2019 (4) TMI 1104 - AT - Income Tax

Addition of unsecured loans u/s 68 - as alleged genuineness creditworthiness/capacity to the lender could not be proved - copies of statements recorded by the AO on oath in remand proceedings, it is clear that all the 11 corporate entities have advanced loans through account payee cheques and reflected in their respective balance sheets, filed with the various agencies including the Income Tax Department along with their return of income - HELD THAT - CIT(A) has given detailed finding and taken into consideration of the submissions made by the assessee as well as the remand report of the Assessing Officer called during Appellate Proceedings. In-fact, from the records it emerges that the unaccounted money as alleged by the Assessing Officer was the loan which was repaid subsequently by the assessee. Therefore, there is no need to interfere with the findings of the CIT(A). The appeal of the Revenue is dismissed.

Summary

Issues:
Appeal against CIT(A) order deleting addition of unverifiable unsecured loans - Creditworthiness and genuineness of transactions in question.

Analysis:
1. The appellant, a Private Limited Company, declared income and raised unsecured loans during the assessment year. The Assessing Officer considered the loans as anonymous/bogus/non-genuine, adding a significant amount to the company's income under section 68 of the Act.

2. The CIT (A) allowed the appeal, emphasizing that the appellant provided substantial evidence to establish the identity, creditworthiness of the lender companies, and the genuineness of the transactions. The appellant submitted confirmation letters, audited balance sheets, and bank statements, which were verified by the AO. The CIT (A) rejected the AO's adverse inference based on various grounds, including discrepancies in signatures and low bank balances of the lender companies.

3. The CIT (A) highlighted that the lender companies were legitimate entities, assessed to tax, and filed income tax returns. The AO failed to provide any adverse material evidence to refute the appellant's claims. The CIT (A) also referenced legal precedents supporting the appellant's position on creditworthiness and genuineness of transactions.

4. The CIT (A) emphasized the importance of proving identity, creditworthiness, and genuineness in line with section 68 of the Act. The appellant successfully discharged its burden by providing relevant documentary evidence. The CIT (A) concluded that the AO's addition of the unsecured loans was unjustified and ordered its deletion.

5. The detailed findings of the CIT (A) considered the submissions of both parties and the remand report of the Assessing Officer. The CIT (A) clarified that the alleged unaccounted money was a loan repaid by the appellant, supporting the decision to dismiss the Revenue's appeal.

6. The judgment was pronounced on 11th February 2019, upholding the CIT (A) order and dismissing the Revenue's appeal. The decision was based on the appellant's successful demonstration of the legitimacy of the unsecured loans, thereby refuting the AO's claims of unverifiable creditworthiness and genuineness.