2018 (12) TMI 1052 - AT - Income Tax

Addition of unsecured loan u/s.68 - loan through RTGS and repaid through account payee/RTGS - Held that - It is pertinent to note that in so far as companies incorporated under Indian Companies Act, whether private limited or public limited, they raise their share-capital through issue of shares though manner of raising of share capital in private company on one hand, and public limited company on other hand, would be different. Share capital and share premium are basically irreversible receipts or credits in the hands of the company. AO failed to appreciate this aspect while dealing with cash credit. The loans received by the assessee are not irreversible receipts in its hands. These are to be repaid. Therefore, angle of inquiry or degree of investigation in both these aspects would be little different. AO emphasised on the financial health of the creditors as well as their promoters. Whereas, the CIT(A) emphasised that the assessee has produced basic details of the creditors, their confirmations. Their existence is not in doubt and how they procured funds from TAPL. TAPL has confirmed all these aspects. Submitted details of loans given by it to those creditors of the assessee. Thus, the assessee has not only proved source but source of source also, which does not otherwise required under the law. Similarly, loan from SIPL was taken only for one day. It has been taking the loan through RTGS and repaid through account payee/RTGS. Bank details were submitted, then how could it be non-genuine ? Taking into consideration all these aspects, we do not find any merit in this ground of appeal raised by the Revenue. It is rejected. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of unsecured loan under Section 68 of the Income Tax Act.
2. Assessment of the genuineness of transactions and creditworthiness of creditors.

Detailed Analysis:

1. Deletion of Addition of Unsecured Loan under Section 68 of the Income Tax Act:

The Revenue challenged the deletion of an addition of ?5.50 crores made under Section 68 of the Income Tax Act by the CIT(A). The Assessing Officer (AO) had added this amount to the total income of the assessee, asserting that the assessee failed to explain the ingredients of Section 68. The AO's scrutiny revealed that the assessee received unsecured loans from three concerns: ?2 crores from M/s. Shashvat Infracon Private Ltd. (SIPL), ?2 crores from General Capital & Holdings P. Ltd. (GCHPL), and ?1.50 crores from Kuviic Reality P. Ltd. (KRPL). The AO doubted the genuineness of these transactions based on the financial health of the lending companies and their directors.

2. Assessment of the Genuineness of Transactions and Creditworthiness of Creditors:

The CIT(A) deleted the addition by examining the submissions and evidence provided by the assessee. The CIT(A) noted that the assessee had provided all necessary details, including confirmation of accounts, bank statements, and audited financial statements of the creditors. The CIT(A) emphasized that the AO's approach was erroneous and that the identity of the creditors, genuineness of the transactions, and creditworthiness of the creditors were sufficiently proved by the assessee. The CIT(A) observed that the AO had presumed adversely about the creditworthiness of the loan creditors based on incorrect appreciation of facts and had not conducted a thorough investigation.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee had discharged the initial onus placed on it by providing comprehensive details of the transactions and the financial status of the creditors. The Tribunal highlighted that the AO failed to distinguish between share application money and simple loans or deposits and emphasized that the loans received by the assessee were to be repaid, unlike share capital, which is an irreversible receipt. The Tribunal concluded that the AO's suspicion-based approach was insufficient and that the Revenue had not provided concrete evidence to prove the allegation of accommodation entries.

Conclusion:

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that deleted the addition of ?5.50 crores under Section 68. The Tribunal found that the assessee had adequately demonstrated the identity, genuineness, and creditworthiness of the creditors, and the AO's adverse presumptions were not supported by substantial evidence. The decision emphasized the necessity for the Revenue to bridge the gap between suspicion and proof to substantiate allegations under Section 68.