2023 (9) TMI 946 - AT - Income Tax

Non-genuine unsecured loan u/s. 68 - assessee submitted that the assessee s husband expired and business was carried out by the assessee with the help of family members - brother of assessee s late husband arranged for the aforesaid unsecured loan in question and the loan was accepted by cheque and was repaid during the year itself from the account of brother of assessee s late husband and since the funds were arranged through a broker there was no direct contact with the lender and hence confirmation could not be placed on record - HELD THAT - As assessee had furnished details regarding the lender Shri Hariom Enterprise viz. postal address PAN number ledger account ledger of lender in the books of AG Brothers (proprietary concern of brother of assessee s late husband) bank statement of AG Brothers etc. and therefore in our view the assessee had discharged the initial onus which was cast upon the assessee under Section 68 of the Act. As observed in the preceding part of the judgement when part of the loans taken from the same lender Shri Hariom Enterprise has been accepted by the Assessing Officer as genuine then it is not understandable as to why the balance loan taken from the same lender should be treated as non-genuine on the ground that no confirmation from the said the lender has been filed. It has also been accepted that part of the loan has been repaid back to the aforesaid lender as well in the very same year. Accordingly looking into the facts of the instant case we are of the considered view that Ld. CIT(Appeals) has erred in facts and in law in confirming the addition made by the AO u/s 68 - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Addition of Rs. 58,85,190/- as non-genuine unsecured loan under Section 68.
2. Charging of interest under Sections 234A, 234B, 234C, and 234D of the I.T. Act, 1961.
3. Initiation of penalty under Section 271(1)(c) of the Act.

Issue 1: Addition of Rs. 58,85,190/- as Non-Genuine Unsecured Loan under Section 68

The assessee was engaged in the wholesale trading of groceries and had taken unsecured loans, including Rs. 58,85,190/- from "Hariom Enterprise". The Assessing Officer (AO) doubted the genuineness of this loan due to the lack of "confirmation of the lender" and added the amount under Section 68 of the Act. Despite the assessee providing various details such as PAN number, ledger account, and bank statements, the AO remained unconvinced. The Ld. CIT(A) upheld the AO's decision, citing the assessee's failure to prove the identity, genuineness, and creditworthiness of the lender, and referenced judicial precedents supporting the decision.

In appeal, the assessee argued that the loan was arranged by her brother through a broker and repaid within the same year. Additional evidence was provided, including the ledger of the lender in the books of AG Brothers and bank statements. The Tribunal observed that the Department had accepted part of the loans from the same lender as genuine, questioning why the balance was considered non-genuine. The Tribunal cited judicial precedents emphasizing that once loan repayment is established, no addition should be made for cash credit. The Tribunal concluded that the assessee had discharged the initial onus under Section 68 and erred in confirming the addition.

Issue 2: Charging of Interest under Sections 234A, 234B, 234C, and 234D

The Tribunal did not provide specific details on this issue but generally, such charges are consequential to the primary addition under Section 68. Given the Tribunal's decision to delete the addition, the interest charges under these sections would likely be impacted accordingly.

Issue 3: Initiation of Penalty under Section 271(1)(c)

Similarly, the Tribunal did not elaborate on this issue. However, the initiation of penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars would be contingent on the primary addition under Section 68. With the deletion of the addition, the basis for penalty would also be affected.

Conclusion:

The Tribunal allowed the appeal, deleting the addition of Rs. 58,85,190/- under Section 68, which would consequentially impact the interest charges and penalty initiation. The Tribunal emphasized the importance of considering the totality of evidence and the consistency in accepting part of the loans from the same lender as genuine.

Order Pronounced in Open Court on 05/09/2023.