and genuineness of the transactions to the satisfaction of the Assessing Officer - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Delay in filing the appeal
2. Disallowance of unsecured loans and interest under section 68 of the Income Tax Act

Analysis:

Issue 1: Delay in filing the appeal
The appellant filed an appeal against the order of the Commissioner of Income Tax (Appeals) after a delay of thirty-one days. The appellant explained that the delay was due to the original appellate order being misplaced and later found. The appellant contended that the delay was unintentional and requested condonation. The Tribunal, after considering the reasons provided, condoned the delay in the interest of justice and admitted the appeal.

Issue 2: Disallowance of unsecured loans and interest under section 68 of the Income Tax Act
The Assessing Officer disallowed unsecured loans shown by the assessee from two individuals as the assessee failed to prove the genuineness, identity, and creditworthiness of the creditors. The Commissioner of Income Tax (Appeals) upheld this disallowance. The appellant argued that all transactions were conducted through banking channels, with loans received and repaid via cheques. The appellant claimed that the loans were used to make payments towards TDS to the government and that the creditors were identifiable. The Departmental Representative supported the lower authorities' decision, stating that the appellant did not provide sufficient explanation to prove the genuineness of the transactions.

The Tribunal noted that the transactions were made through account payee cheques, indicating the identity of the creditors. However, the burden was on the assessee to produce creditors' confirmations and explain the sources of loans. In the interest of justice, the Tribunal granted the assessee one more opportunity to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal set aside the previous order and remanded the issue back to the Assessing Officer for further examination, with the direction to provide the assessee with a fair hearing.

In conclusion, the appeal of the assessee was allowed for statistical purposes, and the Tribunal provided the assessee with an opportunity to prove the legitimacy of the unsecured loans and interest payments under section 68 of the Income Tax Act.

Order pronounced on 30th October 2015 by the Appellate Tribunal ITAT Chennai.