2024 (6) TMI 945 - HC - Income Tax

Treatment of Unsecured Loans - Unsecured loans taken at the rate 9% p.a. disallowed in the tax assessment - Distinguishing the case law cited by the Department, ITAT agreed with the CIT-Appeals and held that the Respondent has discharged the onus of explaining the transactions - ITAT has also examined another decision of the ITAT in respect of another assessee, which also had a valid loan from Javda India Impex Ltd. and agreed with the findings in that case to hold that the addition to the income had been raised merely on conjecture and surmise. HELD THAT - Having heard the parties and having reviewed the record, we do not find this to be a fit case for an appeal, that raises any substantial question of law - a prerequisite for this Appeal to be entertained. This is not a case of accounting entries masquerading as purchase of goods or services. The evidence on record, has led to the questions of fact being answered concurrently in two rounds of review, in favour of the Respondent. Therefore, no substantial question of law arises.

Summary

Issues Involved:
The core issue is whether unsecured loans taken at 9% p.a. should be treated as unexplained and disallowed in tax assessment.

Issue 1: Treatment of Unsecured Loans

The Appeal challenged an order by the Income Tax Appellate Tribunal regarding unsecured loans taken at 9% p.a. for assessment years 2007-08 and 2012-13. Previous appeals found in favor of the assessee, confirming the genuineness of the loan transactions with evidence including creditor confirmations and banking channels. The assessing officer based the disallowance of the loans on a statement during a search and seizure action, which was later retracted. The two lending companies were said to be controlled by the individual who made the retracted statement. However, the CIT-Appeals and ITAT both concluded that the loans were genuine based on documentary evidence, including bank statements and company details. The ITAT found that the Respondent had explained the transactions satisfactorily, dismissing the appeal as it did not raise any substantial question of law.

Decision:

The High Court of Bombay upheld the decisions of the lower authorities, dismissing the appeal as no substantial question of law was raised. The evidence presented by the assessee, including bank statements and confirmations, supported the genuineness of the unsecured loans, leading to concurrent findings in favor of the Respondent in two rounds of review.