2024 (11) TMI 154 - AT - Income Tax

Addition of treating the amount shown to be received as corpus donation as voluntary donation received - genuineness of unsecured loan - CIT(A) directed addition - HELD THAT - We find that as correctly observed by the CIT(A), it remains undisputed that the A.O. simply disallowed 33% of the total unsecured loans as unexplained, without ascribing any reason for his action. Either a loan transaction can be genuine, or it is not; there is no scope for an in between finding in an adhoc manner. No comments have been made by the AO on the documents submitted by the Assessee to establish the genuineness of the loans and creditworthiness of the lenders. There is no material whatsoever on record to establish that the loan transactions were not genuine; in fact, no attempt has also been made by the AO to that end. As observed from the assessment order, there is no enquiry made by the AO from any of the lenders from whom the Assessee had received unsecured loans. CIT(A) has rightly deleted addition. Decided against revenue.

Summary

Issues:
1. Addition of corpus donation as voluntary donation
2. Genuineness of unsecured loan

Analysis:
1. The first issue pertains to the addition of corpus donation as voluntary donation by the Assessing Officer (A.O.). The Assessee showed an addition of Rs. 335,42,110/- in Corpus Fund, which was directly taken to the balance sheet. The A.O. issued notices to some donors but only received one response, which was deemed unacceptable. However, the ld. CIT(A) deleted the addition based on lack of cogent material to support the A.O.'s action. The Assessee's books were audited, and receipts issued clearly indicated the nature of donations as corpus. The A.O. failed to prove any other intent of the donors, and the ultimate utilization of donations was not considered. The ld. CIT(A) rightly observed that the donations were received as corpus and were capital receipts. The A.O. did not conduct proper enquiry and acted on assumptions without concrete evidence, leading to the dismissal of the addition.

2. The second issue involves the genuineness of an unsecured loan amounting to Rs. 42,00,000/-. The A.O. disallowed 33% of the total unsecured loans as unexplained without providing reasons for his action. The ld. CIT(A) noted that there was no material to establish that the loan transactions were not genuine, and no attempt was made by the A.O. to verify the same. The A.O. did not comment on the documents submitted by the Assessee to establish the loans' genuineness and lenders' creditworthiness. The ld. CIT(A) relied on relevant decisions to uphold that a loan transaction is either genuine or not, without room for an ad hoc finding. The Department failed to present any contrary decisions. Consequently, the well-reasoned order of the ld. CIT(A) on this issue was upheld, and the appeal was dismissed.

In conclusion, the Tribunal upheld the ld. CIT(A)'s decisions on both issues, emphasizing the lack of concrete evidence or proper enquiry by the A.O. to support the additions and disallowances made. The Assessee's contentions were supported by documentary evidence, and the Department failed to rebut the same effectively. The judgments cited by the ld. CIT(A) were found relevant and applicable, leading to the dismissal of the appeal.