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2022 (10) TMI 606 - AT - Income TaxAddition u/s 68 - unsecured loans received by the assessee company from it s Associate companies - onus to prove - HELD THAT - When the assessee has proved the initial onus lay upon it by proving the creditworthiness and genuineness of the transaction in the matter addition cannot be made under section 68 - Since the Revenue could not bring out any adverse or cogent material to dispute the creditworthiness of the creditors and genuineness of the transaction in the matter or the amount received by the assessee company was in fact from coffers of the assessee company no addition could have been made in the hands of the assessee treating the same as unsecured loans under section 68 - We decline to accept the reasoning recorded by the Ld. CIT(A) while confirming the part addition made in the hands of assessee with regard to two creditors - Allow the grounds of assessee and direct the A.O. to delete the entire addition confirmed by the Ld. CIT(A).
Issues:
Challenge to addition of unsecured loans under section 68 of the I.T. Act, 1961 received from associate companies. Analysis: The appeal was filed against the order of the CIT(A) relating to the Assessment Year 2012-13. The AO had made additions on account of unsecured loans received from associate companies, other expenses, and depreciation, resulting in a revised total income. Penalty proceedings were also initiated under section 271(1)(c) of the I.T. Act. The CIT(A) partly allowed the appeal, leading to further challenge before the Tribunal. The grounds raised in the appeal primarily questioned the additions made under section 68 of the I.T. Act regarding loans received from associate companies. The assessee contended that the loans were genuine, as the companies were listed on stock exchanges and had sufficient funds. The assessee provided documentary evidence to establish the creditworthiness and genuineness of the transactions. The Counsel argued that the initial burden was discharged by the assessee, warranting deletion of the additions. During the hearing, the Departmental Representative supported the lower authorities' decisions, emphasizing the failure of the assessee to prove the genuineness and creditworthiness of the lenders. The CIT(A) upheld certain additions but deleted one. After considering the submissions and perusing the evidence, the Tribunal found that the assessee had sufficiently proven the creditworthiness and genuineness of the transactions with the associate companies. Citing various judicial precedents, the Tribunal highlighted that once the initial burden is discharged by the assessee, no addition under section 68 is warranted. The Tribunal emphasized the importance of thorough investigation by the Revenue before making such additions. Relying on decisions from the jurisdictional High Court, the Tribunal concluded that the additions made by the lower authorities were unjustified. As the Revenue failed to provide adverse material disputing the creditworthiness and genuineness of the transactions, the Tribunal directed the deletion of the entire confirmed addition. In the final judgment, the Tribunal allowed the appeal of the assessee, pronouncing the order in open court on 14.10.2022.
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