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2021 (9) TMI 1018 - AT - Income TaxUnexplained cash credit - unsecured loan u/s 68 - HELD THAT - The companies being Pvt. Ltd. Company have all the details of their identity including address and financial data s on the portal of Ministry of Corporate Affairs available for the public. The assessee has also filed copies of bank invoices and the income tax return to prove the source. Prima facie in our view the assessee discharged its onus to prove the source of alleged cash credits before AO. Thereafter the burden shifts on to the revenue authorities to disprove such documents or to find any discrepancy in such documents, which has not been found by the revenue authorities in the instant appeal. PAN No. of the alleged cash creditors was very much available with AO. No reports seem to have been called from the counterpart Ld. Assessing Officer having jurisdiction over the alleged cash creditors. The assessee has limited means to call for elaborate information required by AO. Looking to the list of documents filed by the assessee to explain the cash credit we find that nothing more could have been possible for assessee to explain the identity and creditworthiness of the cash creditors and genuineness of the transactions. Thus the assessee has successfully discharged its onus by explaining source of cash credit of loan of ₹ 2.70 cr. received during the year by placing relevant documentary evidences to our satisfaction which have not been found to be untrue/incorrect by the revenue authorities. We, thus set aside the finding of Ld. CIT(A) and delete the addition of ₹ 2.70 cr. made u/s 68 - Decided in favour of assessee. Disallowance of prior period interest - loan from HDFC bank was taken in the name of one of the partner - Interest payable on this loan from HDFC Bank was claimed as a business expenditure by the assessee as the loan was utilized for business purposes - HELD THAT - CIT(A) has not doubted the utilization of loan for the business purpose. Ld. DR failed to controvert this fact that the loan taken from HDFC bank has been utilized for any other purpose other than for business of the firm. Audited balance sheet supports the contention made by the assessee and also there is no difference in the ultimate tax liability as it was subject to tax on the same rate in the preceding years as in the current year. Our view is supported by the judgment in the case of GLAXO SMITHKLINE ASIA (P) LTD. 2010 (10) TMI 21 - SUPREME COURT - we are of the considered view that the claim of prior period interest needs to be allowed - Decided in favour of assessee.
Issues Involved:
1. Addition of ?2,70,00,000/- as unexplained unsecured loan under Section 68 of the Income Tax Act. 2. Disallowance of ?60,61,225/- as prior period interest. 3. Disallowance of ?35,12,470/- and ?12,00,625/- as interest paid on unsecured loans for Assessment Years 2012-13 and 2013-14 respectively. Issue-wise Detailed Analysis: 1. Addition of ?2,70,00,000/- as Unexplained Unsecured Loan Under Section 68: The assessee, a partnership firm, received unsecured loans from five companies amounting to ?2,70,00,000/-. The Assessing Officer (AO) added this amount to the assessee's income under Section 68 of the Income Tax Act, citing that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions despite providing PAN, audited balance sheets, bank advice, and confirmations. The AO's decision was based on the non-receipt of information from the creditors in response to notices issued under Section 133(6). The assessee argued that all transactions were through banking channels, interest was paid, and TDS was deducted. The assessee provided extensive documentation, including PAN, bank statements, income tax returns, and audited financial statements of the creditors. The Tribunal observed that the AO did not find any discrepancies in these documents and did not provide the assessee an opportunity to cross-examine the creditors. The Tribunal referred to several judicial precedents, including the Hon’ble Bombay High Court in H.R. Mehta vs. ACIT and the Hon’ble Supreme Court in CIT Vs Orissa Corporation (P) Ltd, which emphasized that once the assessee provides sufficient documentary evidence, the burden shifts to the revenue authorities to disprove the evidence. The Tribunal also noted that similar creditors were accepted as genuine in the case of M/s Motisons Entertainment (India) Pvt. Ltd. by the Jaipur Bench ITAT. The Tribunal concluded that the assessee had successfully discharged its onus under Section 68 by providing ample documentary evidence, and the AO failed to disprove this evidence. Hence, the addition of ?2,70,00,000/- was deleted. 2. Disallowance of ?60,61,225/- as Prior Period Interest: The assessee claimed prior period interest of ?60,61,225/- on a loan taken from HDFC Bank in the name of one of its partners, Mr. Vaibhav Rai. This interest was for the financial years 2007-08 to 2009-10, which was inadvertently not claimed earlier. The AO disallowed this claim, and the CIT(A) confirmed the disallowance, questioning the utilization of the loan for business purposes. The Tribunal noted that the loan was reflected in the audited balance sheets of the assessee and was utilized for business purposes. The Tribunal also referred to the Hon’ble Supreme Court judgment in Glaxo Smithline (Asia) P Limited, which supports the claim of prior period expenses if they pertain to the business. The Tribunal found that the interest was indeed a business expenditure and allowed the claim of ?60,61,225/-, setting aside the CIT(A)’s disallowance. 3. Disallowance of ?35,12,470/- and ?12,00,625/- as Interest Paid on Unsecured Loans: For the Assessment Years 2012-13 and 2013-14, the AO disallowed interest payments of ?35,12,470/- and ?12,00,625/- respectively, on the grounds that the unsecured loans were treated as unexplained under Section 68. Since the Tribunal deleted the addition of ?2,70,00,000/- under Section 68 in ITANo.335/Ind/2018, the basis for disallowing the interest payments no longer existed. Consequently, the Tribunal allowed the interest claims for both years, setting aside the findings of the lower authorities. Conclusion: The Tribunal allowed the assessee's appeals for all three assessment years, deleting the addition of ?2,70,00,000/- under Section 68, allowing the prior period interest of ?60,61,225/-, and permitting the interest payments of ?35,12,470/- and ?12,00,625/- for the respective years.
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