2023 (1) TMI 887 - AT - Income Tax

Addition u/s 68 - unexplained cash credits - unsecured loans though the assesses has filed the requisite details before the lower authorities - HELD THAT - A.O has failed to make further enquiries and relied on the statement recorded, overlooking the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 - A.O. has not allowed the interest on unsecured loans in the F.Y.2011-12, as the loan transactions are not believed and alleged as non genuine and treated as unexplained cash credit U/sec 68 of the Act and these unsecured loans were repaid through account payee / banking channels in the current financial year and subsequent year which is not disputed. AR submitted that the assessee has substantiated the stand by submitting the details before the A.O. and CIT(A) and discharged the burden. We considering the facts, circumstances and judicial decisions set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition of unsecured loans and allow this ground of appeal in favour of the assessee. A.O has disallowed the interest on unsecured loans - Since we have directed the A.O to delete the addition of unsecured loans in the above Para-7, therefore the interest on the unsecured loans are 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 creditors. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Not giving proper opportunity.
2. Validity of reassessment.
3. Addition on account of unsecured loans under Section 68.
4. Disallowance of interest expenses on unsecured loans.

Detailed Analysis:

1. Not Giving Proper Opportunity:
The appellant argued that the CIT(A) passed the order under section 250 of the Income Tax Act, 1961 without giving sufficient, proper, and adequate opportunity of being heard, thereby breaching the principles of natural justice. The Tribunal noted the appellant's contention but did not delve into this issue as it became academic after deciding on the merits of the case.

2. Validity of Reassessment:
The appellant contested the reassessment proceedings initiated under Section 147 r.w.s. 148 of the Act, claiming that the necessary conditions for initiation and completion were not fulfilled. However, the Tribunal did not address this issue in detail since the appeal was decided on the merits, rendering this ground academic.

3. Addition on Account of Unsecured Loans:
The appellant challenged the addition of Rs. 2,60,00,000/- made by the AO under Section 68 of the Act, arguing that the loans were taken in the regular course of business through proper banking channels, and the appellant had provided all necessary details to prove the genuineness, identity, and creditworthiness of the lenders. The Tribunal observed that the appellant had submitted loan confirmations, bank statements, and other relevant documents. The AO had issued notices under Section 133(6), which were returned undelivered, and despite the appellant providing substantial evidence, the AO was not satisfied. The Tribunal noted that the appellant had discharged the burden of proof by providing requisite details and that the AO and CIT(A) had overlooked these explanations. The Tribunal referred to several judicial precedents supporting the appellant's case and directed the AO to delete the addition of unsecured loans.

4. Disallowance of Interest Expenses:
The appellant also contested the disallowance of Rs. 6,39,452/- claimed as interest paid on the unsecured loans. The Tribunal held that since the addition of unsecured loans was deleted, the interest on these loans should be allowed. The Tribunal directed the AO to delete the disallowance and allow the interest claim.

Conclusion:
The Tribunal allowed the appeal filed by the appellant, directing the AO to delete the addition of unsecured loans and the disallowance of interest expenses. The issues regarding the validity of reassessment and the opportunity of being heard were left open as academic.