2016 (5) TMI 1471 - AT - Income Tax

Addition on account of unsecured loans u/s 68 - assessee was unable to substantiate the genuineness of the transaction and unable to prove the capacity and credit worthiness of the lenders - Held that - Most of the amount has come from the family members/group entities, which are regularly assessed to tax with the same AO and these matters could have been examined and the other allegations of the AO has also been turned down by the CIT(A) on cogent reasons as discussed. Once that is so, then there is no need for making such a wild allegation that the capacity of the lenders has not been proved. Other important fact emerging from records as noted by the CIT(A) that the amount of ₹ 79,90,000/- received from the 12 parties consisting of the family members/group entities have been repaid back in the impugned year itself and on this aspect as pointed out by the ld. Counsel, ITAT in the case of assessee s brother Haresh Majethia has deleted the addition on the ground that if the receipts and repayment of loan is corroborated by the ledger account and bank entries. Here also exactly the same fact is permeating, therefore, following the Tribunal order this amount of ₹ 79,90,000 has to be deleted. On other amount of ₹ 61.50 lakhs also, it is undisputed fact that it has been received from one proprietorship concern of the assessee to another, therefore, it cannot be added as income of the assessee. Thus, on these amounts of loans no adverse inference can be drawn and has rightly been deleted by the CIT(A). As noted above, already an amount of ₹ 46,95,000/- which has been added in the hands of the lenders has already been directed to be deleted by CIT(A) for which there is no dispute by the revenue. Thus, out of ₹ 1,55,10,000/-, sum of ₹ 79,90,000/- and ₹ 61,50,000/- (aggregating ₹ 1,41,40,000) could not have been added in wake of the aforesaid facts. Regarding other small loans also, we agree with the finding of the CIT(A) that the entire onus cast upon the assessee in wake of evidences filed have been fully discharged and accordingly, no addition could be made under the deeming provisions of section 68. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of ?1,55,10,000/- on account of unsecured loans under section 68 due to the assessee's inability to substantiate the genuineness of the transaction and the creditworthiness of the lenders.
2. Whether the Ld. CIT(A) erred in deleting the addition without appreciating the credit entries and the failure of the assessee to discharge the onus of proof.

Detailed Analysis:

1. Deletion of Addition of ?1,55,10,000/- on Account of Unsecured Loans:

The main issue in the appeal was the addition of unsecured loans amounting to ?2,02,50,000/- (disputed amount ?1,55,10,000) received by the assessee from 29 persons. The AO conducted a search and seizure operation under section 132(1) and found that the assessee, through various proprietary concerns and partnership firms, was involved in real estate business. Loose papers revealed several loans taken and given by the assessee and their family concerns. The AO doubted the genuineness of the loans based on field enquiries and statements from some lenders, concluding that the lenders were of little means and unaware of the transactions. The AO added the loans as unexplained cash credits under section 68.

Before the CIT(A), the assessee clarified that the total unsecured loans were ?2,02,50,000/- and not ?2,04,83,832/- as added by the AO. The assessee provided confirmations, PAN cards, bank statements, and other documents to prove the genuineness of the transactions. The CIT(A) deleted the addition, noting that the loans were repaid within the year, and the lenders were either family members or assessed in the same charge.

2. Failure to Appreciate Credit Entries and Onus of Proof:

The AO observed that the lenders had meager incomes and the loans were credited to their accounts before being advanced to the assessee. The AO issued a show-cause notice, but the assessee failed to produce the lenders for cross-verification. The AO concluded that the transactions were bogus. The CIT(A), however, noted that the loans were repaid within the year and the lenders were related to the assessee. The CIT(A) found no instances of cash deposits in the lenders' accounts before advancing the loans and concluded that the transactions were genuine.

The CIT(A) also noted that the AO should have made further enquiries from the respective AOs of the lenders. The CIT(A) held that the assessee had discharged the onus of proving the identity, genuineness, and creditworthiness of the lenders. The CIT(A) deleted the addition based on the evidence provided by the assessee.

Conclusion:

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence to prove the genuineness of the transactions. The Tribunal found that the AO had not brought any specific material to rebut the evidence provided by the assessee. The Tribunal affirmed the CIT(A)'s order and dismissed the revenue's appeal. The Tribunal also noted that similar additions in the case of the assessee's brother were deleted by the Tribunal in an earlier order.

Order:

The appeal of the revenue was dismissed, and the order was pronounced in the open court on 6th May, 2016.