2024 (6) TMI 149 - AT - Income Tax

Unexplained cash credit u/s 68 - unsecured loan receipts - identity, creditworthy and genuineness of transaction not proved - onus to prove - assessee vehemently argued that the entire loan amount has been repaid in subsequent assessment year - HELD THAT - The assessee has filed the details of repayment by way of banking channel alongwith the bank details and filed copy of the pass book or bank details. On cross verification, we find that the details of repayments are correct. Even otherwise, such repayments are not controverted by the revenue, despite providing all the details in advance. We find that in CIT Vs Ayachi Chandrashekhar Narsangji 2013 (12) TMI 372 - GUJARAT HIGH COURT held that where the department has accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. We find that on the basis of such legal ratio, this bench in various cases including in ACIT Vs Naresh Nemchand Shah 2022 (8) TMI 130 - ITAT SURAT , and Rajhans Construction (P) Ltd. 2022 (3) TMI 672 - ITAT SURAT has taken a similar view. As in CIT Vs. Amber Tradecorp (P) ltd. 2022 (7) TMI 902 - GUJARAT HIGH COURT also held that where the assessee took loan from two parties and assessee has furnished requisite material showing identity of loan givers and that assessee was not beneficiary as loan was repaid in subsequent year, no addition under Section 68 could be made on account of such loan. As decided in Rohini Builders 2001 (3) TMI 9 - GUJARAT HIGH COURT when the assessee has discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers, PAN and copy of assessment orders wherever readily available and proved the capacity of creditors that amounts were paid through cheques. Repayment of loan and interest thereon was also made by cheques; the Assessing Officer was not justified. Also stated in USHA STUD AGRICULTURAL FARM LTD. 2008 (3) TMI 91 - DELHI HIGH COURT no addition u/s 68 of the Act can be made in respect of opening balance of the depositors/lender We find that once the assessee furnished complete details of lenders including repayment of unsecured loan, the ld CIT(A) was not justified in confirming the addition of such unsecured loan. Thus, ground of appeal raised by assessee is allowed.

Summary

Issues Involved:
1. Addition of Rs. 1,42,85,813/- as unexplained cash credit u/s 68 of the IT Act.
2. Assessment of unsecured loans and their genuineness.

Summary:

Issue 1: Addition of Rs. 1,42,85,813/- as unexplained cash credit u/s 68 of the IT Act

The assessee filed an appeal against the order of NFAC, Delhi, which upheld the AO's addition of Rs. 1,42,85,813/- as unexplained cash credit u/s 68 of the IT Act. The AO had treated unsecured loans aggregating Rs. 4.96 crores as unexplained and added them u/s 68 in the assessment order passed u/s 144 on 29.12.2017. The assessee argued that the majority of the loans were from earlier years and provided bifurcation of old loans and new loans, along with supporting documents like ledger accounts, confirmations, bank statements, ITRs, and balance sheets of lenders. The Ld.CIT(A) deleted the addition of Rs. 3.35 crores (old loans) but confirmed the addition of Rs. 1.42 crores (new loans).

Issue 2: Assessment of unsecured loans and their genuineness

The Ld.CIT(A) prepared a summary of unsecured loans from 25 parties, noting that most lenders had low income and meager bank balances, with amounts transferred shortly before being given to the assessee. The Ld.CIT(A) concluded that the assessee failed to prove the genuineness and creditworthiness of the transactions. The Tribunal, however, found that the assessee had provided sufficient evidence, including repayment details of the loans in the subsequent year, which were not disputed by the revenue. The Tribunal cited various case laws, including CIT Vs Ayachi Chandrashekhar Narsangji and DCIT Vs Rohini Builders, to support the view that no addition should be made if the loan is repaid and the identity and creditworthiness of the lenders are established.

Conclusion:

The Tribunal allowed the appeal, holding that the assessee had discharged the primary onus of proving the genuineness of the loans and that the AO had not conducted any independent investigation. The addition of Rs. 1.42 crores was deleted, and the appeal was allowed in favor of the assessee. The order was pronounced in the open court on 31/05/2024.