2018 (1) TMI 449 - AT - Income Tax

Additions u/s. 68 - loans from unsecured creditors - assessee had failed to furnish bank statements of the creditors - Held that - We are in agreement with the findings of authorities below that mere furnishing of confirmations and PAN are not sufficient to prove the creditworthiness of the creditors. The assessee has to prove financial capacity of the creditors. The assessee was required to furnish evidence that would show financial worth of the creditors, such as bank statements, to remove the shadow of doubt from the mind of Assessing Officer. Taking into consideration totality of facts, we deem it appropriate to restore this issue back to the file of Assessing Officer in respect of 11 creditors mentioned in the grounds of appeal. The assessee is directed to furnish all necessary documents before the Assessing Officer to prove the genuineness and creditworthiness of the creditors. The Assessing Officer after affording opportunity of hearing to the assessee shall decide this issue, in accordance with law. It is made clear that the Assessing Officer shall not disturb the relief already granted by the First Appellate Authority in respect of addition u/s. 68 of the Act. Appeal of assessee is allowed for statistical purpose.

Summary

Issues:
Assailing confirming of various additions u/s. 68 of the Income Tax Act, 1961.

Analysis:
The judgment pertains to an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2010-11. The primary issue raised by the assessee was the confirming of various additions under section 68 of the Income Tax Act. The Assessing Officer had observed outstanding unsecured loans, leading to additions under section 68. The First Appellate Authority deleted some additions but confirmed a significant amount. The assessee contended that confirmations from creditors were disbelieved, and the Assessing Officer accepted funds' availability for certain creditors. The Department, however, supported the Commissioner's findings, alleging the introduction of fictitious creditors and unaccounted money by the assessee.

The Tribunal noted that the assessee raised multiple grounds challenging the additions under section 68, focusing on loans from unsecured creditors. The Tribunal found that simply furnishing confirmations and PAN details were insufficient to establish the creditors' creditworthiness. The assessee needed to provide evidence like bank statements to prove the financial capacity of the creditors. Therefore, the Tribunal decided to remand the issue back to the Assessing Officer for further verification. The assessee was directed to submit all necessary documents to establish the genuineness and creditworthiness of the creditors. The Assessing Officer was instructed not to disturb any relief granted by the First Appellate Authority concerning the additions under section 68.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for proper documentation to prove the creditworthiness of creditors. The judgment was pronounced on January 3, 2018.