2023 (10) TMI 1274 - AT - Income Tax

Addition u/s 68 - unexplained credit - onus to prove genuineness and creditworthiness - Addition of advanced paid on the ground that the assessee has not furnished any agreement with the parties and only copy of ledger was furnished, which do not justify the payment of huge amount without any registered document - HELD THAT - AO wrongly invoked the provision of section 68, when such amount was not credited in the books of account of assessee, rather it was a clear case of advance. Such investments are shown in the assets side of the balance sheet. The real issue before the AO was, if the advance or investment made by the assessee are from the known sources or from unexplained sources. We find that before CIT(A) the assessee filed detailed written submissions, which are not recorded here for the sake of brevity. We further find that the CIT(A) on appreciation of such submissions recorded that source of advance to Rameshwaram developers was from the loan availed by the assessee. CIT(A) appreciated the fact that once, entire loan was added u/s 68, the application of fund by way of investment cannot be added again, which is otherwise double additions - stand of the assessee right from the beginning is that the assessee made advance for purchase of land for development. The land was ultimately transferred in favour of assessee in assessment year 2019- 20 purchases by way of two sale deeds on 02.07.2018 vide document No.11863 respectively, copy of such sale deed is available on record. All the payment for purchase of land was made by way of account payee cheques. AO has not brought adverse material on record to doubt the transaction of land which was in consequence of the advance payment of the land. Hence, no infirmity or illegality in the order of CIT(A) in deleting the addition which is affirmed. Decided against revenue. Addition u/s 68 - taxation u/s 115BBE - issuing show cause notice the assessee failed prove genuineness and creditworthiness of loan amount - HELD THAT - We find that the assessee has already furnished all details in the comprehensive sheet mentioned; the name of the lender, PAN, amount of loan, repayment of loan, interest paid and Tax Deducted at Source (TDS in short) and the closing balance as on 31.03.2018 and complete pdf folder consisting of duly signed of confirmation of ITR, relevant bank statement of the depositors was furnished, even on furnishing such details, the Assessing Officer has not made any enquiry of his own either issuing notice under section 133(6) or 131 of the Act. The assessee has discharged its onus. The Assessing Officer without making any independent verification or enquiry prepared to make huge addition in Crores of rupees, which he clearly tantamount to travesty of justice. While making submissions before us, the ld AR for the assessee vehemently argued that the assessee has already repaid the entire loan amount of 14 lenders, the details of whom were furnished by assessee in a chart, showing the amount, date of repayment and the details of banks of lenders. Such facts were not disputed before us. We also find that the assessee furnished all such details of the lenders/ depositors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. As decided in Ayachi Chandrashekhar Narsangji 2013 (12) TMI 372 - GUJARAT HIGH COURT held that when loan amount has been repaid by the assessee in the immediately next year and the department has accepted the repayment of such loan without proving it, no addition can u/s 68 can be made. No justification in making the addition of unsecured loan amount as unexplained credit u/s 68 by assessing officer and confirmed by ld CIT(A) - Decided in favour of assessee.

Summary

Issues Involved:

1. Addition under Section 68 of the Income Tax Act for unsecured loans.
2. Addition under Section 68 for advances given to Rameshwaram Developers.

Summary of Judgment:

Issue 1: Addition under Section 68 for Unsecured Loans

The assessee, a Limited Liability Partnership (LLP) engaged in real estate development, was scrutinized for unsecured loans amounting to Rs. 26.42 crores. The Assessing Officer (AO) added this amount to the income of the assessee under Section 68, stating that the genuineness and creditworthiness of the lenders were not proven. The assessee provided details of the lenders, including their PAN, ITR, bank statements, and confirmations. The AO, however, did not conduct independent verification and made the addition based on presumptions.

The CIT(A) upheld the AO's addition for most lenders, categorizing them into tables based on their creditworthiness and the timing of bank deposits. However, the CIT(A) accepted the genuineness of loans from three major lenders: Rajgreen Infrastructure, Sai Developers, and Srushti Developers, but still upheld the addition due to doubts about the source of funds.

The Tribunal found that the assessee had discharged its onus by providing comprehensive details and that the AO failed to conduct further investigations. The Tribunal noted that the loans from the three major lenders were genuine and that the AO had not provided evidence to the contrary. The Tribunal deleted the addition under Section 68, emphasizing that the burden of proof shifts to the AO once the assessee discharges its initial onus.

Issue 2: Addition under Section 68 for Advances to Rameshwaram Developers

The AO added Rs. 27.72 crores as unexplained credit under Section 68, claiming that the assessee failed to prove the genuineness and creditworthiness of the advance given to Rameshwaram Developers for land purchase. The assessee argued that the advance was shown on the asset side of the balance sheet and provided documentary evidence, including sale deeds executed in the subsequent year.

The CIT(A) deleted the addition, stating that the source of the advance was from the loans already added under Section 68 and that double addition was not justified. The Tribunal upheld the CIT(A)'s decision, noting that the advance was for a genuine transaction and that the AO had not provided any adverse material to doubt the transaction.

Conclusion:

The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, deleting the additions under Section 68 for both unsecured loans and advances to Rameshwaram Developers. The Tribunal emphasized the importance of proper verification by the AO and the need to avoid double additions.