2023 (10) TMI 190 - AT - Income Tax

Addition u/s 68 - bogus unsecured loans and bogus interest expenses claimed on such loan - applicant had not satisfactorily established the identity, creditworthiness and genuineness of the transaction - CIT(A) deleted the addition - HELD THAT - Assessee has placed complete details including PAN Nos., bank account statements, financial statements and income tax details of each of the cash creditors. The ld. Assessing Officer has not indicated any discrepancy in any of these details. CIT(A) has also examined each of the cash creditors in detail including the fact that in some of the cases there are cash creditors who had already advanced funds for the assessee in the preceding year and some fresh loans have been taken. Interest has been paid through banking channels and tax has been deducted at source. AO failed to bring any adverse material against the assessee and the loan borrowed. Most of the unsecured loans have been repaid in the subsequent period. We, thus are of the considered view that the ld. CIT(A) after examining the facts of the case and giving finding of fact that the assessee has explained the nature and source of alleged sum and has proved the identity and creditworthiness of the cash creditors and genuineness of the transactions and further placing reliance on the judgement of Dataware Pvt. Ltd. 2011 (9) TMI 175 - CALCUTTA HIGH COURT , Sophia Finance Ltd. 1993 (8) TMI 62 - DELHI HIGH COURT and Ayachi Chandrashekhar Narsangji 2013 (12) TMI 372 - GUJARAT HIGH COURT has rightly deleted the addition made by the Assessing Officer under section 68. Disallowance u/s 14A - HELD THAT - As only investment made by the assessee firm in mutual funds is at Rs. 5,00,000/-. During the appellate proceedings before the ld. CIT(A), prayer of the assessee was to direct the Assessing Officer to verify the claim of the appellant in view of the decision of M/s. REI Agro Ltd. 2013 (12) TMI 1517 - CALCUTTA HIGH COURT - Considering the same, we fail to find any infirmity in the finding of the ld. CIT(A) in restoring the issue of disallowance under section 14A to the assessing officer for necessary verification - Ground raised by the revenue is dismissed. Adhoc disallowance made @ 20% - CIT(A) has confirmed the said disallowance observing that the expenditure being personal nature cannot be ruled out - HELD THAT - It was the assessee who had to raise such ground but there is no appeal filed by the assessee and it seems that the revenue has inadvertently raised a wrong ground challenging the finding of the ld. CIT(A) even though it has been decided in favour of the revenue. Thus, Ground raised by the revenue becomes infructuous and the same is dismissed as such.

Summary

Issues Involved:
The appeal involves issues related to the condonation of delay in filing the appeal, addition of bogus unsecured loans and interest expenses, disallowance under section 36(1)(iii) of the IT Act, disallowance under section 14A of the IT Act, and adhoc disallowance of expenses.

Condonation of Delay:
The Tribunal condoned the delay of 59 days in filing the appeal by the revenue, considering the period of delay fell during the time of the Covid-19 pandemic, which was excluded for the purpose of limitation by the Hon'ble Supreme Court. The appeal was admitted for hearing after the delay was condoned.

Addition of Bogus Unsecured Loans and Interest Expenses:
The revenue raised grounds of appeal challenging the deletion of the addition of Rs. 4,99,50,000/- of bogus unsecured loans and interest expenses claimed on such loans under section 68 of the IT Act. The Assessing Officer treated the unsecured loans as bogus entries and accommodation entries, disallowing the claimed interest. However, the Tribunal found that the assessee had satisfactorily established the identity, creditworthiness, and genuineness of the transactions. The Tribunal upheld the decision of the CIT(A) in deleting the addition, citing various legal precedents and documents provided by the assessee.

Disallowance under Section 36(1)(iii) of the IT Act:
The revenue also challenged the deletion of the disallowance of the entire amount claimed by the assessee firm under section 36(1)(iii) of the IT Act. The Tribunal found that the CIT(A) had examined the details provided by the assessee, including PAN numbers, bank statements, and financial statements of cash creditors. It was concluded that the assessee had explained the nature and source of the sum, proving the identity and creditworthiness of the creditors. The Tribunal dismissed the revenue's appeal against this disallowance.

Disallowance under Section 14A of the IT Act:
Another ground of appeal was related to the disallowance made under section 14A of the IT Act. The Tribunal noted that the only investment made by the assessee was in mutual funds, and the disallowance was based on dividend income received. The issue was restored to the assessing officer for further verification in light of relevant legal judgments, and the Tribunal upheld the decision of the CIT(A) in this regard.

Adhoc Disallowance of Expenses:
The revenue challenged the deletion of adhoc disallowance made by the Assessing Officer in relation to certain expenses. However, the Tribunal found that the revenue inadvertently raised a wrong ground, as the disallowance had already been confirmed by the CIT(A). Therefore, the ground raised by the revenue was dismissed as infructuous.

General Ground and Conclusion:
A general ground of appeal was also raised by the revenue, which was dismissed. In the end, the Tribunal dismissed the appeal of the revenue, upholding the decisions of the CIT(A) on various issues. The order was pronounced in Kolkata on 26th July 2023.