2023 (10) TMI 463 - AT - Income Tax

Addition u/s 68 - unsecured loan receipts - assessee has failed to discharge the onus of establishing creditworthiness of lenders/creditors and genuineness of transactions of unsecured loan viz-a-viz payment of interest thereon - CIT(A) confirmed addition - HELD THAT - As CIT(A) noted that since the source of companies was doubtful, therefore, the same was rightly added by the AO u/s 68 of the Act. The learned CIT(A) while confirming the second part of addition also concluded that since the loans has been treated as bogus, the interest also rightly disallowed by the AO. CIT(A) has right to relied on the judgment of Mihir Kanti Hazra 2015 (5) TMI 319 - CALCUTTA HIGH COURT wherein it was held that it is now well settled that the creditworthiness of the alleged creditors and the source of the source are relevant enquiries. We unable to see any valid reason to interfere with the findings recorded by the CIT(A) while confirming both the additions. Decided against assessee.

Summary

Issues Involved:
The judgment involves issues related to addition of unsecured loan and interest under section 68 of the Income Tax Act, 1961, genuineness of transactions, creditworthiness of lenders, disallowance of interest without issuance of final show-cause notice, and double addition of interest.

Addition of Unsecured Loan and Interest - Grounds 1 & 2:
The assessee contested the addition of Rs. 2,18,66,082 on account of unsecured loan and interest disallowed under section 68 of the Income Tax Act, 1961. The contention was that the loan was received through normal banking channels, establishing the genuineness and creditworthiness of the lender. However, the CIT(A) upheld the additions, stating that the assessee failed to prove the creditworthiness of the lender and genuineness of the transactions. The AO and CIT(A) concluded that since the source of funds was doubtful, the additions were justified.

Disallowed Interest and Double Addition - Grounds 3 & 4:
The assessee raised concerns regarding the disallowance of interest without a final show-cause notice and the alleged double addition of interest. The Sr. D.R. supported the lower authorities, stating that no disallowance or addition was made under section 40(a)(ia) of the Act. Consequently, grounds 3 & 4 of the assessee were dismissed for being baseless and misconceived.

General Grounds - Grounds 5 & 6:
The remaining grounds raised by the assessee were deemed general in nature and did not require specific adjudication.

Conclusion:
After evaluating the contentions, submissions, and findings of the AO and CIT(A), the Tribunal upheld the additions of unsecured loan and interest, citing the failure of the assessee to establish the creditworthiness of lenders and genuineness of transactions. As no disallowance or addition was made under section 40(a)(ia) of the Act, the appeal of the assessee was dismissed.