2022 (2) TMI 1456 - HC - Income Tax

Addition u/s 68 - creditworthiness of the lenders has not been proved - ITAT deleted addition - HELD THAT - CIT (A) as well as the Tribunal re-examined the facts to ascertain as to whether the assessee had established the creditworthiness of the lenders and on facts findings have been recorded that the lender companies are income tax assessees, they are regularly filing income tax returns, the loans were advanced through account payee cheque, details of bank accounts and statements were available. Assessee was also able to demonstrate the source of money deposited into their bank accounts, which, in turn, has been used by them to lend it to the assessee as loan. Thus, the CIT (A) and the Tribunal, considering the facts of the case, held that the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the lender companies and, thereafter, the onus shifted on the AO to disprove the documents furnished by the assesssee, which was not done by the AO despite the CIT (A) calling for remand report on two occasions Addition u/s 14A read with Rule 8D - Assessee had made a specific claim that there was no exempt income earned by them during the relevant assessment years - ITAT deleted addition - HELD THAT - This factual position was not controverted by the AO and therefore the CIT (A) and the Tribunal granted relief to the assessee correctly.

Summary

Issues:
1. Deletion of alleged unsecured loan received by the assessee for Assessment Years 2012-13 and 2013-14.
2. Addition under Section 14A read with Rule 8D for both assessment years.
3. Addition made under Section 68 of the Income Tax Act, 1961 for Assessment Year 2013-14.

Deletion of Alleged Unsecured Loan:
For the Assessment Year 2012-13, the primary issue was the deletion of a sum of Rs. 10,65,32,302 representing an alleged unsecured loan received by the assessee. The Income Tax Appellate Tribunal (ITAT) was questioned for deleting this amount without proper substantiation of creditworthiness and genuineness of the transaction. Similarly, for the Assessment Year 2013-14, a sum of Rs. 1,42,95,699 was in question for the same reasons. The Tribunal's decision in both cases was based on the assessee's ability to prove the identity, creditworthiness, and genuineness of the lender companies. The Tribunal found that the lender companies were tax assessees regularly filing returns, and the loans were transferred through proper banking channels. The assessee demonstrated the source of funds deposited into their accounts, which were then lent to them. Consequently, the Court upheld the Tribunal's decision, emphasizing that the onus was on the Assessing Officer to disprove the documents provided by the assessee, which was not done despite multiple opportunities.

Addition under Section 14A read with Rule 8D:
Regarding the addition under Section 14A read with Rule 8D for both assessment years, the Court noted that the assessee had claimed no exempt income during the relevant assessment periods. This claim was not refuted by the Assessing Officer. As a result, the Commissioner of Income Tax (Appeal) and the Tribunal granted relief to the assessee. The Court found no error in this decision, stating that the authorities correctly considered the legal aspects. Therefore, substantial questions of law related to this issue were decided against the revenue.

Addition under Section 68 of the Income Tax Act, 1961:
The next issue considered was the addition made under Section 68 of the Income Tax Act for the Assessment Year 2013-14. The Assessing Officer contended that the creditworthiness of the lenders was not established. However, the CIT (A) thoroughly examined this aspect, calling for remand reports twice to review the documents provided by the assessee. The CIT (A) observed that the Assessing Officer did not raise any adverse comments on the documents. Both the CIT (A) and the Tribunal re-evaluated the facts and found that the assessee had indeed proven the creditworthiness of the lender companies. The lender companies were tax-compliant, transactions were through legitimate channels, and the source of funds was traced back to the lenders. The Court concluded that this issue revolved around facts, with no legal questions arising. Therefore, the appeal was dismissed, affirming the findings of the lower authorities.

In conclusion, the High Court of Calcutta dismissed the revenue's appeal under Section 260A of the Income Tax Act, 1961, challenging the ITAT's order for the Assessment Years 2012-13 and 2013-14. The judgment focused on the deletion of alleged unsecured loans, addition under Section 14A read with Rule 8D, and addition under Section 68 of the Act. The Court upheld the Tribunal's decisions, emphasizing the importance of proving creditworthiness, genuineness, and compliance with tax regulations in such cases.