2019 (4) TMI 1662 - AT - Income Tax

Addition u/s 68 - unsecured loans received from various friends and family members - HELD THAT - Merely suspicion should not be the basis of addition. There should be some material when the assessee has proved credit by furnishing material in the form of confirmation etc. to discard such evidence. AO should ascertain the veracity of claim of the assessee by summoning the persons who have advanced unsecured loans to the assessee. We therefore set aside the orders of the authorities below and restore this issue to the file of the AO for decision afresh. The AO is hereby directed to verify the claim of the assessee by making necessary enquiries and by giving reasonable opportunity to the assessee.- Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
1. Addition of unsecured loans under section 68 of the Income Tax Act.
2. Failure to provide sufficient opportunity to the assessee.
3. Charging of interest under sections 234C and 234D of the Act.

Analysis:

Issue 1: Addition of unsecured loans under section 68 of the Income Tax Act
The appellant contested the addition of ?5,81,000 as unsecured loans, arguing that the initial burden to prove identity, genuineness, and creditworthiness of lenders was discharged with documentary evidence. The appellant provided a list of lenders, confirmations, acknowledgments of ITR, and STI, along with letters from two parties confirming the loans. The appellant highlighted that all three criteria under section 68 were fulfilled, shifting the onus to the revenue. The appellant criticized the authorities for not verifying the evidence provided and focusing on irrelevant issues. The Tribunal agreed that suspicion alone should not warrant an addition and directed the AO to verify the claims by summoning the lenders, setting aside the lower authorities' decision and allowing the appeal for statistical purposes.

Issue 2: Failure to provide sufficient opportunity to the assessee
The appellant argued that the authorities erred by not providing adequate opportunity to prove the source of credit. The appellant contended that all necessary documentation was submitted and the amount being less than ?20,000 should not raise suspicion. The Tribunal acknowledged the appellant's claim and emphasized the importance of verifying claims by summoning relevant parties, ultimately directing the AO to conduct further inquiries and provide a reasonable opportunity to the assessee.

Issue 3: Charging of interest under sections 234C and 234D of the Act
The issue of charging interest under sections 234C and 234D was deemed consequential and was also restored to the file of the AO for further consideration. The Tribunal did not provide specific details on this issue but indicated that it should be reviewed by the AO.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the additions and directing the AO to re-examine the issues by verifying the claims and providing the assessee with a fair opportunity to present their case.