2018 (10) TMI 924 - AT - Income Tax

Addition u/s 69A on account of unexplained unsecured loans - Held that - There is a material on record and finding of fact by the Ld. CIT(A) which has not been rebutted by the department that out of the said amount added by the AO, sums aggregating to ₹ 89,42,500/- were in fact cheques given to the assessee on 31.3.2010 which were not presented to the bank before the end of the year and once the amount has not been received during the year nor credited in the bank account of the assessee or in the books, then no addition for amount of ₹ 89,42,500/- could have been made. The remaining balance amount of ₹ 45,02,898/- relates to purchases made from M/s. Raj Overseas, where regular running ledger account and other documents like purchase bills, etc., were produced before the authorities below to show that it is a genuine purchase transaction and how this amount has been treated as unsecured loan by the AO is not clear. Apart from these facts, it is also noted that these parties in response to the notices u/s 133(6) have clearly confirmed this aspect, but AO without applying his mind on the material available on record has made the addition simply because these persons could have furnished their replies along with documentary evidences. Such observation de hors any material facts or evidences, we do not find any reasons for such an addition, therefore it has rightly been deleted by the Ld. CIT(A). - Decided in favour of assessee.

Summary

Issues involved:
- Deletion of addition of unexplained unsecured loans made by the revenue under section 69A for the assessment year 2010-11.

Detailed Analysis:
1. The appeal was filed by the revenue and Cross Objection by the assessee against the order dated 21.5.2015, challenging the deletion of addition of ?1,34,45,398/- made under section 69A on account of unexplained unsecured loans for the assessment year 2010-11.
2. The assessee, engaged in manufacturing and trading, accepted and repaid unsecured loans during the year. The AO held the loans as not genuine under section 69A due to lack of reliable documentary evidence from parties despite responses to notices u/s 133(6) and summons u/s 131.
3. Before the Ld. CIT(A), the assessee explained that a portion of the addition related to uncleared cheques received at the end of the year and returned in the subsequent year. The remaining amount was for purchases wrongly treated as unsecured loans. The Ld. CIT(A) noted discrepancies in the AO's assessment and accepted the assessee's explanation based on submitted documents.
4. The Ld. CIT(A) found that the unsecured loans in the balance sheet did not match the addition made by the AO. He considered the documents provided by the assessee, including financial statements, loan details, affidavits, and bank statements of lenders, to conclude that the loans were genuine, especially since transactions were through banking channels and parties were regular income tax assesses.
5. The Tribunal observed that a significant portion of the added amount was for uncleared cheques not credited during the year, and the rest related to genuine purchases from a specific entity. The AO's lack of proper assessment and reliance on absence of documentary evidence without considering the material provided led to the deletion of the addition by the Ld. CIT(A).
6. The Tribunal dismissed the appeal of the revenue and Cross Objection as the addition of unexplained unsecured loans was found to be unjustified based on the detailed analysis and evidence presented during the proceedings.

This detailed analysis highlights the discrepancies in the AO's assessment, the assessee's explanations supported by documentary evidence, and the subsequent decisions by the Ld. CIT(A) and the Tribunal leading to the deletion of the addition of unexplained unsecured loans.