2022 (7) TMI 743 - AT - Income Tax

Addition of loan creditors - loan from farmers (having agriculture income) - assessee failed to furnish any documentary evidences in support of identity, credit worthiness and genuineness of the transaction - as claim of unsecured loans by the assessee stood unproved and hence, the AO added the same to the income of assessee, treating the same as income from other sources - main grievance of the assessee is that the lower authorities have not properly appreciated the evidences placed before the AO as well as the Ld.CIT(A) - HELD THAT - The copies of the affidavits produced by the assessee before the AO were verified and the said loan creditors were examined on oath and sworn statements were recorded. On examination, the AO has categorically mentioned that all of them are uneducated and having meagre agricultural land and some of them are having savings account with no balance - AO further observed that all of them had given unsecured loans to the assessee on a single day without charging any interest, without any collateral security or guarantee, which appears to be unreasonable and far from reality. Based on this remand report, CIT(A) also observed that creditors are having meagre extent of land and the agricultural income of these land holdings would be sufficient only to manage their livelihood and domestic expenditure. CIT(A) further held that persons with lower income, advancing such a huge amount in a single day is improbable. The main contention of the assessee is that there is nothing wrong in receiving the amount of Rs.25,00,000/- in a single day and they all are agriculturists and they have accumulated profits from their agricultural holdings. But there is no satisfactory evidence about the credit worthiness of the creditors. We are of the view that the assessee failed to establish about the genuineness of the loan transactions except filing the affidavits. Even before us also the assessee has not filed any satisfactory evidence about the loan transactions. Therefore, we do not find any infirmity in the orders passed by the lower authorities and the ground raised by the assessee is dismissed. Unexplained capital/Investment - AO noted that the assessee has made total investment of Rs.20,33,333/- towards first instalment of license fee and first purchase of liquor - assessee has submitted that the assessee is doing business for several years and filing the returns of income regularly and the present investments in business represent his accumulated savings and he has not made any further investment during the year under consideration - HELD THAT - Admittedly, the assessee has not placed any evidence regarding this amount even before the Tribunal to substantiate his claim. In the absence of any evidence, we do not find infirmity in the order passed by the lower authorities and the ground raised by the assessee is dismissed.

Summary

Issues:
1. Unsecured loan creditors of Rs.25,00,000
2. Unexplained capital of Rs.7,97,500

Analysis:

Issue 1: Unsecured loan creditors of Rs.25,00,000

The Assessing Officer (AO) added Rs.25,00,000 to the income of the assessee as income from other sources due to lack of documentary evidences supporting the unsecured loans. The assessee claimed the loans were genuine and produced affidavits of loan creditors. The AO, after a remand report, found the creditors to be uneducated with meager agricultural land and no substantial financial standing. The Commissioner of Income Tax (Appeals) (CIT(A)) upheld the addition, stating that the creditors' economic capacity did not support the loans given on a single day without interest. The Tribunal dismissed the appeal, as the assessee failed to provide satisfactory evidence of the loan transactions' genuineness beyond the affidavits.

Issue 2: Unexplained capital of Rs.7,97,500

The AO added Rs.7,97,500 as unexplained capital, as the assessee could not prove the source of this capital contribution with documentary evidence. The CIT(A) upheld the addition, noting the lack of substantiated agricultural income claims or evidence of the source of the capital. The Tribunal dismissed the appeal, as the assessee failed to provide any evidence to support the claimed capital investment, leading to the conclusion that the amount was sourced from unexplained sources. The orders of the lower authorities were upheld due to the lack of evidence presented by the assessee during the proceedings.

In conclusion, the Tribunal dismissed the appeal in both issues, emphasizing the importance of providing substantial evidence to support claims and transactions in tax assessments.