2022 (6) TMI 661 - AT - Income Tax

Addition u/s 68 - unsecured cash creditors - Assessing Officer (A.O) has received information that the assessee has obtained the unsecured loan and interest on loan - Onus to prove - HELD THAT - We find the Ld. CIT(A) has dealt on the submissions of the assessee supporting the loan creditor with confirmation ledger, PAN, Bank Statement of loan creditor. We find that the assessee has to satisfy the 3 ingredients with respect to identity, creditworthiness and genuineness of the transaction. CIT(A) has discussed on the provisions of the Act and Primafacie the CIT(A) has not accepted the identity, credit worthiness and the genuineness of the transactions. We are of the opinion that the assessee has discharged the burden of proof in filling the documents before the A.O and the CIT(A). But the A.O has taken the different view and over looked the explanations of the assessee. Accordingly, we set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition of unsecured loan and allow this ground of appeal in favour of the assessee. AO has disallowed the interest on unsecured loan - Since we have directed the A.O to delete the addition of unsecured loans in the abovePara-6, therefore the interest on the unsecured loan has to be allowed. Accordingly, we direct the A.O to delete the addition and allow the interest claim of the assessee on the unsecured loan creditor. Appeal of assessee allowed.

Summary

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Addition of Rs. 10,00,000/- under Section 68 of the Income Tax Act, 1961.
3. Disallowance of interest expenses of Rs. 87,354/- on the loan of Rs. 10,00,000/-.

Detailed Analysis:

1. Validity of Notice Issued Under Section 148:
The assessee contested the validity of the notice issued under Section 148 for reopening the assessment. The Assessing Officer (A.O.) had received information regarding bogus loans and accommodation entries from certain groups. Based on this information, the A.O. believed that the assessee had not disclosed fully and truly all material facts necessary for the assessment, leading to the issuance of the notice under Section 148. The assessee argued that all necessary details were provided, and the reopening was unjustified. However, this issue was left open as the appeal was decided on merits.

2. Addition of Rs. 10,00,000/- Under Section 68:
The A.O. added Rs. 10,00,000/- as unexplained cash credit under Section 68, citing that the loan from M/s Maniprabha Impex Pvt. Ltd. was bogus. The assessee provided various documents to substantiate the genuineness of the loan, including bank statements, loan confirmations, and financial statements. The A.O. issued a notice under Section 133(6) to the loan creditor, which returned unserved. The assessee argued that the loan was genuine, supported by RTGS transactions and interest payments via cheque. The CIT(A) upheld the A.O.'s decision, but the Tribunal found that the assessee had discharged the burden of proof by providing sufficient evidence of the loan's genuineness, identity, and creditworthiness. The Tribunal directed the A.O. to delete the addition of Rs. 10,00,000/-.

3. Disallowance of Interest Expenses of Rs. 87,354/-:
The A.O. disallowed the interest expenses on the grounds that the loan itself was bogus. The assessee contended that the interest was paid through account payee cheques, and the loan was genuine. Since the Tribunal directed the deletion of the loan addition, it also allowed the interest claim of Rs. 87,354/-, directing the A.O. to delete the disallowance.

Conclusion:
The Tribunal allowed the appeal in favor of the assessee, directing the deletion of the addition under Section 68 and the disallowance of interest expenses. The validity of the reassessment proceedings was left open as the appeal was decided on merits. The decision applied mutatis mutandis to other related appeals with identical facts and circumstances. All four appeals filed by the assessee were allowed.