2020 (12) TMI 70 - AT - Income Tax

Addition u/s 68 - unsecured loans from individuals, HUF and companies - CIT-A deleted addition holding that the assessee has proved the genuineness of transaction by filing confirmation, PAN, return of income, bank statements etc. - Whether assessee has failed to establish the genuineness of the transactions in question? - HELD THAT - In the present case, there is no evidence on record, to conclude that the amounts of loans in question actually belonged to the assessee and were introduced in the books of account in the name of the creditors. In our considered view, the assessee has discharged the onus of establishing identity and creditworthiness of the lenders and the genuineness of transactions. AO has not pointed out any evidence to rebut the contention of the assessee that the transactions are genuine. In our considered view, the facts of cases relied upon by the revenue are different from the facts of the present case, therefore not applicable to the present case. Hence, we do not find any infirmity in the order passed by the Ld. CIT (A) to interfere with - Decided against revenue.

Issues Involved:

1. Deletion of addition of ?2,20,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961.
2. Evaluation of the genuineness of unsecured loans from individuals, HUF, and companies.
3. Consideration of relevant judicial precedents and their applicability to the case.

Detailed Analysis:

Issue 1: Deletion of Addition of ?2,20,00,000/- as Unexplained Cash Credit under Section 68 of the Income Tax Act, 1961

The revenue challenged the deletion of the addition of ?2,20,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, treating unsecured loans as unexplained cash credits. The Commissioner of Income Tax (Appeals) [CIT(A)] had deleted this addition, holding that the assessee had proved the genuineness of the transaction by filing confirmations, PAN, return of income, bank statements, etc. The revenue contended that the CIT(A) ignored the Supreme Court's decision in Navodaya Castle (P) Ltd., which held that mere submission of PAN and other documents was insufficient for identifying the subscriber company.

Issue 2: Evaluation of the Genuineness of Unsecured Loans from Individuals, HUF, and Companies

The revenue argued that the CIT(A) erred in deleting the addition, ignoring the financial inability of the investors to invest such a large amount and that the explanation offered by the assessee was unsatisfactory. The revenue cited the Bombay High Court's decision in Major Metals Ltd. v. UOI, which upheld the addition under Section 68 when the nature and source of receipt were not satisfactorily explained. The Calcutta High Court's decision in Precision Finance Pvt. Ltd. was also referenced, which held that mere payment by account payee cheque does not establish the genuineness of the transaction.

The assessee's counsel countered by asserting that the onus of establishing the identities and creditworthiness of the parties and the genuineness of the transactions was discharged by submitting PAN Nos., IT returns, confirmations, bank statements, and audited accounts. The counsel argued that the cases cited by the revenue were not applicable to the present case due to different facts.

Issue 3: Consideration of Relevant Judicial Precedents and Their Applicability to the Case

The Tribunal examined the rival submissions and reviewed the material on record, including the cases relied upon by both parties. The CIT(A) had concluded that the assessee discharged the primary onus of furnishing complete details of the lenders to establish their identity, creditworthiness, and the genuineness of transactions. The CIT(A) relied on several judicial precedents, including the Supreme Court's decision in Lovely Exports Pvt. Ltd., which held that the AO could bring amounts to tax in the hands of the investors if their identity, genuineness, and creditworthiness were not proved.

The Tribunal noted that the assessee provided loan confirmations, ITR acknowledgments, income tax computations, and bank statements for the lenders. The transactions were conducted through banking channels, and the assessee furnished the addresses and PAN Nos. of the lenders. The Tribunal referenced the Supreme Court's decision in CIT vs. Orissa Corporation Pvt. Ltd., which held that if the assessee provided the names and addresses of creditors, the onus was on the revenue to pursue the matter with the creditors.

The Tribunal concluded that there was no evidence to suggest that the loans actually belonged to the assessee and were introduced in the books in the name of creditors. The assessee had discharged the onus of establishing the identity and creditworthiness of the lenders and the genuineness of the transactions. The AO failed to provide evidence to rebut the assessee's claims. The facts of the cases cited by the revenue were found to be different from the present case, making them inapplicable.

Conclusion:

The Tribunal upheld the CIT(A)'s findings and dismissed the appeal filed by the revenue, concluding that the assessee had successfully established the genuineness of the transactions and the identity and creditworthiness of the lenders. The appeal for the assessment year 2013-2014 was dismissed.

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