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2023 (8) TMI 428 - AT - Income TaxAddition u/s 68 - unsecured loans received from various parties - HELD THAT - The provision of section 68 of the Act fastens the liability on the assessee to make proper and reasonable explanation to the AO with regard to sum credited in the books of account. The assessee is liable to provide proof of the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the credit entries u/s 68 in the case of CIT Vs. Precision finance (P) Ltd 1993 (6) TMI 17 - CALCUTTA HIGH COURT AO on the basis of material supplied by the assessee made independent inquiry with banks and brought evidences that the repayment shown to the loan party actually has gone to someone else and accordingly raised the question with regard to the genuineness of loan. But the assessee failed to rebut the finding of the AO before the lower authorities as well as before us. Therefore, in the absence of any justification from the assessee about the repayment of the loan to the 3rd party including the bearer cheque, we do not find any infirmity in the order of the learned CIT(A) to the extent of his finding with regard to credit of loan from the party namely Ashmi Marketing Pvt. Ltd. The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques. Thus we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him with regard to loan credit from the party namely Shri Harish Ambika Prasad. Also the amount was received through banking channel and the same was repaid through banking channel within the period of a month or so. There is no finding of the lower authorities that the amount was not received from the impugned party or repayment of the amount gone to any third party. Therefore, applying the ratio laid down in case of CIT Vs. Rohini Builders 2001 (3) TMI 9 - GUJARAT HIGH COURT the action of the authorities below are not justified. Hence, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made on account of loan credit from the party namely Smt. Kaushalya Ben. Also we note that the amount was not credited during the year under consideration, as such the same was carried forward from earlier years. Therefore, the provision of section 68 of the Act cannot be made applicable on the same in the year under consideration. We hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him on account of outstanding loan liabilities from the parties namely M/s Pooja Garments P Ltd and M/s Parkash Fortan Softech Ltd respectively. Finding of the CIT(A) that liability of the assessee to pay such loan came to be ceased and the same is liable to be taxed u/s 41(1) - As there should be two conditions required to be satisfied before any amount could be brought to tax u/s 41(1) - These conditions are that that amount in question has been allowed as deduction in any past assessment year and there has been a receipt of any amount or benefit by way of a cessation or remission with regard to the above allowance in any subsequent year. The scheme of provision of section 41(1) are that if an expenditure or loss or trading liability is allowed for any assessment year and subsequently if the assessee recoups the loss or expenditure or gets some benefit by way of remission or cessation of the trading liability, then such amount or benefit is to be taxed in the year in which such liability came to be ceased. Thus there is no material and finding on record by the revenue authorities that the assessee has been allowed any deduction in any past assessment year on account of credit of such loans liabilities. Therefore, in our considered opinion, the provision of section 41(1) cannot be invoked in the given facts and circumstances. We draw support and guidance from the judgment of Mahindra and Mahindra Ltd 2003 (1) TMI 71 - BOMBAY HIGH COURT
Issues Involved:
1. Addition of unsecured loans as unexplained cash credits under section 68 of the Income Tax Act. 2. Initiation of penalty proceedings under section 271(1)(c) for alleged concealment and/or furnishing of inaccurate particulars of income. 3. Charging of interest under sections 234A, 234B, 234C, and 234D of the Income Tax Act. Summary: Issue 1: Addition of Unsecured Loans as Unexplained Cash Credits under Section 68 The assessee, a private company engaged in manufacturing and trading of Bitumen, was scrutinized for unsecured loans amounting to Rs. 6,10,38,513/- received from various parties. The Assessing Officer (AO) treated these loans as unexplained cash credits under section 68 of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the AO's addition, leading to the assessee's appeal. - Ashmi Marketing Pvt Ltd: The assessee received Rs. 10 lakhs from this party, repaid partially, leaving an outstanding balance of Rs. 3,55,500/-. The AO found discrepancies in the repayment transactions and the assessee failed to justify these discrepancies. The Tribunal upheld the addition due to the lack of satisfactory explanation from the assessee. - Harish Ambika Prasad: The assessee received Rs. 8 lakhs, which was repaid within the year. The Tribunal found the loan genuine as all transactions were through banking channels and confirmed by the lender. The Tribunal directed the AO to delete this addition. - Kaushalya Ben: The assessee received Rs. 7 lakhs, repaid within a month. Despite the lack of certain documents, the Tribunal found the transactions genuine and directed the AO to delete this addition. - Pooja Garments Pvt Ltd and Prakash Fortan Softech Ltd: The outstanding loans from these parties were treated as unexplained. The Tribunal noted that these loans were from previous years and could not be taxed under section 68 or section 41(1) as there was no cessation of liability or deduction claimed in past years. The Tribunal directed the AO to delete these additions. Issue 2: Initiation of Penalty Proceedings under Section 271(1)(c) The CIT(A) had dismissed the ground relating to the initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act for alleged concealment and/or furnishing of inaccurate particulars of income. The Tribunal's decision on this issue is not explicitly detailed in the provided text. Issue 3: Charging of Interest under Sections 234A, 234B, 234C, and 234D The CIT(A) confirmed the charging of interest under sections 234A, 234B, 234C, and 234D of the Income Tax Act. The Tribunal's decision on this issue is not explicitly detailed in the provided text. Conclusion: The appeal of the assessee was partly allowed, with the Tribunal directing the deletion of additions related to loans from Harish Ambika Prasad, Kaushalya Ben, Pooja Garments Pvt Ltd, and Prakash Fortan Softech Ltd, while upholding the addition related to Ashmi Marketing Pvt Ltd. The Tribunal emphasized the necessity for the assessee to provide satisfactory explanations and evidence for the loans received. The decision on penalty proceedings and interest charges was not explicitly detailed.
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