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2017 (8) TMI 1130 - AT - Income TaxAddition u/s 68 - unsecured loan - genuineness and credit worthiness - Addition on unverified purchases - bogus purchases to suppress the profit - Held that - Assessee has only emphasized that Income Tax Return, PAN and other details have been filed by the assessee before the AO and therefore the credit worthiness of the parties has been established. However, the AR has not provided the details of returned income of the parties and the explanation for deposit of cash by one person immediately before cheques were issued to the appellant. Establishing the credit worthiness and genuine would imply that the parties would be having sufficient surplus savings and funds backed by capital assets to provide loan to the assessee. Merely by providing the Income Tax Return and PAN number is not enough to establish the creditworthiness and genuineness of the unsecured loans. Accordingly, this addition made by the AO was rightly upheld by the Ld. CIT(A) - Decided against assessee Addition on unverified purchases - Held that - it appears that these purchases from M/s Haryana Trading Company and M/s Vishal Traders have been used for suppressing the profits of the business. Even though the books of account have not been rejected, since the AO has clearly established that the purchases were bogus, there is no justification for accepting the contentions of the AR that only part of the purchase should be disallowed. In view of the above observations this addition made by the AO was rightly upheld by the Ld. CIT(A), which does not need any interference on my part, hence, uphold the order of the Ld. CIT(A) on the issue in dispute and dismiss the issue in dispute raised by the Revenue.
Issues:
1. Confirmation of assessment by Ld. CIT(A) at a taxable income of ?36,65,080 with respect to unsecured loans addition. 2. Confirmation of erroneous addition of ?7,20,000 for genuine unsecured loans. 3. Confirmation of erroneous addition of ?21,46,261 for genuine trade purchases. Analysis: 1. The Assessee appealed against the Ld. CIT(A)'s order confirming the assessment made by the AO at a taxable income of ?36,65,080. The AO added ?28,66,261 to the income of the Assessee due to unsecured loans from certain parties, questioning the creditworthiness of the lenders. The Ld. CIT(A) upheld this addition, emphasizing the lack of establishment of creditworthiness by the Assessee. The Tribunal concurred with the Ld. CIT(A)'s decision, stating that merely providing Income Tax Return and PAN numbers is insufficient to prove the genuineness of unsecured loans. The Tribunal upheld the addition, dismissing the Assessee's appeal. 2. Regarding the addition of ?7,20,000 for genuine unsecured loans, the Tribunal noted the AO's concerns about cash deposits in the lenders' accounts preceding the issuance of cheques to the Assessee. The Tribunal agreed with the Ld. CIT(A)'s decision to uphold this addition, as the creditworthiness of the lenders was not adequately established by the Assessee. The Tribunal emphasized the need for surplus savings and capital assets to support the loans, which were not demonstrated by the Assessee. The Tribunal found no reason to interfere with the Ld. CIT(A)'s order on this issue, hence dismissing the Assessee's dispute. 3. The addition of ?21,46,261 for genuine trade purchases was also contested. The AO found discrepancies in the details of purchases from specific companies, highlighting missing tax identification numbers and non-existent addresses upon verification. The Tribunal agreed with the Ld. CIT(A)'s decision to uphold this addition, as the purchases were deemed bogus for profit suppression. Despite the books of account not being rejected, the Tribunal supported the AO's conclusion that the purchases were invalid. The Tribunal dismissed the Assessee's argument that only a portion of the purchases should be disallowed, upholding the Ld. CIT(A)'s order on this issue. The Tribunal found no grounds to interfere with the Ld. CIT(A)'s decision, hence dismissing the Revenue's dispute. In conclusion, the Tribunal upheld the Ld. CIT(A)'s decisions on all issues raised by the Assessee and the Revenue, dismissing the appeals and pronouncing the order on 08-08-2017.
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