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2023 (2) TMI 755 - HC - Income TaxUnsecured loan u/s 68 - Assessee did not produce the 200 odd farmers from whom the Assessee had borrowed an unsecured loan - Before the ITAT, it was the second round of litigation - direction issued by the ITAT in the first round was to the effect that the AO should verify whether the Assessee had repaid the amount by calling all the creditors - Appellant seeks to contend that in terms of the direction issued by the ITAT, it is the AO who should have issued summons to the farmers in question to verify the facts - HELD THAT - As submitted that it is the AO who should have issued summons to them to appear. Even assuming that the AO did not do so, the fact remains that the Assessee did not ask for summons to be issued and the Assessee did not produce any fresh affidavits of the lender farmers to confirm that their loans to the Assessee had been repaid to them. The Assessee could have easily done this to satisfy the requirement of the directions of the ITAT in remand. In the present case, factually the ITAT has found the addition to be justified and going by ratio of the aforementioned decision, this Court should not interfere with such factual determination by the ITAT. No substantial question of law arising from the impugned order of the ITAT. The appeal is accordingly dismissed.
Issues:
1. Addition of unsecured loan to taxable income under Section 68 of the Income Tax Act, 1961. 2. Compliance with the directions of the ITAT regarding verification of loan repayments. 3. Applicability of legal precedents in similar cases. Analysis: Issue 1: Addition of unsecured loan to taxable income under Section 68 of the Income Tax Act, 1961 The appeal challenged an order by the Income Tax Appellate Tribunal (ITAT) directing the addition of Rs.45,29,020/- to the Assessee's taxable income under the head 'unsecured loan' as per Section 68 of the Income Tax Act. The Assessee had borrowed an unsecured loan from numerous farmers, ranging from Rs.7,000/- to Rs.19,500/-. The Tribunal upheld the addition as the Assessee failed to produce the farmers to confirm loan repayments during the assessment year 2007-08. The Commissioner of Income Tax (Appeals) also affirmed the addition, stating that the Assessee did not comply with the ITAT's directions to verify loan repayments. The Court found no infirmity in the orders of the AO and CIT(A) and dismissed the appeal. Issue 2: Compliance with the directions of the ITAT regarding verification of loan repayments During the initial round of litigation, the ITAT had directed the Assessing Officer (AO) to verify the genuineness of the loan transactions by calling all the creditors, i.e., the farmers. However, the Assessee failed to produce the farmers for verification, leading to the AO's decision to treat the loans as unexplained and make the addition to the taxable income. The Assessee's argument that the AO should have issued summons to the farmers was rejected by the Court, emphasizing that the Assessee did not request summons or provide fresh affidavits from the lenders, as required by the ITAT's directions. Issue 3: Applicability of legal precedents in similar cases The Assessee relied on legal precedents such as Commissioner of Income Tax v. Bharat Engineering & Construction Co. and India Rice Mills v. Commissioner of Income Tax to argue against the addition of unsecured loans. However, the Court distinguished these cases based on the facts of non-compliance with the ITAT's remand order in the present case. Another cited case, Commissioner of Income Tax, Bikaner v. M/s. Kewal Krishan, was deemed inapplicable due to differing factual circumstances. The Court concluded that no substantial question of law arose from the ITAT's order and dismissed the appeal based on the factual determination by the ITAT.
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