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Facts
The assessee filed a return of income and claimed an unsecured loan of Rs. 52,00,000/- from M/s Nuvaan Buildtech Private Limited. The Assessing Officer (AO) made additions under Section 68 of the Income Tax Act, 1961, on the ground that the assessee failed to prove the genuineness of the loan. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the lower authorities ignored the fact that the loans were taken through banking channels and that the source of the source need not be proved for the year under consideration. The Tribunal noted that the assessee had produced some documents, though claimed to be incomplete by the department.
Key Issues
Whether the addition under Section 68 was justified when the loan was taken through banking channels and the assessee had produced documents to prove the identity, creditworthiness, and genuineness of the transaction.
Sections Cited
68, 143(2)
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Income Tax Appellate Tribunal, DELHI
Before: SHRI M. BALAGANESH & SH. YOGESH KUMAR U.S.
ORDER
PER YOGESH KUMAR, U.S. JM:
The present appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-4, New Delhi (in short ‘Ld.
CIT(A)’) dated 29.07.2019 for the Assessment Year 2015-16.
Brief facts of the case are that, the Assessee filed return of income at Rs.52,08,710/- for AY 2015-16. The return was processed and the case of the Assessee was selected for scrutiny u/s 143(2) of the Income Tax Act, 1961 ('Act' for short). During the course of assessment proceedings, the assessee was asked to substantiate the claim of unsecured loan of Rs.52,00,000/- taken from M/s Nuvaan Buildtech Private Limited. The assessee produced certain documents to prove the identity, creditworthiness and genuineness of the transactions. After analyzing the documents produced by the assessee, the AO opined that the assessee has failed to discharge its onus of proving the genuineness of the unsecured loan. Accordingly, made additions u/s 68 of the Act to the tune of Rs.52,00,000/-.
Aggrieved by the assessment order dated 28.12.2017, the Assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A), vide order dated 29.07.2019, dismissed the appeal filed by the assessee. As against the order of the Ld. CIT(A) dated 29.07.2019, the assessee is in appeal before us by raising the following grounds of appeal:-
1. That the impugned order of the appeal passed by the CIT (Appeals) is completely bad in law and wrong on facts. The learned CIT (Appeals), in confirming the additions made by the AO has only gone by surmises, conjecture and guess work in drawing inference and in recording his conclusion. In the absence of any cogent material to support his findings, the same being based on conjuncture and surmises cannot be upheld.
2. That the learned CIT (Appeals), has erred in law and on facts and circumstances of the case, in confirming the additions made in hypothetical manner a sum of Rs.52,00,000/- on account of unsecured loan taken from M/s Nuvaan Buildtech Private Limited under section 68 of the Act during the year, without appreciating the fact that the such loans were taken during the relevant previous year through banking channel.
The learned CIT (Appeals), has erred in law and on facts and circumstances of the case, in confirming the additions of Rs.52,00,000/- in hypothetical manner on account of unsecured loan taken from M/s Nuvaan Buildtech Private Limited under section 68 of the Act during the year, by stating that the documents furnished before him do not constitute sufficient evidence to prove the creditworthiness of the lender and genuineness of the transaction, thus the genuineness of the transaction is suspected, as if, the instant case is of the share application money received by the Assessee/Appellant. This violated the basic principle as laid down under section 68 of the Act, inquiring the source of the source, which is not applicable in case of the unsecured loans.
4. That the learned CIT (Appeals), has erred in law and on facts and circumstances of the case by mentioning the drawback in the submission of the AR of the appellant that no complete copy of return of income of M/s Nuvaan Buildtech Private limited has been submitted and in the financial statement of the said lender M/s Nuvaan Buildtech Private Limited the amount lent to the appellant has been shown under the head debtors without specifying the further defects to comply the prerequisites of the section 68 i.e. identity, creditworthiness and genuiness of the transaction in a hypothetical manner.
5. That the learned CIT (Appeals) erred in law and on facts while dismissing the appeal without acknowledging the fact that the appellant has produced all the possible documents before him and has exhausted all the possible resources to prove the identity, genuineness, and creditworthiness of the lender. Further, the learned CIT (Appeals) has failed to identify the defect in the documents furnished before him to complete the requirements of Section 68 of the Act, and has consequently dismissed the appeal in a routine manner.” 3. None appeared on behalf of the assessee, however, an application for adjournment has been filed. Considering the fact that the present appeal is pending since 2019 and the Assessee’s Representative taking adjournment continuously on all previous occasions, we deem it fit to decide the appeal on hearing the ld. Sr. DR and verifying the material available on record.
The Ld. DR submitted that the assessee failed to file complete and satisfactory details before the AO to prove the genuineness of the transactions not filed complete bank statement of the lender and not even failed complete copy of the return of income and the assessee has not produced the directors of the lender company. Further, submitted that the bank statement of the lender company clearly shows that the huge amounts of money are transferred, however, the lender company has shown ‘Nil’ revenue from operations and the same is not involved in the real business activities as seen from the return of income placed on record. The Ld. DR submitted that the company i.e. M/s Nuvaan Buildtech Private Limited is a dummy/paper company created with a motive to provide entries to interested parties. The ld. DR by relying upon the judgment of Hon’ble jurisdictional High Court in the case of Pr. CIT vs Bikram Singh, reported in [2017] 85 taxmann.com 104 (Del.), sought for dismissal of the appeal.
We have heard the ld. DR and perused the material available on record. During the assessment proceedings, the assessee was asked to substantiate the claim to prove the identity, creditworthiness and genuineness of the transactions. As per the assessee, to satisfy the query of the AO, the Assessee has produced the ledger account of M/s Nuvaan Buildtech Pvt. Ltd., acknowledgment of ITR, bank statement reflecting the transaction made through banking channel and copy of the balance sheet. The addition came to be made on the ground that the assessee failed to furnish the ‘complete copy of return of income’ and ‘balance sheet’ of the said lender. The said addition made by the A.O. has been confirmed by the ld. CIT(A).
On going through the record, it is found that it is a case of the assessee that the lower authorities have ignored the vital fact that the said loans were taken during the relevant previous year through banking channel, and for the purpose of applying section 68 of the Act, source of the source need not be proved for the year under consideration. It is not the case of the Department that the Assessee has not at all produced any document, however, it is a case of Department is that the assessee has provided incomplete documents and not produced the director of the lender company. Considering the fact that the assessee has indeed produced certain documents which are claimed to be incomplete as per the Department in the absence of any material available on record to examine the factual dispute, in the interest of justice, we deem it fit to remand the matter to the file of the ld. CIT(A) for adjudicating issue afresh. The assessee is hereby directed to produce the ‘complete’ documents to the satisfaction of the Ld. CIT(A) and the ld. CIT(A) is directed to adjudicate the issue afresh in accordance with law after considering all the documents provided by the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 22nd May, 2025