2017 (9) TMI 1811 - AT - Income Tax

Addition on account of unsecured loans u/s 68 - whether assessee brought on record all material and evidences to prove the identity and creditworthiness of the lenders and genuineness of the transaction? - HELD THAT - After perusing the assessment records appellate order and the Remand Report it is apparent that the lenders of funds have not at any stage discharged their onus in furnishing documentary evidence in respect of cash deposits made in their accounts and against which loans were advanced to the assessee - the creditworthiness of the lenders and the genuineness of the transaction is not clear. The lenders who were summoned by the AO have not submitted their Income Tax Returns. CIT(A) has rightly confirmed the addition in dispute made by the AO u/s. 68 which does not need any interference on our part - Decided against assessee Denying exemption u/s. 10(23C)(iiiad) - excess of income over expenditure has been shown - as alleged gross receipts of the society are exceeding Rs. One crore and the society has not taken prior approval from the Ld. CCIT - HELD THAT - A notice was issued and assessee society was asked to show cause as to why the exemption claimed u/s 10 23C)(iiiad) should not be withdrawn and excess of income over expenditure should not taxed as per the provisions of Income Tax Act as the gross receipts of the society are exceeding Rs. One crore and the society has not taken prior approval from the Ld. CCIT Panchkula u/s 10(23C) (vi) which is mandatory for claiming exemption. In response the society filed its written reply stating therein that receipt of our school should be kept at Rs. 72, 28, 383/- which is prescribed limit explained in section 10(23c)(iiiad). This contention of the assessee is not genuine because the gross annual receipts of the society exceeding Rs. One crore and society has not taken prior approval from the CCIT Panchkula Therefore the society is not eligible for exemption u/s. 10(23C)(iiiad) - Decided against assessee.

Summary

Issues Involved:
1. Legality and factual correctness of the CIT(A)'s order.
2. Confirmation of addition of Rs. 67,75,000/- as unsecured loans under Section 68 of the Income Tax Act.
3. Denial of exemption under Section 10(23C)(iiiad) amounting to Rs. 7,89,745/-.

Issue-wise Detailed Analysis:

1. Legality and Factual Correctness of the CIT(A)'s Order:
The appellant argued that the order passed by the CIT(A) was both legally and factually incorrect. The Tribunal, however, upheld the CIT(A)'s decision, finding no merit in the appellant's contention that the order was bad in law or on facts. The Tribunal emphasized that the CIT(A) had properly considered the evidence and arguments presented.

2. Confirmation of Addition of Rs. 67,75,000/- as Unsecured Loans under Section 68:
The appellant contended that the CIT(A) erred in confirming the addition of Rs. 67,75,000/- as unsecured loans under Section 68. The appellant had provided material and evidence to prove the identity and creditworthiness of the lenders and the genuineness of the transactions. Despite this, the CIT(A) confirmed the addition, taking an adverse view without conducting any independent investigation. The Tribunal found that the lenders did not discharge their onus of providing documentary evidence for the cash deposits made in their accounts. The creditworthiness of the lenders and the genuineness of the transactions were not established, as the lenders did not submit their Income Tax Returns. Consequently, the Tribunal upheld the CIT(A)'s decision to confirm the addition under Section 68.

3. Denial of Exemption under Section 10(23C)(iiiad) Amounting to Rs. 7,89,745/-:
The appellant argued that the CIT(A) wrongly upheld the AO's action of denying the exemption under Section 10(23C)(iiiad) amounting to Rs. 7,89,745/-. The appellant claimed that the society was eligible for the exemption as its gross receipts from fees and interest were Rs. 72,28,382/-, and the excess of income over expenditure was Rs. 7,89,745/-. However, the AO added the unsecured loan amount to the gross receipts, making it Rs. 1,40,03,382/-, which exceeded the Rs. 1 crore limit. The Tribunal agreed with the CIT(A) and AO, noting that the society failed to discharge its onus regarding the unsecured loan, and thus, the gross receipts exceeded Rs. 1 crore. The society had not obtained prior approval from the CCIT, Panchkula, making it ineligible for the exemption. The Tribunal upheld the CIT(A)'s decision to deny the exemption and add the excess of income over expenditure to the returned income.

Conclusion:
The Tribunal dismissed the appeal, upholding the CIT(A)'s decisions on all grounds. The addition of Rs. 67,75,000/- as unsecured loans under Section 68 and the denial of exemption under Section 10(23C)(iiiad) were confirmed. The Tribunal found that the appellant failed to establish the creditworthiness of the lenders and the genuineness of the transactions, and the society's gross receipts exceeded the prescribed limit without the necessary approval for exemption.