2024 (2) TMI 603 - AT - Income Tax

Addition u/s. 68 - unsecured loans - as assessee to prove identity, genuineness and creditworthiness of the loan parties failing which the amount be treated as undisclosed income of the assessee - money is being credited to their account either by depositing cash or through RTGS from unexplained sources and money is being immediately transferred to the appellant which reflects that these are merely accommodation entries and lack genuineness - DR argued that the notices issued by the Revenue Authorities have not been complied by the loan parties and hence there is an absolute failure on the part of the assessee to prove the credential of the loan parties. HELD THAT - On going through the entire details, we find that the assessee has furnished all the required documents during the course of assessment proceedings and additional evidences in appellate proceedings. AO has disregarded the creditworthiness of the lenders stating that they did not have sufficient sources or that their income is disproportionate to the loan advanced without making any verification in the case of the depositors. During the course of assessment proceedings and through additional evidence, the appellant has submitted the ITR reflecting the PAN and address details, relevant bank statement and confirmation of the creditors. Thus the assessee can be said to have discharged the onus laid upon them. CIT(A) has rightly held that, AO has rejected the evidences furnished by the appellant without establishing falsity of the documents filed by the assessee. Personal identities of these investors were proved, the sources have been proved, the ITRs and the subsequent repayments has been examined. Having so examined the CIT(A) came to a conclusion that the AO is not justified treating the unsecured loans received u/s. 68. Appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition made by the AO under Section 68 on account of unsecured loans amounting to Rs. 2,25,40,000.

Summary:

Issue 1: Deletion of Addition under Section 68

The Revenue challenged the deletion of an addition of Rs. 2,25,40,000/- made by the AO under Section 68 of the Income Tax Act, 1961, on account of unsecured loans. The AO had issued notices under Section 133(6) to all the loan parties, but only five responded. The AO concluded that the parties lacked creditworthiness to extend the loans, leading to the addition based on the precedent set by the Hon'ble High Court of Delhi in the case of Titan Securities Ltd.

During the appellate proceedings, the ld. CIT(A) deleted the addition, accepting the assessee's submission of confirmations, bank accounts, and ITRs of the lenders. The CIT(A) also called for a remand report from the AO and examined the additional evidence provided by the assessee.

The Tribunal reviewed the submissions and evidence, noting that the assessee had provided sufficient documentation, including ITRs reflecting PAN and address details, relevant bank statements, and confirmations from the creditors. The Tribunal found that the AO had disregarded the creditworthiness of the lenders without proper verification and had not established the falsity of the documents filed by the assessee.

The Tribunal upheld the CIT(A)'s decision, concluding that the assessee had discharged the onus of proving the identity and creditworthiness of the loan parties. The AO's rejection of the evidence was deemed unjustified. Consequently, the Tribunal declined to interfere with the order of the CIT(A) and dismissed the Revenue's appeal.

Conclusion: The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld, confirming that the assessee had adequately established the identity and creditworthiness of the loan parties.