2023 (3) TMI 114 - AT - Income Tax

Addition u/s. 68 towards Loan - identity, creditworthiness and genuineness of transactions - HELD THAT - From the details placed on record before us, we observe that so far as the first creditor, Shri Prakashbhai Shivbhai is concerned, the assessee has placed on record confirmation from such creditor. Further, we also observe that the creditor is having PAN and had filed return of income of approximately Rs. 2,50,000/- for assessment years 2016-17 2017-18, he is a mechanical engineer by profession and has been working for M/s. Ajanta India Ltd. for past many years, copy of his bank passbook was also furnished. We also observe that the aforesaid loan was also repaid back by the company to Shri Shivlal Manjibhai and copy of account statement reflecting the repayment to Shri Prakashbhai Shivbhai has also been produced before us. Accordingly, assessee has been able to substantiate identity, creditworthiness and genuineness of transactions in respect of unsecured loan taken from Shri Prakashbhai Shivbhai. Second creditor Shri Shivlal Manjibhai, we observe that the assessee has filed various details like copy of confirmation from Shri Shivlal Manjibhai before ld. CIT(A), copy of agricultural forms Shri Shivlal Manjibhai, copy of confirmation from Smt. Laxmiben Manjibhai dated 10- 06-2021 to the effect that he had advanced a sum of Rs. 97,000/- to Shri Shivlal Manjibhai, copy of agricultural forms of Shri Shivlal Manjibhai were also furnished before ld. CIT(A) during the course of appellate proceedings. Assessee has also produced extracts of the bank statement reflecting repayment of the above amount back to Shri Laxmiben Manjibhai which was repaid through banking channel. Assessee has been able to establish identity, creditworthiness and genuineness of the transaction in respect of both the unsecured loans. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing appeal due to Covid-19 pandemic.
2. Addition of unsecured loans under section 68.
3. Rejection of appeal by CIT(A) based on lack of creditworthiness of depositors.
4. Assessee's challenge to CIT(A)'s decision regarding creditworthiness and genuineness of transactions.
5. Tribunal's decision on the appeal.

Analysis:

1. Condonation of Delay in Filing Appeal:
The appeal before the Appellate Tribunal ITAT Rajkot involved a delay of 164 days in filing the appeal. The delay was attributed to the Covid-19 pandemic, and the assessee relied on a judgment by the Hon'ble Supreme Court regarding the extension of limitation periods due to the pandemic. The Tribunal, considering the circumstances, condoned the delay in filing the appeal by the assessee.

2. Addition of Unsecured Loans under Section 68:
The Assessing Officer had added a sum of Rs. 2,29,000/- in the assessment of the assessee concerning unsecured loans taken from two depositors. The CIT(A) upheld this addition, stating that the creditworthiness of the depositors could not be established. However, the Tribunal later found that the assessee had provided evidence to substantiate the identity, creditworthiness, and genuineness of the transactions with both depositors. Consequently, the Tribunal directed the deletion of the additions made by the Assessing Officer.

3. Rejection of Appeal by CIT(A) Based on Lack of Creditworthiness:
The CIT(A) dismissed the assessee's appeal, emphasizing the lack of creditworthiness of the depositors and confirming the addition of Rs. 2,29,000/- to the assessee's income. The CIT(A) specifically highlighted discrepancies in the depositors' financial transactions to support the decision. The Tribunal, however, upon reviewing the evidence presented by the assessee, concluded that the creditworthiness and genuineness of the transactions had been adequately demonstrated.

4. Assessee's Challenge to CIT(A)'s Decision:
The assessee challenged the CIT(A)'s decision, arguing that the identity, creditworthiness, and genuineness of the transactions with the depositors had been proven. Detailed submissions were made regarding the financial backgrounds and transaction details of the depositors, supported by documentary evidence. The Tribunal, after considering the arguments and evidence, found merit in the assessee's contentions and ruled in favor of the assessee.

5. Tribunal's Decision on the Appeal:
After thorough consideration of the facts and evidence presented, the Tribunal allowed the assessee's appeal. The Tribunal observed that the assessee had successfully established the identity, creditworthiness, and genuineness of the transactions with both depositors. Consequently, the Tribunal directed the deletion of the additions made by the Assessing Officer, thereby ruling in favor of the assessee.

This comprehensive analysis highlights the key issues addressed in the judgment, providing a detailed overview of the legal proceedings and the Tribunal's decision in the case.