2021 (1) TMI 942 - AT - Income Tax

Addition u/s 68 - unsecured loans as unexplained cash credits - interest therein as unexplained expenditure u/s. 69C - HELD THAT - When the assessee files all necessary evidences on record before the Assessing Officer, then mere failure of the creditor party(ies) to appear cannot form the so basis to invoke sec. 68.- Keeping in mind the detailed evidence as well as judicial precedents, we hold that once the assessee has discharged its onus on identity, genuineness and creditworthiness of running account discharged its onus qua credit side of loan and interest expenditure thereupon before the AO, both the lower authorities have erred in law and on facts in treating the same as unexplained cash credits unexplained expenditure u/s. 68 69C respectively. These two additions made u/s. 68 69C of the Act are directed to be deleted therefore. - Decided in favour of assessee.

Summary

Issues:
Assessment of unsecured loans as unexplained cash credits under section 68 of the Income-tax Act, 1961.
Assessment of interest expenditure on unsecured loans as unexplained expenditure under section 69C of the Income-tax Act, 1961.

Analysis:
The appeal in question pertains to the assessment year 2015-16 and challenges the treatment of unsecured loans and interest expenditure by the lower authorities. The authorized representative of the assessee argued that the lower authorities erred in law by treating the unsecured loans and interest expenditure as unexplained cash credits and unexplained expenditure, respectively. The representative highlighted that the assessee had provided extensive documentation, including loan confirmations, audited accounts, and judicial precedents, to support the legitimacy of the transactions. The representative contended that the creditors were wrongly perceived as accommodation entry providers, and the loans were not unexplained cash credits but genuine transactions.

The Revenue, on the other hand, supported the actions of the lower authorities in treating the unsecured loans and interest expenditure as unexplained cash credits and unexplained expenditure, respectively. However, upon careful consideration of the submissions from both parties, the Tribunal observed that the assessee had submitted a comprehensive paper book consisting of various documents supporting the transactions. The Tribunal noted that the assessee had availed fresh unsecured loans from multiple entities and had made repayments to these entities, indicating a genuine running account maintained by the assessee.

Moreover, the Tribunal referenced judicial precedents to emphasize that once the assessee had provided detailed explanations and evidence regarding the identity, genuineness, and creditworthiness of the transactions, the burden shifted to the Assessing Officer to conduct further verification. The Tribunal cited relevant case laws to support its conclusion that the lower authorities had erred in treating the transactions as unexplained cash credits and unexplained expenditure under sections 68 and 69C of the Act. Consequently, the Tribunal directed the deletion of the additions made by the lower authorities under sections 68 and 69C of the Act.

In light of the detailed evidence presented by the assessee and the legal principles discussed, the Tribunal allowed the appeal of the assessee and pronounced the order in favor of the assessee on 15-12-2020.