2024 (1) TMI 423 - AT - Income Tax

Addition u/s 68 - unsecured loans raised from 12 entities/companies along with interest as unexplained cash credit - AO made the addition on the basis of statements of three persons, which were extracted in the assessment order also - HELD THAT - We find that the assessee has raised loans from twelve entities, the details of which were given in the assessment order in para 3. We note that the assessee has also paid interest on these loans after deduction of tax at source and the details were also given in the same table. The tax deducted at source was also deposited in the Government Treasury. We would like to note that these loans were repaid through banking channel even prior to passing of the assessment order by the ld. Assessing Officer. The assessee has filed copies of ITR acknowledgments, master-data of the lenders, audited financial statements, Memorandum Article of Associations, copies of bank statements, loan confirmations and ledgers showing receipt and refund of loans alongwith TDS details in respect of each of the lenders. We note that the six parties, to whom notices were served, have duly responded and replied with all the requisite details. Where the assessee has filed all the evidences concerning transactions to establish the identity and creditworthiness of the lenders and to prove the genuineness of the transactions and the ld. Assessing Officer has not carried out any further verification, the addition cannot be made in the hands of the assessee. AO must examine the issue in the cases of creditors and make the addition there and not in the hands of the assessee. The assessee has discharged its initial burden and the burden shifted on the AO to enquire further into the matter by filing the evidences, which he failed to do. Accordingly, we set aside the order of ld. CIT(Appeals) and direct the ld. Assessing Officer to delete the addition. Decided in favour of assessee.

Summary

Issues Involved:
1. Ground No. 1: Not pressed by the assessee.
2. Grounds No. 2, 3, 4 & 5: Confirmation of addition of Rs. 3,57,85,862/- under section 68 of the Income Tax Act, 1961.

Summary:

Ground No. 1:
The issue raised in Ground No. 1 was not pressed by the counsel for the assessee at the time of hearing and was thus dismissed as not pressed.

Grounds No. 2, 3, 4 & 5:
The primary issue revolves around the confirmation of an addition of Rs. 3,57,85,862/- under section 68 of the Income Tax Act, 1961, by the Commissioner of Income Tax (Appeals) [CIT(A)].

Facts:
The assessee filed its return of income on 13.09.2013, declaring a total income of Rs. 52,24,330/-. During scrutiny, the Assessing Officer (AO) observed unsecured loans of Rs. 3.40 crores from twelve parties with an interest of Rs. 17,85,862/-. The AO called upon the assessee to prove the identity, creditworthiness of the lenders, and genuineness of the transactions. The assessee provided various documents, including ITRs, bank statements, and loan confirmations. However, the AO issued notices under section 133(6) to twelve parties, but only six responded. The AO made the addition based on the statements of three individuals, concluding that the loans were from paper companies.

Appellate Proceedings:
The CIT(A) upheld the AO's order in a non-speaking manner. The assessee argued that all necessary documents were provided, and the AO's reliance on the statements of three individuals was misplaced as they were not connected to the lender companies. The assessee also cited various judicial precedents to support their case.

Tribunal's Findings:
The Tribunal noted that the assessee had filed comprehensive evidence, including ITRs, bank statements, and loan confirmations, and had repaid the loans through banking channels. The AO's reliance on the statements of three individuals without substantive evidence was insufficient. The Tribunal cited several judicial precedents, including decisions from the Hon'ble Calcutta High Court, which emphasized that when an assessee provides all necessary evidence, the burden shifts to the AO to further investigate the creditors.

Conclusion:
The Tribunal concluded that the assessee had discharged its burden by providing all relevant evidence. The AO failed to provide substantive evidence to disprove the genuineness of the transactions. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition of Rs. 3,57,85,862/-. The appeal of the assessee was allowed.