2022 (10) TMI 387 - AT - Income Tax

Disallowance of unsecured loans u/s. 68 - HELD THAT - AO has made the addition of unsecured loans based on his finding that assessee has not filed any document in support of the above unsecured loans. We observe that Ld.CIT(A) has deleted additions with the finding that assessee has filed all the relevant information and gave the finding that loans are from the Shareholders / Directors and related concerns. Therefore, the relevant interest payment on the above said loans are considered to be genuine as well. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A). Bogus purchases - addition as non-genuine purchases on the sole ground that in response to notice u/s. 133(6) of the Act he has not received any replies from all the three parties - AO issued notices u/s. 133(6) to all the three parties since he has not received any response from these parties AO treated the same as non-genuine - HELD THAT - CIT(A) has deleted the additions with the finding that these parties are regular parties, regularly supplying and servicing the assessee in the past as well as in the subsequent AY. The same parties were supplying the material as well as providing services to the assessee in earlier AY, none of the AO disallowed or found any discrepancies in these parties. Therefore, we are inclined to accept the findings of the CIT(A) and we do not find any reason to disturb the findings of the CIT(A). Appeals of the revenue are dismissed.

Summary

Issues Involved:
1. Deletion of Unsecured Loans
2. Disallowance of Interest Expenses
3. Disallowance of Purchases as Bogus

Issue-Wise Detailed Analysis:

1. Deletion of Unsecured Loans:
The Revenue appealed against the deletion of unsecured loans by the Ld.CIT(A). The assessee had filed detailed submissions before the Ld.CIT(A), providing all required details about the borrowing, including confirmations from the parties whose loan amounts were considered unsecured. The Assessing Officer (AO) had issued notices under section 133(6) to the loan creditors but did not receive any confirmations. The Ld.CIT(A) admitted additional evidence from the assessee, including ITR acknowledgements, bank statements, and confirmations from the lenders. The Ld.CIT(A) remitted the information to the AO, who submitted a remand report. The assessee responded, clarifying that the loans were from shareholders and directors, and provided sufficient evidence to prove identity, genuineness, and creditworthiness. The Ld.CIT(A) found that the AO had not properly considered the evidence and deleted the additions. The Tribunal upheld the Ld.CIT(A)'s decision, agreeing that the loans were genuine and the parties had sufficient resources to provide the loans.

2. Disallowance of Interest Expenses:
The AO disallowed interest expenses on the grounds that the unsecured loans were disallowed. The assessee argued that the interest was paid on genuine loans from directors and shareholders, and provided necessary details and TDS certificates. The Ld.CIT(A) deleted the disallowance, noting that since the unsecured loans were genuine, the corresponding interest expenses were also genuine. The Tribunal upheld the Ld.CIT(A)'s decision, agreeing that the interest payments were legitimate and supported by evidence.

3. Disallowance of Purchases as Bogus:
The AO treated certain purchases as bogus because the parties did not respond to notices under section 133(6). The assessee provided detailed submissions and additional evidence, including invoices, bank statements, and TDS certificates, proving the genuineness of the purchases. The Ld.CIT(A) remitted the evidence to the AO, who submitted a remand report. The Ld.CIT(A) found that the AO had not properly considered the evidence and deleted the disallowance. The Tribunal upheld the Ld.CIT(A)'s decision, agreeing that the purchases were genuine and the assessee had provided sufficient evidence to prove their authenticity.

Conclusion:
The Tribunal dismissed the Revenue's appeals for both assessment years, upholding the Ld.CIT(A)'s decisions on all issues. The Tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the unsecured loans, interest expenses, and purchases, and the AO had not properly considered the evidence. The Tribunal agreed with the Ld.CIT(A) that the additions and disallowances made by the AO were not warranted.