2023 (7) TMI 554 - AT - Income Tax

Addition u/s 68 - Unsecured Loans - onus to proof - treating as share application money an accommodation entry - reliance on information from ADIT (Investigation) - HELD THAT - As assessee has successfully demonstrated the factum of identity, capacity and creditworthiness of the creditors who gave loan of Rs. 25 lakhs to the assessee - there is no IOTA of doubt regarding this transaction which was rooted through banking channels the assessee has also paid interest thereon after deducting the TDS with the department. Assessee had also paid interest on the unsecured loan after deducting TDS @20% which reveals that during subsequent assessment year 2012-13 (A.Y. 2013- 14) the assessee had squared up the account by repaying entire loan amount along with due interest after deducting TDS @ 20%. Thus assessee during the proceeding before the AO as well as before the ld CIT(A) successfully discharges its onus lend on his shoulders as per requirement of section 68 of the Act and submitted all documentary evidences under his command - Decided in favour of assessee.

Summary

Issues:
The sole issue in the appeal is the addition/disallowance of Rs. 85,00,000.00 on account of Unsecured Loans treated as share application money and an accommodation entry.

Summary of Judgment:

Issue 1: Addition of Unsecured Loan as Share Application Money
The assessee contested the addition of Rs. 85 lakhs as share application money, arguing that the transaction was an unsecured loan repaid through banking channels with interest paid after TDS deduction. The assessee provided documentary evidence of the loan transactions, including confirmations from creditors and bank statements. The Tribunal observed that the assessee demonstrated the identity, capacity, and creditworthiness of the creditors, along with the genuineness of the transactions. The Tribunal found no basis for the addition made by the Assessing Officer and upheld by the CIT(A). The Tribunal allowed the appeal, directing the deletion of the addition.

Key Points:
- The assessee successfully proved the identity, capacity, and creditworthiness of the creditors through documentary evidence.
- The loan transactions were routed through banking channels, with interest paid after TDS deduction.
- The creditors responded to notices from the AO, providing confirmations and relevant documents.
- The AO's addition under section 68 of the Act was deemed unjustified, and the CIT(A)'s decision to uphold it was overturned.
- The Tribunal held that the addition should be deleted, as the assessee fulfilled the onus of proof required by section 68 of the Act.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee and directing the deletion of the addition of Rs. 85 lakhs on account of Unsecured Loans treated as share application money.