2019 (11) TMI 1657 - AT - Income Tax

Assessment of trust - bogus unsecured loans - anonymous donations u/s 115BBC - HELD THAT - The Hon ble Apex Court in case of NRA Iron Steel Pvt. Ltd 2019 (3) TMI 323 - SUPREME COURT categorically held that the Assessing Officer is duty bound to investigate the credit worthiness of the creditors / subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name lenders. In the present case, the assessee has given all the details which were required to prove the genuineness, credit worthiness and identity of the lenders which was totally ignored and has not been taken cognizance by the Assessing Officer. The CIT(A) has taken the cognizance of the evidences and has given a justified reason while deleting the said addition. - Appeal of the Revenue is dismissed.

Summary

Issues:
1. Allowance of inter-organization donation
2. Deletion of addition of a specific amount
3. Allowance of depreciation
4. Legitimacy of unsecured loans treated as anonymous donations

Analysis:
1. The appellant, a society registered under the Societies Act, filed an appeal against the order passed by CIT(A)-Meerut for Assessment Year 2013-14. The primary issue was the allowance of inter-organization donation of ?3,20,00,000 by the CIT(A), which the Revenue contested.

2. The CIT(A) allowed the appeal of the assessee by deleting the addition of ?3,20,00,000 and also permitted depreciation of ?2,30,33,137. The Assessing Officer had treated the unsecured loans taken by the assessee as anonymous donations under section 115BBC of the Income Tax Act, 1961, and added it to the income of the assessee. The CIT(A) disagreed with this treatment, emphasizing that the assessee had provided sufficient evidence to prove the identity, genuineness, and creditworthiness of the lenders.

3. The Revenue contended that the CIT(A) did not provide detailed reasoning for excluding the loans from the category of anonymous donations. The Revenue requested a remand for further adjudication on this issue. However, the CIT(A) had already considered all relevant materials submitted by the assessee during the assessment proceedings, leading to the deletion of the addition.

4. The CIT(A) held that the Assessing Officer's action of treating the loans as anonymous donations was unlawful as the assessee had fulfilled its obligation to prove the legitimacy of the transactions. The CIT(A) cited a Supreme Court judgment emphasizing the duty of the Assessing Officer to verify the creditworthiness, identity, and genuineness of transactions, which the AO had overlooked in this case. Consequently, the appeal of the Revenue was dismissed, upholding the decision of the CIT(A) in favor of the assessee.