2019 (12) TMI 1158 - AT - Income Tax

Unsecured loan received by the assessee - Addition u/s 68 - HELD THAT - As pursuant to notice issued by AO u/s 142(1) assessee explained that it had received sum of ₹ 16,20,000/- from M/s Dhoot Infrastructure Projects Limited, towards sale of shares to them. Copies of purchase and sale invoices were also furnished by the assessee. Copy of the invoice dated 15-03-2013 of ₹ 16,20,000/- against trade payable in the name of Dhoot Infrastructure Projects Ltd. against sale of equity shares along with copy of the ledger accounts for the period 01-04-2012 to 31-03-2013. We note that the nature of such Trade Payable was also explained to the AO. The assessee furnished the complete details including name, address, PAN, Bank statement highlighting the transaction before the AO. We also note that the Ld. CIT(A) has called for the remand report twice, however, the AO did not raise any adverse view about the veracity of the documents filed by assessee, therefore, the addition of sum received by the assessee as 'advance as unexplained cash credit under section 68 of the Act was not warranted and therefore the Ld CIT(A) rightly deleted the addition. So, we are inclined to confirm the order of the Ld. CIT(A) and dismiss the ground of appeal raised by the revenue.

Summary

Issues Involved:

1. Deletion of addition of unsecured loans under Section 68 of the Income Tax Act for AY 2012-13 and 2013-14.
2. Deletion of addition under Section 14A read with Rule 8D for AY 2012-13 and 2013-14.
3. Deletion of addition of trade payables under Section 68 for AY 2013-14.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Unsecured Loans under Section 68:

For AY 2012-13, the Assessing Officer (AO) added ?10,65,32,302/- as unexplained cash credits under Section 68 of the Income Tax Act, 1961, due to non-compliance by the assessee in producing directors and documents to substantiate the creditworthiness and genuineness of the transactions. The assessee had filed various documents such as loan confirmations, copies of income tax returns, audited financial statements, and bank statements of the lender companies, which were not independently verified by the AO. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting that the AO did not point out any defects in the documents provided by the assessee. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had discharged its onus to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal cited various judicial precedents, including the Supreme Court's decisions, emphasizing that the AO should have made independent inquiries to verify the creditworthiness of the lenders.

For AY 2013-14, similar additions were made by the AO totaling ?1,42,95,699/- and ?1,30,00,000/- as unexplained cash credits. The CIT(A) deleted these additions as well, and the Tribunal upheld the CIT(A)'s decision, reiterating that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the lender companies.

2. Deletion of Addition under Section 14A read with Rule 8D:

For both AY 2012-13 and 2013-14, the AO made additions under Section 14A read with Rule 8D for ?33,70,549/- and ?95,65,382/- respectively. The CIT(A) deleted these additions, noting that the assessee did not earn any exempt income during these years. The Tribunal upheld the CIT(A)'s decision, citing the Calcutta High Court's ruling in CIT Vs. Ashika Global Securities Ltd., which held that no disallowance under Section 14A can be made if there is no exempt income.

3. Deletion of Addition of Trade Payables under Section 68:

For AY 2013-14, the AO added ?16,20,000/- as unexplained cash credits under Section 68, stating that the assessee failed to provide satisfactory explanations and documents regarding trade payables. The CIT(A) deleted the addition, noting that the assessee had provided complete details, including the name, address, PAN, and bank statements of the creditor, Dhoot Infrastructure Projects Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the AO did not raise any adverse views about the veracity of the documents provided by the assessee during the remand proceedings.

Conclusion:

The Tribunal dismissed the revenue's appeals for both assessment years, confirming the CIT(A)'s decisions to delete the additions made by the AO under Section 68 and Section 14A read with Rule 8D, and the addition of trade payables under Section 68 for AY 2013-14. The Tribunal emphasized the importance of the AO making independent inquiries and verifying the evidence provided by the assessee before making any additions.