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2021 (5) TMI 303 - AT - Income TaxUnsecured loans u/s 68 - AO observed that the assessee had shown unsecured loans from various parties in its balance sheet - CIT-A deleted the addition and directing the ld AO to allow interest paid on such unsecured loans - HELD THAT - Once the assessee has furnished the complete details about the loan creditors together with their latest addresses as available with it and affidavits from directors duly notarised including details of loan repayments made to those companies and confirmations from them for the loans advanced to the assessee, the onus cast on the assessee u/s 68 of the Act stands duly discharged and no addition could be made in its hands merely on because the lenders fail to appear before the ld AO or the assessee failing to produce them before the ld AO. See M/S. ORCHID INDUSTRIES PVT. LTD. 2017 (7) TMI 613 - BOMBAY HIGH COURT No addition could be made on mere presumption that the assessee routed its own cash in the form of unsecured loans without any concrete evidence to this effect. See M/S. ACQUATIC REMEDIES PVT. LTD. 2018 (8) TMI 347 - BOMBAY HIGH COURT As the directors of the lending companies had filed affidavits confirming the loan transactions before the ld AO which had not been disputed. Once the averments made in the affidavit are not disputed or refuted, the same are to be construed as true and correct, as held by the Hon ble Supreme Court in the case of Mehta Parikh Co. 1956 (5) TMI 4 - SUPREME COURT . We find no infirmity in the order of the ld CIT-A deleting the addition made towards unsecured loans u/s 68 of the Act and correspondingly allowing interest on such unsecured loans by duly appreciating the facts and evidences on record. Grounds raised by the revenue are dismissed.
Issues Involved:
1. Justification of deletion of addition of ?2,86,00,000/- on account of unsecured loans under Section 68 of the Income Tax Act. 2. Justification of allowing interest paid on unsecured loans amounting to ?2,80,828/-. Detailed Analysis: 1. Justification of Deletion of Addition of ?2,86,00,000/- on Account of Unsecured Loans under Section 68 of the Income Tax Act: The primary issue revolves around whether the Commissioner of Income Tax (Appeals) [CITA] was justified in deleting the addition of ?2,86,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The AO had observed that the assessee, a partnership firm engaged in property development, had unsecured loans totaling ?7,77,18,378/- from various parties. During the assessment proceedings, the assessee furnished loan confirmations, ITR acknowledgments, balance sheets, and bank statements of the lenders. However, the AO noted that information from the DGIT (Inv.) Mumbai indicated that some of these lenders were involved in providing bogus accommodation entries. Consequently, the AO issued notices under Section 133(6) to verify the identity and creditworthiness of the loan creditors. While three parties responded, the AO found their financial disclosures insufficient and unverifiable. Notices to the remaining four parties were returned unserved. The AO concluded that the assessee failed to prove the creditworthiness and genuineness of the transactions and treated the loans as unexplained cash credits under Section 68. The CITA, however, observed that the AO did not conduct any independent inquiry and relied solely on the statement of a third person without corroborative evidence. The CITA emphasized that the assessee had submitted all necessary documents, and the AO failed to point out defects in these documents. The CITA stated that once primary documents are submitted, the onus shifts to the AO to prove their non-genuineness. The AO's failure to discharge this onus led the CITA to delete the addition. 2. Justification of Allowing Interest Paid on Unsecured Loans Amounting to ?2,80,828/-: The interconnected issue pertains to whether the CITA was justified in directing the AO to allow the interest paid on such unsecured loans amounting to ?2,80,828/-. Since the CITA found the loans to be genuine and deleted the addition under Section 68, the corresponding interest on these loans was also allowed. Tribunal's Observations and Conclusion: The Tribunal noted that the assessee had repaid the loans to the lenders within the relevant assessment years. It also referenced previous tribunal decisions where loans from six of the seven lenders were accepted as genuine. The Tribunal emphasized that the assessee had provided comprehensive details about the loan creditors, including affidavits and confirmations, thereby discharging its onus under Section 68. The Tribunal cited judicial precedents affirming that no addition could be made merely because lenders failed to appear before the AO or the assessee could not produce them. The Tribunal concluded that the CITA's order was justified, as the AO did not provide concrete evidence to dispute the genuineness of the transactions. Consequently, the Tribunal dismissed the revenue's appeal, upholding the deletion of the addition and the allowance of interest on unsecured loans. Final Judgment: The appeal of the revenue was dismissed, and the order pronounced in the open court confirmed the CITA's decision to delete the addition of ?2,86,00,000/- and allow the interest of ?2,80,828/- on unsecured loans.
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