2019 (3) TMI 1244 - AT - Income Tax

Addition u/s 68 - unsecured loans and advances - lender companies ignored summon issued to them u/s 131 - genuineness of the transaction - discharge on initial onus - In spite of several opportunities neither did the assessee produce the Principal Officers of the three lender companies in spite of summon issued to them u/s 131 - HELD THAT - Assessee has filed copy of Income Tax return, Bank Account confirmed copy of account from its books of accounts, bank statement and copy of Form 16A to prove the fact that assessee has deducted TDS on interest payment to the aforesaid party. When assessee has duly discharged its initial onus by proving the identity of the creditors by filing their copy of ITR, Bank Accounts, the addition u/s 68 of the Act cannot sustain merely on the ground that assessee has failed to produce them despite issuance of summons u/s 131 of the Act. In Dy. Commissioner of Income Tax vs. Rohini Builders ROHINI BUILDERS. 2001 (3) TMI 9 - GUJARAT HIGH COURT decided the identical issue in favour of the assessee that when assessee has discharged initial onus lay on it in terms of Section 68 by providing their complete address, bank statement and the assessee has also proved on record confirmed copy of account of his creditors from its books of account, bank statement and copy of form 16A showing that assessee has deducted TDS on interest payment to the creditors addition u/s 68 of the Act is not sustainable. More over assessee has established the identity and creditworthiness of the creditors as well as genuineness of the transaction by bringing on record the fact that the loans in question were taken and repaid through banking channel and TDS thereon was duly deducted and all the three creditors were assessed to Income Tax.- Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) erred in law and fact in deleting the addition of ?95,00,000/- made by the Assessing Officer under section 68 of the I.T. Act, 1961.
2. Whether the Commissioner of Income Tax (Appeals) erred in law and fact in deleting the addition without considering the failure of the assessee to produce the Principal Officers of the lender companies and any documentary evidence.
3. Whether the order of the Commissioner of Income Tax (Appeals) may be set aside and that of the Assessing Officer be restored.

Analysis:
1. The appellant, Deputy Commissioner of Income Tax, sought to set aside the order passed by the Commissioner of Income Tax (Appeals) regarding the addition of ?95,00,000/- under section 68 of the I.T. Act, 1961. The addition was made due to the failure of the assessee to prove the identity, creditworthiness, and genuineness of the unsecured loans received from three companies.

2. The assessee provided various documents like ITRs, bank account details, and Form 16A to establish the genuineness of the transactions. The Commissioner of Income Tax (Appeals) deleted the addition, partially allowing the appeal. The revenue challenged this decision before the Tribunal, claiming that the assessee did not produce the Principal Officers of the lender companies or any documentary evidence despite opportunities provided.

3. The Tribunal noted that the assessee had availed unsecured loans from the mentioned companies and had submitted relevant documents to prove the transactions' authenticity. The Tribunal cited a case where the High Court held that when the assessee proves the identity of creditors, the addition under section 68 is not sustainable solely based on the failure to produce them.

4. The Tribunal further emphasized that the assessee had discharged the initial burden of proving the creditors' identity and capacity. The loans were transacted through banking channels, TDS was deducted, and the creditors were assessed to Income Tax. Consequently, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the addition of ?95,00,000/-.

5. In conclusion, the Tribunal found no illegality or perversity in the decision of the Commissioner of Income Tax (Appeals) and allowed the appeal of the assessee. The judgment was pronounced on 29th January 2019.