2023 (7) TMI 1278 - AT - Income Tax

Addition u/s 68 - Unsecured Loans transaction - as per assessee the first proviso to sec 68 is restricted to credits on account share application money, share capital and share premium etc. and this does not apply to transactions in the nature of unsecured loans - HELD THAT - CIT(A) confirmed the addition without proper appreciation of facts and relevant law and the same is based on the incorrect and wrong factual findings. CIT(A) wrongly noted that the assessee did not requested to provide cross examination and wrongly noted that the search was carried out in the premises of Anirudh Joshi whereas in fact the search was carried on in Skylarc Group on 25.04.2017 and these incorrect facts have not been disputed by the ld. Senior DR. CIT(A) recorded a finding that no proof of interest payment and TDS but the confirmations and other documentary evidence not only reveals the fact of payment of interest to the creditors after deduction of TDS by the assessee but also reveals the factum of repayment of entire loan during FY 2013-14 and these vital facts cannot be ignored or kept aside by way of incorrect appreciation and recording of wrong findings. Assessee has discharged onus lay on it as per mandatory requirement sec 68 - Per contra, as per discussion made hereinabove based on self speaking documentary evidences of the assessee we are compelled to hold that the assessee has properly discharged said onus by way of sustainable explanation and documentary evidence showing and establishing identity, capacity creditworthiness of lenders and genuineness of transaction therefore no addition can be made in the hands of assesses u/s. 68 or any provision of the Act. - Decided in favour of assessee.

Issues Involved:
1. Interpretation of Section 68 of the Income Tax Act, 1961 regarding unsecured loans.
2. Discharge of initial onus by the assessee to prove the identity, creditworthiness, and genuineness of transactions.
3. Criteria for assessing the creditworthiness of creditor lenders.
4. Examination of the source of sources by the Assessing Officer.
5. Consideration of interest payment and TDS deduction in assessing genuineness.
6. Repayment of lent money and its impact on genuineness assessment.

Summary:

Issue 1: Interpretation of Section 68 of the Income Tax Act, 1961 regarding unsecured loans

The assessee contended that the first proviso to Section 68 is restricted to credits on account of share application money, share capital, and share premium, and does not apply to unsecured loans. The Tribunal noted that the addition made by the Assessing Officer under Section 68 for unsecured loans from KRAC Securities and Pooja Equity Advisors was not sustainable on this count.

Issue 2: Discharge of initial onus by the assessee to prove the identity, creditworthiness, and genuineness of transactions

The assessee submitted various documents, including confirmation of accounts, PAN cards, ITR acknowledgments, financial statements, bank statements, and incorporation details of the creditors to establish the identity and creditworthiness of the lenders and the genuineness of the transactions. The Tribunal found that the assessee had discharged the onus laid upon it by providing sufficient documentary evidence.

Issue 3: Criteria for assessing the creditworthiness of creditor lenders

The assessee argued that the creditworthiness should not be confined to the declared income but should consider the net worth of the lenders. The Tribunal agreed, noting that the financial statements of the lenders showed significant net worth, which supported the assessee's claim.

Issue 4: Examination of the source of sources by the Assessing Officer

The Tribunal observed that the examination of the source of sources is within the purview of the Assessing Officer. However, since the creditors were income tax assessees and their assessment details were submitted, the assessee's responsibility was deemed fulfilled.

Issue 5: Consideration of interest payment and TDS deduction in assessing genuineness

The Tribunal noted that the assessee paid interest on the unsecured loans after deducting TDS, which was claimed by the creditor lenders. This fact supported the genuineness of the transactions.

Issue 6: Repayment of lent money and its impact on genuineness assessment

The Tribunal found that the repayment of the loans, along with interest, further supported the genuineness of the transactions. The authorities below had not provided any positive adverse material against the assessee to doubt the genuineness.

Conclusion:

The Tribunal concluded that the authorities below erred in holding that the assessee had not discharged the onus under Section 68. The assessee had provided sufficient documentary evidence to prove the identity, capacity, and creditworthiness of the lenders and the genuineness of the transactions. Consequently, the addition made under Section 68 was deleted, and the appeal was partly allowed.

← Previous Next →