2018 (12) TMI 1452 - AT - Income Tax

Addition of unsecured loans followed by disallowance of interest paid thereupon - identity, genuineness and creditworthiness of the creditors / family members - Held that - We find no merit in Revenue s instant arguments. It has come on record that the assessee has obtained its unsecured loans of ₹62 lac from ten family members including three related HUFs. We find from the corresponding tabulation in the case file that six of the said parties involved opening balances as well. This means that the assessee has carried forward preceding years closing balance of loans in this impugned assessment year. The very loans had attained finality therefore as the AO nowhere raised any objection in earlier assessment years. We notice that taxpayer has placed on record not only his creditors confirmations but also their entire detailed evidence in the nature of income tax returns, computation, capital account, balance-sheet, bank statement, affidavits etc. All of them are stated to be assessed in the same jurisdiction. The assessee has also repaid the impugned loans in eight cases in full / part alongwith interest involving TDS deduction. We take into account all these voluminous debtors to conclude that the CIT(A) has rightly deleted the impugned unsecured loans and interest as the assessee satisfied all the relevant particulars of identity, genuineness and creditworthiness of his creditors / family members. Revenue s appeal is dismissed.

Summary

Issues involved:
Appeal against the Commissioner of Income Tax (Appeals) order regarding addition of unsecured loans and disallowance of interest under section 143(3) of the Income Tax Act, 1961.

Analysis:
The appeal concerned the addition of unsecured loans and disallowance of interest by the Assessing Officer, which was reversed by the Commissioner of Income Tax (Appeals). The Tribunal considered the detailed discussion provided by the CIT(A) regarding the loans received by the assessee from family members and relatives. The CIT(A) highlighted that the loans were received and repaid through account payee cheques, with interest paid after TDS deduction. The Tribunal noted that the burden of proof was on the Assessing Officer to show that the loans were bogus, and found that the assessee had sufficiently discharged the requirements under section 68 of the Act. Detailed analysis of individual loan transactions was provided, showing explanations and supporting evidence for each loan received and repaid. The Tribunal concluded that the additions made by the AO were not maintainable and deleted the entire addition of unsecured loans and interest.

The Tribunal further discussed the arguments presented by the appellant, emphasizing the source of income of the creditors and factual inconsistencies regarding family members and related HUFs. It was observed that the assessee had obtained unsecured loans from family members, with some loans carrying forward from previous years. The Tribunal noted that the assessee had provided detailed evidence including creditors' confirmations, income tax returns, bank statements, and other documents, demonstrating the identity, genuineness, and creditworthiness of the creditors. Additionally, the repayment of loans along with interest and TDS deduction was considered. Based on the evidence presented, the Tribunal upheld the CIT(A)'s decision to delete the unsecured loans and interest, as the assessee had satisfied all relevant criteria regarding the loans.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of unsecured loans and interest. The judgment highlighted the importance of fulfilling the requirements under section 68 of the Act and providing substantial evidence to support loan transactions with family members and relatives. The Tribunal emphasized the need for the Assessing Officer to prove any allegations of bogus loans and upheld the principle that the apparent state of affairs is considered real unless proven otherwise.