2022 (9) TMI 375 - AT - Income Tax

Addition u/s 68 - addition of unsecured loans - assessee failed to verify the genuineness and creditworthiness of the lenders - Case selected for scrutiny and notice us 143(2) and 142(1) issued - CIT-A deleted the addition - HELD THAT - The assessee has received the unsecured loans from 9 parties who are having the opening balance of unsecured loans with the assessee in the F.Y.2011-12. AR demonstrated the confirmations - We are of the view that the CIT(A) has considered the submissions and evidences and granted the relief. Further the provisions of section 68 of the Act cannot be invoked on the opening balance of unsecured loan. The Ld.AR has demonstrated the Assessment order passed U/sec 143(3) for A.Y.2011-12 of the assessee , where the return of income was accepted. Unsecured loan disclosed in the Balance sheet received by the assessee in the earlier years in full and final settlement with the partnership firm - AR has demonstrated the submissions made before the A.O by letter filed on 27-03-2015 explaining the facts and circumstances of receipt of money in the financial year 2007-08. AR has highlighted the transactions with the details of payments made to the assessee and supporting bank statements of M/s Time Star Ltd which cannot be over looked - DR could not controvert the findings of the CIT(A) with any new evidence or information to take a different view. We find that the CIT(A) relied on the judicial decisions and also the facts, additional evidence, remand report and provisions of Sec. 68 of the Act has passed a reasoned order. Accordingly, we are not inclined to interfere with the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue

Summary

Issues Involved:
1. Deletion of addition under Section 68 of the Income Tax Act, 1961.
2. Deletion of disallowance of interest expenses under Section 57 of the Income Tax Act, 1961.
3. Deletion of addition on account of unsecured loan from M/s Time Star Pvt. Ltd.

Issue-wise Detailed Analysis:

Issue 1: Deletion of Addition under Section 68 of the Income Tax Act, 1961
The Assessing Officer (A.O.) added Rs. 1,94,93,998/- to the assessee's income under Section 68, citing failure to verify the genuineness and creditworthiness of the lenders. The assessee provided loan confirmations during appellate proceedings, which were forwarded to the A.O. for verification. The A.O. reported that the loans were genuine and the opening and closing balances were the same. The Commissioner of Income Tax (Appeals) [CIT(A)] admitted additional evidence under Rule 46A and concluded that the nature and source of the loan transactions were satisfactorily explained. Consequently, the addition was deleted.

Issue 2: Deletion of Disallowance of Interest Expenses under Section 57 of the Income Tax Act, 1961
The A.O. disallowed interest expenses of Rs. 14,17,828/- due to the disallowance of the loan amount under Section 68. During the appellate proceedings, the assessee submitted necessary documents to establish the genuineness of the loan transactions. The A.O. found no discrepancies except for Rs. 89,960/-. The CIT(A) concluded that the interest expenditure was satisfactorily explained and directed the A.O. to delete the addition.

Issue 3: Deletion of Addition on Account of Unsecured Loan from M/s Time Star Pvt. Ltd.
The A.O. added Rs. 3,02,25,000/- to the assessee's income, stating that M/s Time Star Pvt. Ltd. denied the loan transaction and claimed it was a repayment of an outstanding balance. The assessee clarified that the amount was received as a partner of M/s Sadguru Homes. The CIT(A) noted that the A.O. did not properly investigate the evidence provided by the assessee, including bank statements and confirmations. The CIT(A) concluded that the nature and source of the transaction were satisfactorily explained and directed the A.O. to delete the addition.

Conclusion:
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, agreeing that the additional evidence and explanations provided by the assessee were sufficient to establish the genuineness of the transactions. The ITAT dismissed the revenue's appeal, affirming the deletion of additions under Sections 68 and 57, and the unsecured loan from M/s Time Star Pvt. Ltd.