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2024 (3) TMI 98 - AT - Income TaxAddition u/s 68 - unsecured loans - Onus to prove - addition made as assessee failed to discharge the onus in proving the credit as genuine - HELD THAT - The assessee has furnished confirmation, copy of Income tax returns of the lender, copy of bank statements of the lender to prove the identity, genuineness and creditworthiness of the transaction. Assessee also produced the financials of the company in which the lender was one of the Directors holding 98.4% of the shareholding. According to which the company made substantial profits and had sufficient funds to advance amounts to the Director. Therefore, the assessee has proved the source of source also in this case although not required to prove in law. We hold that the assessee has proved the identity, genuineness and creditworthiness of the creditor and therefore, the AO is erred in treating the loan of Rs. 80 lakhs received by the assessee as unexplained cash credit u/s 68 - Thus, reversing the findings of the CIT(A), we direct the AO to delete the addition made u/s 68. Addition u/s 2(22)(e) - Assessee is a Director and shareholder of company granting loan, thus holding more than 10% of voting rights of the company - CIT(A) sustained the addition - HELD THAT - Counsel before us reiterated the submissions made before the CIT(A) submitted that the company has provided loan for purchase of agricultural land to the assessee as the assessee has experience and expertise in arranging the land to the company. Ld. Counsel submits that the loan was given to the assessee for the purpose of business. However, the assessee could not produce any substantial evidence to prove its contentions. Therefore, we see no infirmity in the order passed by the CIT(A) in sustaining the addition. This ground of appeal is rejected. Appeal of the assessee is partly allowed.
Issues involved:
The appeal challenges the addition of Rs. 80 lakhs made under section 68 of the Income Tax Act, 1961 for the assessment year 2013-14. Additionally, the appeal contests the addition of Rs. 85,304 under section 2(22)(e) of the Act. Issue 1 - Addition under section 68 of the Income Tax Act, 1961: - The Assessing Officer (AO) raised concerns regarding the unsecured loan of Rs. 80 lakhs, emphasizing the lack of complete documentary evidence to establish the identity, creditworthiness, and genuineness of the lender, Shri Sachin Dutta. - The appellant provided various documents, including bank statements, financials of Shri Balaji Hitech Constructions Pvt. Ltd., and income tax returns of the lender, to prove the transactions were conducted through banking channels and to establish the creditworthiness of the lender. - Despite the additional evidence submitted under Rule 46A of the Act, the AO contended that the identity of the creditor was not proven, as the lender was not produced before the AO. - The Commissioner of Income Tax (Appeals) upheld the addition under section 68, concurring with the AO's view that the appellant failed to establish the lender's identity. Issue 2 - Addition under section 2(22)(e) of the Act: - The AO treated the loan of Rs. 8,75,000 received by the appellant from M/s KAJ Infrastructure Pvt. Ltd. as deemed dividend under section 2(22)(e) due to the appellant's significant shareholding in the company. - The AO restricted the addition to Rs. 85,304, considering the accumulated profits of M/s KAJ Infrastructure Pvt. Ltd. - The CIT(A) sustained this addition, as the appellant could not provide substantial evidence to support the purpose of the loan for business use. Judgment: - The Tribunal found merit in the submissions made by the appellant's counsel, acknowledging the evidence presented to establish the identity, creditworthiness, and genuineness of the lender in the case of the Rs. 80 lakhs loan. The Tribunal reversed the CIT(A)'s decision and directed the AO to delete the addition under section 68 of the Act. - However, regarding the addition under section 2(22)(e) of the Act, the Tribunal upheld the CIT(A)'s decision as the appellant failed to provide substantial evidence to support the business purpose of the loan received from M/s KAJ Infrastructure Pvt. Ltd. - Consequently, the appeal was partly allowed, with the addition under section 68 being deleted while the addition under section 2(22)(e) was sustained.
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