2022 (10) TMI 278 - AT - Income Tax

Unexplained unsecured loans - genuineness of the transaction and creditworthiness of the lending company not proved - Case of the assessee was selected for limited scrutiny to ascertain the source of investment in property - HELD THAT - The company from which appellant has claimed to have obtained loan is a private limited company, therefore, it is bound to abide by the provisions of Companies Act, 2013 and for giving any loan, it is governed by the provisions of section 186 of the Companies Act. However as per details available on record, it is not established that the company in question has complied with these provisions before giving loan to the appellant. Thus in context of the above facts on record the genuineness of the transaction and creditworthiness of the lending company remains unexplained. No interference is called for to the addition made by the AO as appellant has failed to establish the genuineness of the transaction and creditworthiness of the lender, which is a pre-condition to discharge onus lies on the appellant as per the provisions of section 68 of the Act. Accordingly the ground of appeal taken by the appellant is dismissed.

Summary

Issues Involved:
Appeal against addition of unexplained unsecured loans for assessment year 2015-16.

Analysis:
1. The assessee appealed against the addition of Rs. 20,00,000 as unexplained unsecured loans. The AO concluded that the lender lacked creditworthiness and the transaction was not genuine, leading to the addition in income assessment.
2. The assessee's grounds of appeal challenged the CIT(A)'s decision, alleging errors in upholding the addition and relying on non-applicable judicial precedents. The appeal also contended that the order was based on surmises and conjectures, ignoring factual details submitted during assessment.
3. During the hearing, no representation was made on behalf of the assessee, and the appeal was heard based on available records. The primary issue was the addition of Rs. 20,00,000 as unexplained unsecured loans, the only effective ground raised by the assessee.
4. The CIT(A) upheld the addition, emphasizing the lack of creditworthiness of the lender and the absence of genuine transactions. The appellant failed to provide contrary material to rebut the CIT(A)'s findings, leading to the dismissal of the appeal.
5. The CIT(A) highlighted discrepancies in the loan transaction, including the lack of a specified repayment period, the absence of collateral or interest, and the unusual nature of the loan given the parties' relationship. The appellant's failure to establish creditworthiness and genuineness of the transaction led to the dismissal of the appeal.
6. The CIT(A) referred to the provisions of the Companies Act, 2013, emphasizing the necessity for compliance when giving loans. The appellant's inability to prove compliance with these provisions further weakened the genuineness of the transaction.
7. The CIT(A) decision was supported by the lack of evidence provided by the appellant to counter the findings. The Tribunal affirmed the CIT(A)'s decision, dismissing the grounds raised by the assessee and upholding the addition of unexplained unsecured loans.

This comprehensive analysis covers the issues raised in the appeal against the addition of unexplained unsecured loans for the assessment year 2015-16, detailing the arguments presented and the final decision reached by the Tribunal based on the available evidence and legal provisions.