2015 (12) TMI 1864 - AT - Income Tax

Addition u/s 68 - Addition of sum received by assessee trust as unsecured loan - onus to prove - CIT -A deleted the addition - HELD THAT - Creditor has explained that the amount was withdrawn from Rajasthan bank Limited and same were deposited in union bank of India and then cheques were issued to the assessee trusts. These facts were also confirmed by AO in remand proceedings also. Now looking at the information that has been gathered by AO from ADIT is very simple which is available in case of every company and is also based on the information filed by those companies as per the Companies Act 1956. Therefore it is the same information which company has uploaded on the website of MCA and same information is supplied by the assessee and lender company to the AO. On perusal of information received it does not suggest that the company is not in existence or the sources of the funds which are given as loan to the assessee trust are not proper in spite of the compliance made by lender by making himself available before AO for examination. It is also not important that whether the company is carrying on any business activity or not but what is important is that funds lent by that company are also shown in the balance sheet of the lender who is assessed to Income Tax - assessee has discharged its onus cast up on as per the provisions of section 68 by proving identity, creditworthiness and genuineness of the transaction and therefore we confirm the order of CIT (A) in deleting the addition - Decided against revenue.

Summary

Issues Involved:
Appeal against deletion of addition u/s 68 of the Income Tax Act - Unsecured loan received by assessee trust from M/s Nishyam Farms (P) Limited.

Analysis:

Issue 1: Addition u/s 68 of the Income Tax Act
The appeal was directed by the revenue against the deletion of addition u/s 68 of the Income Tax Act concerning an unsecured loan of &8377; 2,99,50,000/- received by the assessee trust from M/s Nishyam Farms (P) Limited. The assessee, a trust running a university, received the unsecured loan during the year. The Assessing Officer (AO) made the addition based on information obtained regarding the lender company's fund flow, despite the assessee providing confirmation of the company, director's examination, and audited annual accounts. The CIT (A) deleted the addition, leading to the revenue's appeal.

Issue 2: Arguments and Submissions
The Revenue argued that the lender company did not engage in any business activity and provided a substantial loan to the assessee trust, supporting the AO's decision. The assessee contended that it fulfilled its burden under section 68 by presenting substantial evidence confirming the creditors, leading to the deletion of the addition by the CIT (A).

Issue 3: Analysis and Decision
The Tribunal carefully considered the contentions and evidence presented. The assessee had received the loan from Nishyam Farms (P) Limited and provided extensive documentation to prove the transaction's genuineness, including the director's affidavit, confirmation letter, income tax returns, and bank statements. The sources of funds were explained, and the AO's concerns regarding cash deposits were addressed satisfactorily. The information gathered by the AO from the Ministry of Corporate Affairs (MCA) website did not undermine the transaction's legitimacy. The Tribunal held that the assessee had fulfilled the requirements of section 68 by establishing the identity, creditworthiness, and genuineness of the transaction. Consequently, the Tribunal confirmed the CIT (A)'s decision to delete the addition of &8377; 2,95,00,000/- under section 68 of the Income Tax Act.

Conclusion:
Ultimately, the Tribunal dismissed the revenue's appeal, upholding the CIT (A)'s decision to delete the addition under section 68 of the Income Tax Act. The judgment emphasized the importance of the assessee meeting the burden of proof regarding the loan transaction's legitimacy, which was successfully demonstrated in this case.