2024 (12) TMI 39 - AT - Income Tax

Addition in respect to loan obtained u/s 68 or under section 69A - HELD THAT - Assessee, vide submission had submitted before the Assessing Officer, a detailed reply along with documents wherein confirmation in respect of loan taken from M/s. Abhilasha Shoppers Pvt. Ltd. for the period from 01/04/2012 to 31/03/2015 were submitted. It is clear that the loan creditor is assessed to income tax and its address and PAN details are matter of record. The financial statements of M/s.Abhilasha Shoppers Pvt. Ltd., were also submitted. The amount received and payable by the assessee as on 31/03/2013, is verifiable from the financial statements of the lender. The TDS certificate also placed - assessee has discharged its onus to explain the credit by adducing proper legal evidence. The amount has been repaid through proper banking channel and same is verifiable from the bank statement of the assessee. The statements of various persons reproduced in assessment order are not with reference to the verification of loan transaction of the assessee. They are general statements recorded by Investigation Wing of Kolkata, which are reproduced in the assessment order and are not in respect to any enquiry of loan in the case of the assessee. Confirmed copy of ledger evidencing repayment to lender is furnished. The legal evidence placed on record to explain loan credit does not get discredited by general statements. Addition u/s 68 - In the present case also, the loan amount has been repaid through proper banking channel along with interest. On the above factual position, there remains no scope to make addition under section 68. Consequently, respectfully following the decision of M/s. Vibrant Global Capital Ltd 2024 (11) TMI 312 - ITAT NAGPUR and detailed legal position discussed therein, we are of the considered opinion that the addition made in the present case of the assessee u/s 68 of the Act is unjustified and unsustainable on facts and in law. In assessee s case, the confirmation and financial statement of lender have been placed on record. The assessee has reasonably discharged his onus to explain the credit by adducing legal evidence on record. Accordingly, we set aside the impugned order passed by the learned CIT(A) and the Assessing Officer on this issue and the addition made u/s 68 is hereby directed to be deleted. Thus, the grounds raised by the assessee are allowed. Addition being interest paid to M/s. Abhilasha Shoppers Pvt. Ltd. - The interest paid by the assessee is through proper banking channel. The TDS was deducted and was deposited in the account of the Government. The genuineness of loan transaction is held by us to have been established and we have ordered deletion of the addition of ₹ 50 lakh. The loan obtained has been utilized for the purpose of business. The interest paid to the very same party during subsequent assessment year has been allowed. Accordingly, the addition made by the AO by disallowing interest paid is held to be unjustified.

Issues Involved:

1. Validity of notice issued under section 148 of the Income Tax Act, 1961.
2. Validity of assessment framed without issuance of notice under section 143(2) of the Act.
3. Legality of addition of Rs. 50 lakh under section 68 or 69A of the Act.
4. Legality of disallowance of interest of Rs. 1,99,520 under section 36(1)(iii) of the Act.
5. Procedural fairness in the appellate process.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued under Section 148:

The assessee contested the notice issued under section 148, arguing it was based on a mere change of opinion without new tangible material. The notice was issued following an investigation report from Kolkata, but no independent inquiry was conducted by the Assessing Officer (A.O.) before its issuance. The assessee's objections to the notice were not disposed of, rendering the reassessment invalid. The Tribunal noted that the original assessment had accepted the loan from M/s Abhilasha Shoppers Pvt. Ltd. as genuine, and the new information was general, not specific to the transaction. The Tribunal found that the notice lacked legal basis as it was not supported by new material evidence, citing relevant case law to support this position.

2. Validity of Assessment without Notice under Section 143(2):

The assessment was challenged for being framed without issuing a notice under section 143(2), despite the assessee filing a return of income. The Tribunal highlighted that the issuance of such notice is mandatory for a valid assessment, as per the Supreme Court's ruling in ACIT v/s Hotel Blue Moon. The absence of this notice invalidated the assessment, and the Tribunal emphasized that compliance with procedural requirements is essential.

3. Addition of Rs. 50 Lakh under Section 68 or 69A:

The addition of Rs. 50 lakh as unexplained credit was disputed by the assessee, who provided confirmation, bank statements, and financial records of the lender, M/s Abhilasha Shoppers Pvt. Ltd. The Tribunal found that the assessee had discharged the onus of proving the genuineness of the transaction, as the loan was repaid through proper banking channels and the lender's identity and creditworthiness were established. The Tribunal criticized the A.O. for relying on general statements without specific evidence against the assessee and concluded that the addition was unjustified and unsustainable, directing its deletion.

4. Disallowance of Interest of Rs. 1,99,520:

The interest disallowance was linked to the disputed loan transaction. Since the Tribunal found the loan transaction genuine, it also held that the interest paid was legitimate. The interest was paid through proper channels, with TDS deducted and deposited, and was allowed in subsequent assessments. The Tribunal directed the deletion of the disallowed interest, reinforcing the principle that interest on a genuine loan is deductible.

5. Procedural Fairness in the Appellate Process:

The assessee argued that the CIT(A) did not provide adequate reasons for dismissing the appeal. The Tribunal noted that the CIT(A) failed to address the assessee's submissions comprehensively, which amounted to procedural unfairness. The Tribunal emphasized the need for reasoned orders in appellate proceedings to ensure fairness and transparency.

Conclusion:

The Tribunal allowed the appeal, setting aside the additions and disallowances made by the A.O. and upheld by the CIT(A). It reinforced the importance of adhering to procedural requirements and ensuring that assessments and reassessments are based on concrete evidence rather than assumptions or general reports. The judgment underscores the necessity of providing taxpayers with a fair opportunity to present their case and have their submissions duly considered.

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