2024 (7) TMI 1549 - AT - Income Tax

Addition u/s 68 - no identity of the lender, genuineness of the transaction and the credit worthiness of the lender provided - As argued assessee has filed the details in respect of the loans/inter corporate deposits and submitted the confirmation of the loan creditors along with other supporting details - HELD THAT - Assessee has cooperated in submitting the information in the assessment proceedings, whereas the A.O has ignored the information, evidences and audited financial statements and unilaterally made addition u/sec 68. AR emphasized that the assessee has discharged its burden by submitting the financial statements of the lenders where the payment is made through banking channel and identity, creditworthiness and genuineness of the lender company was proved in the assessment proceedings. Assessee has submitted the audited financial statements, confirmations, Bank statements of lender company, copy of the income tax returns, ledger account, and the repayment details to substantiate the genuineness and credit worthiness of loan creditors. AR demonstrated the bank statement of the Lender company having opening balance Rs. 23 Crores (appx) before granting Unsecured loan/ inter corporate deposit of Rs. 20 Crores in September 2014. Further the Ld.AR has filed the audited financial statements of the lender company for F.Y. 2014-15 F.Y. 2015-16 to substantiate the identity and Net worth of the company and at page 109 of the paper book, the lender company has disclosed the loan under Long Term Loans and Advances . AR demonstrated the copy of bank statements reflecting the repayment of unsecured loan/inter corporate deposit which is not disputed by the revenue. Further, the A.O has failed to make further enquiries and over looked the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 of the Act. Further the A.O. dealt on the loan transactions and alleged as non genuine and treated as unexplained cash credit U/sec 68 of the Act. Whereas the unsecured loan was repaid through account payee / banking channels in the subsequent financial year which is not disputed by the revenue and in the year of repayment of loan, the revenue has accepted returned income of the assessee and passed the order u/sec 143(1). Thus, Assessing officer is directed to delete the addition of unsecured loan and allow the grounds of appeal in favour of the assessee.

Summary

Issues Involved:

1. Addition of Rs. 20 Crores under Section 68 of the Income Tax Act.
2. Application of the proviso to Section 68.
3. Violation of principles of natural justice.
4. Liability to pay interest under Sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Addition of Rs. 20 Crores under Section 68:

The primary issue was the addition of Rs. 20 Crores as unexplained cash credit under Section 68 of the Income Tax Act. The assessee argued that the loan was taken from M/s Kriveria Impex Pvt. Ltd., and they had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the transaction. The evidence included confirmation of the loan, bank statements, and the lender's financial statements. The assessee contended that the loan was received through proper banking channels and was repaid in the subsequent financial year, which was accepted by the Income Tax Department. The Tribunal found that the assessee had discharged the burden of proof by providing adequate documentation and that the Assessing Officer (AO) and CIT(A) had overlooked these submissions. The Tribunal relied on various judicial precedents, including CIT Vs. Orissa Corporation and CIT Vs. Ranchhod Jivanbhai Nakhava, which supported the assessee's claim that once the identity, creditworthiness, and genuineness are established, the burden shifts to the Revenue to prove otherwise. Consequently, the Tribunal directed the AO to delete the addition.

2. Application of the Proviso to Section 68:

The assessee argued that the proviso to Section 68, which pertains to share capital, was incorrectly applied by the AO since the transaction in question was a loan and not related to share capital. The Tribunal agreed with the assessee, noting that the proviso was not applicable in this case, as the transaction was an unsecured loan and not a share capital contribution. The Tribunal emphasized that the AO had misapplied the proviso, leading to an unjustified and unsustainable addition.

3. Violation of Principles of Natural Justice:

The assessee claimed that the CIT(A) upheld the addition without allowing an opportunity for a physical hearing through video conferencing, which was a violation of the principles of natural justice. The Tribunal did not specifically address this issue in detail but focused on the adequacy of evidence provided by the assessee and the procedural lapses by the AO and CIT(A) in evaluating the evidence.

4. Liability to Pay Interest under Sections 234A, 234B, and 234C:

The assessee denied liability to pay interest under Sections 234A, 234B, and 234C, arguing that the levy was unjustified and excessive. The Tribunal's decision to delete the addition under Section 68 implies a favorable outcome for the assessee concerning the interest liability, as the basis for such interest would be the disputed addition.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, directing the deletion of the Rs. 20 Crores addition under Section 68. The Tribunal emphasized that the assessee had adequately discharged its burden of proof regarding the loan transaction, and the Revenue failed to provide evidence to the contrary. The Tribunal's decision was based on a detailed examination of the evidence and reliance on established judicial precedents.