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2019 (6) TMI 930 - AT - Income TaxAddition u/s 68 - proof of identity, creditworthiness and genuineness of the loan obtained - HELD THAT - Each of the two creditors have sufficient funds and assessee has lead all the evidences to discharge its onus under section 68 in respect of identity, creditworthiness and genuineness of the loan obtained by it, because the lenders had sufficient income at their disposal to provide loans to the assessee which is substantiated by their return of income. Lenders are either Pvt. Ltd. Company or a Public Company whose details are available on public domain and the loans have been advanced by the companies through banking channels or from their own funds. However, there is no allegation of the AO that there was cash deposits in the bank accounts by these lenders before providing loans to the assessee and there was no adverse information with the AO in respect of the lenders. CIT(A) has rightly deleted the addition - Decided in favour of assessee. Addition u/s 68 - creditor had little or no income - HELD THAT - The judgment of the Supreme Court in the case of NRA Iron and Steel Pvt. Ltd. 2019 (3) TMI 323 - SUPREME COURT and Delhi High Court in Pr. CIT vs. NDR Promoters Pvt. Ltd. 2019 (1) TMI 1089 - DELHI HIGH COURT are different on facts and distinguishable In the present case, the assessee company has taken loan and on which it is paying interest so there is a justification for the lender company to advance money to the assessee company. Such loan and interest has been duly reflected by the lender company. Nothing adverse has come against the lender company. Further, bank statement of lender company have been submitted to establish the source of the funds along with the balance sheet and the profit and loss account. Evidences and the explanation has been rejected by the AO merely on the basis of doubt without bringing any material to discredit the document and information on record. CIT(A) has also arbitrarily rejected the explanation of the assessee company ignoring the above facts. The assessee has lead all evidences in support of its contention and the identity, creditworthiness and genuineness of the transaction stand established and hence the addition made by the AO is directed to be deleted. In the result, the appeal of the assessee is allowed.
Issues Involved:
1. Addition of unsecured loans as undisclosed income under Section 68 of the Income Tax Act. 2. Deletion of additions by the CIT(A) and the justification for such deletions. 3. Assessment of identity, creditworthiness, and genuineness of transactions related to unsecured loans. Issue-wise Detailed Analysis: 1. Addition of Unsecured Loans as Undisclosed Income under Section 68: The Revenue's appeal contested the deletion of additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The AO had added a total of ?9,46,00,000/- as undisclosed income, questioning the identity, creditworthiness, and genuineness of the transactions related to unsecured loans from various lenders. The AO's scrutiny revealed that the lenders had insufficient income to justify the loans advanced to the assessee, leading to the addition of the loans as undisclosed income. 2. Deletion of Additions by the CIT(A) and the Justification for Such Deletions: The CIT(A) deleted the addition of ?1,11,00,000/- from I World Business Solutions Pvt. Ltd. and ?15,00,000/- from KG Embroidery Mills Ltd., concluding that the lenders had sufficient income and the transactions were genuine. The CIT(A) based his decision on the fact that the lenders had reported substantial income in their returns, and the loans were advanced through banking channels without any cash deposits. The CIT(A) held that the identity, creditworthiness, and genuineness of the transactions had been established. 3. Assessment of Identity, Creditworthiness, and Genuineness of Transactions Related to Unsecured Loans: The Tribunal upheld the CIT(A)'s findings, emphasizing that the assessee had provided all necessary documents, including confirmations, bank statements, and income tax returns of the lenders. The lenders had sufficient funds, and the loans were advanced through proper banking channels. The Tribunal noted that the AO's adverse inferences were based on presumptions rather than concrete evidence. The Tribunal also highlighted that the AO failed to bring any adverse material against the lenders or the transactions. Detailed Analysis of Individual Lenders: 1. AKB Trexim Pvt. Ltd.: The assessee received a loan of ?50,00,000/- from this company. The AO questioned the creditworthiness based on the company's low income. However, the Tribunal found that the company had a net worth of over ?8 crore, including accumulated profits, and the loan was advanced through banking channels. The Tribunal concluded that the identity, creditworthiness, and genuineness of the transaction were established. 2. Luminant Distributors Pvt. Ltd.: The assessee received a loan of ?25,00,000/- from this company. The AO's adverse inference was based on the company's low income and common business premises with another lender. The Tribunal found that the company had a net worth of over ?6 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 3. Fair Securities Pvt. Ltd.: The assessee received a loan of ?50,00,000/- from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?3 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 4. KPC Consultants Pvt. Ltd.: The assessee received a loan of ?30,00,000/- from this company. The AO questioned the creditworthiness based on the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?72 lacs and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 5. Avail Financial Securities Pvt. Ltd.: The assessee received a loan of ?1,00,00,000/- from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?11 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 6. Lovely Securities Pvt. Ltd.: The assessee received a loan of ?1,00,00,000/- from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?11 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 7. Takmin Trading Pvt. Ltd.: The assessee received loans of ?50,00,000/- each on two occasions from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?6.30 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 8. Yashodham Merchants Pvt. Ltd.: The assessee received a loan of ?50,00,000/- from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?17.57 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 9. Modern Credit Pvt. Ltd.: The assessee received loans totaling ?3,00,00,000/- from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?5.36 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 10. YP Finance and Securities Pvt. Ltd.: The assessee received a loan of ?50,00,000/- from this company. The AO questioned the creditworthiness due to the company's low income and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?47.31 lacs and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 11. Mudraksh Investfin Pvt. Ltd.: The assessee received a loan of ?15,00,000/- from this company. The AO questioned the creditworthiness due to non-receipt of replies to notices and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?77.07 lacs and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. 12. RKG Finvest Ltd.: The assessee received a loan of ?50,00,000/- from this company. The AO questioned the creditworthiness due to non-receipt of replies to notices and non-appearance in response to summons. The Tribunal found that the company had a net worth of over ?10.86 crore and the transactions were genuine. The Tribunal upheld the CIT(A)'s deletion of the addition. Conclusion: The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, concluding that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions related to the unsecured loans. The Tribunal found that the AO's addition of the loans as undisclosed income was based on presumptions and not supported by concrete evidence. The Tribunal upheld the CIT(A)'s well-reasoned findings and deleted the additions made by the AO.
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