2018 (11) TMI 133 - AT - Income Tax

Addition u/s 68 - amount of unsecured loans taken during the year - creditworthiness of the lenders were not established whereas the lenders have duly accepted the notices under Section 133(6) - Held that - Out of the total lenders 16 were from Ghatkopar but CIT(A) doubted the trasactions on this basis also. Moreover, opening of account in one bank could not be a basis for doubting the transactions. Revenue authorities have not disputed the interest paid during the year which is duly paid/discharged by the assessee after deducting tax at source. It is very surprising and strange that the Revenue has accepted interest on loan but the genuineness was doubted which appears to be fallacious and wrong. The case of the assessee is supported by case of CIT vs. Orissa Corporation Pvt. Ltd. 1986 (3) TMI 3 - SUPREME COURT wherein held that where the assessee has given names and addresses of the alleged creditors and the said creditors were in the knowledge of the Revenue authorities to be income tax assessees and their index numbers were in the file of Revenue, the Revenue did not pursue the matter further apart from issuing notices under Section 131 of the Act. Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. Thus there was no effort made to pursue the so called alleged creditors. The Court further held that if Tribunal came to the conclusion that the assessee has discharged the burden they lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. Thus set aside the order of the CIT(A) by holding that the assessee has duly discharged the its onus by filing the necessary evidences before the authorities below and therefore addition by the AO u/s 68 of the Act is ordered to be deleted. The appeal of the assessee is allowed.

Summary

Issues Involved:

1. Addition of ?2,27,50,000/- under Section 68 for unsecured loans (A.Y. 2010-11).
2. Addition of ?27,97,283/- on account of interest paid on unsecured loans (A.Y. 2012-13).
3. Addition of ?20 lakhs under Section 68 for an unsecured loan from Smt. Rachana Ravan (A.Y. 2013-14).
4. Addition of ?32,08,252/- on account of interest paid on unsecured loans (A.Y. 2013-14).

Issue-wise Detailed Analysis:

1. Addition of ?2,27,50,000/- under Section 68 for unsecured loans (A.Y. 2010-11):

The assessee's appeal was against the CIT(A)'s order confirming the addition of ?2,27,50,000/- under Section 68 of the Act. The AO had treated these loans as unexplained cash credits due to the failure to establish the creditworthiness and genuineness of the lenders. Despite the assessee submitting bank statements, ITRs, confirmations, and PAN details, the AO concluded that the creditworthiness of the lenders was not established. The CIT(A) upheld this view, noting that the lenders were not available at the given addresses and that the assessee failed to produce them for verification.

However, the Tribunal found that the assessee had discharged the primary onus by providing necessary documentation. The Tribunal observed that the Revenue did not carry out further investigations despite receiving responses to notices under Section 133(6). The Tribunal cited several judicial precedents, including CIT vs. Orissa Corporation Pvt. Ltd., which held that once the assessee provides sufficient evidence, the onus shifts to the Revenue. The Tribunal concluded that the Revenue's acceptance of interest on the loans while doubting their genuineness was contradictory. Consequently, the addition of ?2,27,50,000/- was deleted, and the appeal was allowed.

2. Addition of ?27,97,283/- on account of interest paid on unsecured loans (A.Y. 2012-13):

This issue was related to the interest paid on the unsecured loans treated as bogus in A.Y. 2010-11. Since the Tribunal had already decided that the loans were genuine in ITA No. 1633/Mum/2017, it applied the same rationale to this appeal. The Tribunal directed the AO to delete the disallowance of ?27,97,283/-, and the appeal was allowed.

3. Addition of ?20 lakhs under Section 68 for an unsecured loan from Smt. Rachana Ravan (A.Y. 2013-14):

The AO had added ?38 lakhs as unexplained cash credit, which the CIT(A) partly allowed, sustaining ?20 lakhs. The CIT(A) doubted the genuineness of the loan due to the lender's low income. The assessee provided confirmation letters, bank statements, PAN, and addresses of the lender. The Tribunal found that the assessee had discharged the onus by providing necessary evidence, and it was the Revenue's responsibility to carry out further investigations. The Tribunal applied its findings from ITA No. 1633/Mum/2017 and directed the AO to delete the addition of ?20 lakhs, allowing the appeal.

4. Addition of ?32,08,252/- on account of interest paid on unsecured loans (A.Y. 2013-14):

This issue pertained to the interest paid on unsecured loans treated as bogus in A.Y. 2010-11. Since the Tribunal had already decided that the loans were genuine, it directed the AO to delete the disallowance of ?32,08,252/-, and the appeal was allowed.

Conclusion:

The Tribunal allowed all the appeals filed by the assessee, setting aside the orders of the CIT(A) and directing the AO to delete the respective additions. The Tribunal's decisions were based on the assessee having discharged the initial onus of proof and the Revenue's failure to conduct further investigations, supported by various judicial precedents.