2024 (10) TMI 532 - AT - Income Tax

Addition u/s 68 - unexplained unsecured loan along with disallowing the interest paid / payable thereon - onus to prove - CIT(A) deleted addition - HELD THAT - We observe that the assessee has duly discharged its primary onus casted upon it by furnishing the relevant details to explain the nature and source of unsecured loans and also explained that the interest paid there on are mostly on the loans taken in the preceding years and the remaining loans taken during the year but that all loan transactions are genuine and carried out in the regular course of business. Now, once the assessee discharges its onus, the AO has to record his satisfaction before making any addition. AO has to conduct necessary enquiry and to find any discrepancy in the details filed by the assessee. When the AO was made available with the PAN no. and the address of the alleged parties, AO ought to have carried out the exercise u/s 133(6) of the Act or to contact the concerned AO of the alleged parties. In the light of the ratio laid down by the Hon'ble Apex Court in case of Orissa Corpn. (P.) 1986 (3) TMI 3 - SUPREME COURT and the decision of this Tribunal in assessee s own case 2024 (7) TMI 1535 - ITAT KOLKATA we find that the assessee has successfully explained the nature and source of the alleged unsecured loan and has proved the identity and creditworthiness of the cash creditors and genuineness of the transactions and therefore, we fail to find any infirmity in the finding of the ld. CIT (A) deleting the impugned addition u/s 68 of the Act and also deleting the interest disallowance made by the ld. AO. Accordingly, grounds of appeal raised by the Revenue are dismissed.

Summary

Issues Involved:

1. Addition of unexplained unsecured loans under Section 68 of the Income-tax Act, 1961.
2. Disallowance of interest paid on the alleged unsecured loans.

Detailed Analysis:

1. Addition of Unexplained Unsecured Loans:

The core issue in this case revolves around the addition of Rs. 3,23,00,000/- as unexplained unsecured loans under Section 68 of the Income-tax Act, 1961 by the Assessing Officer (AO). The assessee, a partnership firm engaged in the saree business, had declared unsecured loans from various parties amounting to Rs. 7,32,58,026/-. The AO was dissatisfied with the genuineness, identity, and creditworthiness of these loans, leading to the addition of Rs. 3,23,00,000/- as unexplained cash credits.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT (A)] partially accepted the assessee's explanations and reduced the addition to Rs. 1,26,50,000/-. The CIT (A) was convinced about the identity, creditworthiness, and genuineness of loans amounting to Rs. 1,96,50,000/-, and thus deleted the corresponding addition.

The Tribunal, upon further appeal by the assessee, deleted the entire addition of Rs. 1,26,50,000/- sustained by the CIT (A). The Tribunal found that the assessee had adequately discharged its onus by providing necessary details such as addresses, PAN numbers, and loan confirmation letters from the creditors. The Tribunal emphasized that once the assessee discharges its primary onus, the AO must conduct further inquiries to substantiate any discrepancies. The Tribunal referenced the Supreme Court's decision in CIT vs. Orissa Corpn. (P.) Ltd., which held that if an assessee provides sufficient evidence regarding the identity and creditworthiness of creditors, the burden shifts to the Revenue to disprove the claims.

2. Disallowance of Interest on Unsecured Loans:

The AO also disallowed interest payments of Rs. 42,19,262/- on the unsecured loans, which was partially upheld by the CIT (A) at Rs. 1,26,50,000/-. The Tribunal, however, deleted the entire disallowance of interest. It found that the interest payments were genuine and related to loans taken in the regular course of business. The assessee had consistently taken and repaid unsecured loans, with interest duly charged and TDS deducted where applicable. The Tribunal noted that most of these loans were repaid in subsequent periods, further supporting their genuineness.

The Tribunal's decision was informed by its own earlier ruling in the assessee's case for the same assessment year, where similar additions were deleted based on sufficient evidence provided by the assessee regarding the identity, creditworthiness, and genuineness of the transactions.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s decision to delete the impugned additions and disallowances. The Tribunal found no infirmity in the CIT (A)'s findings, as the assessee had successfully explained the nature and source of the unsecured loans and proved the genuineness of the transactions. The appeal of the Revenue was thus dismissed.