2022 (6) TMI 1147 - AT - Income Tax

Addition u/s 68 - unsecured loan - main thrust of the assessee to explain the cash credit in the shape of unsecured loan is that its account are audited under section 44AB of the Act and Audit Report was filed alongwith the return of income - assessee further explained that the loan from Kumar Nagendra is explained by the assessee by filing a copy of account and bank statement of the party but the same was ignored by the authorities - HELD THAT - The assessee has failed to discharge its onus as required under section 68 of the Act to prove the identity of the loan creditor, creditworthiness of the loan creditor and the genuineness of the transaction. Accordingly, the Assessing Officer made this addition. As assessee explained the loan from Kumar Nagendra is explained by the assessee by filing a copy of account and bank statement of the party but the same was ignored by the authorities. Except this explanation the assessee has not brought anything on record to prove the identity of the loan creditors, creditworthiness of the loan creditor and genuineness of the transaction Since the assessee has not produced any documentary evidence in respect of the unsecured loan from Munna Kumar, we find that the assessee failed to discharge its primary onus to prove the identity and creditworthiness of the loan creditor as well as genuineness of the transaction. As regards the unsecured loan of Rs. 40 Lac from Kumar Nagendra is concerned, the Assessing Officer as well as the CIT(A) has recorded this fact from the bank statement that a cash was deposited immediately prior to issuing of D.D. in favour of the assessee. Merely filing the bank statement by the assessee would not discharge the onus cast upon it to prove the creditworthiness of the loan creditor and genuineness of transaction particularly when the cash was deposited in tranches within a short spam of about ten days before issuing a D.D. in favour of the assessee. In the absence of any material brought on record before us to counter the finding of the Assessing Officer as well as the CIT(A), we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. Accordingly, the impugned order of the CIT(A) is upheld. - Decided against assessee.

Issues:
Addition under section 68 of the Income Tax Act for unsecured loans from two creditors.

Analysis:

Issue 1: Addition under section 68 for unsecured loan of Rs. 40 Lac in the name of Kumar Nagendra
- The assessee contested the addition under section 68 for an unsecured loan of Rs. 40 Lac in the name of Kumar Nagendra, arguing that the loan was genuine and backed by proper documentation.
- The Assessing Officer and the CIT(A) found discrepancies in the cash deposits made prior to issuing a Demand Draft in favor of the assessee from Kumar Nagendra's account, raising doubts about the genuineness of the transaction.
- The CIT(A) upheld the addition, stating that the assessee failed to prove the creditworthiness of the creditor and the genuineness of the transaction, despite submitting bank statements and account details.
- The Tribunal agreed with the CIT(A)'s decision, emphasizing that the onus to establish the legitimacy of the loan was not met by the assessee, leading to the dismissal of the appeal.

Issue 2: Addition under section 68 for unsecured loan of Rs. 30 Lac in the name of Munna Kumar
- The assessee also challenged the addition under section 68 for an unsecured loan of Rs. 30 Lac in the name of Munna Kumar, which was mistakenly recorded in the balance sheet under Kumar Nagendra's name.
- The CIT(A) corrected this error and deleted the addition related to the loan from Kumar Nagendra, providing relief of Rs. 30 Lac to the assessee.
- However, the Tribunal noted that the assessee failed to provide sufficient documentary evidence to prove the legitimacy of the unsecured loan from Munna Kumar, resulting in the confirmation of the addition by the CIT(A).
- The Tribunal upheld the CIT(A)'s decision, highlighting the lack of evidence regarding the identity and creditworthiness of the loan creditor and the genuineness of the transaction, leading to the dismissal of the appeal.

Conclusion:
The Tribunal affirmed the CIT(A)'s decision to uphold the additions under section 68 for unsecured loans from both creditors, as the assessee failed to adequately substantiate the legitimacy of the transactions. The appeal was dismissed, emphasizing the importance of meeting the burden of proof in such cases.

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