2014 (5) TMI 190 - AT - Income Tax

Addition made u/s 68 of the Act Unexplained cash credits Unsecured loan received Held that - The amount was received by the assessee as loan per account payee cheque from M/s.Kundan Traders (proprietor Shri Bipin) - creditor has confirmed the copies of the account for the relevant year as well as subsequent years - the interest amount was disclosed by the creditor in his P&L account, and was a part of the total income computed for the relevant AY 2007-08 and necessary evidences has been filed before the Tribunal - The identity of the creditor is not in dispute - the assessee has discharged its onus of proving the identity and creditworthiness of the creditor and the genuineness of the transaction of the loan to the assessee Decided in favour of Assessee. Addition made without considering the proper and sufficient materials Held that - The addition on account of credit entry of M/s.Kundan Traders has been deleted thus, no disallowance of interest to M/s.Kundan Traders could be made - the amount of credit entry of M/s.Manoj Textiles added in the earlier AY 2005-06 - the interest pertaining to M/s.Manoj Textile during the relevant year could not be disallowed Decided in favour of Assessee.

Summary

Issues:
1. Addition of unsecured loan received from M/s. Kundan Traders under section 68 of the Act.
2. Disallowance of interest paid for the purpose of business.

Analysis:

Issue 1:
The appeal was against the order of the CIT(A) regarding the addition of an unsecured loan of Rs.100,000 received from M/s. Kundan Traders under section 68 of the Act. The assessee contended that proper materials and records were submitted to prove the genuineness of the transaction. The loan amount was received through account payee cheques, interest was paid, TDS was deducted, and the loan was repaid in subsequent years. The creditor's identity, creditworthiness, and genuineness of the transaction were established with supporting documents. The Tribunal found that the assessee had fulfilled the onus of proving these aspects, and hence, decided in favor of the assessee, allowing ground no.2 of the appeal.

Issue 2:
The second ground of appeal related to the disallowance of interest paid amounting to Rs.23,967 for the assessment year 2007-08. This included amounts paid to M/s. Kundan Traders and M/s. Manoj Textiles. The Tribunal had already ruled in favor of the assessee regarding the credit entry of M/s. Kundan Traders in the previous issue. Additionally, the disallowance of interest related to M/s. Manoj Textiles for the earlier assessment year 2005-06 had been deleted by the CIT(A), and no further appeal was made by the Revenue. As a result, the interest disallowance for both entities was not upheld, and ground no.1 of the appeal was allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the fulfillment of onus in proving the genuineness of the loan transaction and the disallowance of interest payments was not justified based on the previous rulings and deletions by the CIT(A).