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Facts
The assessee's case was selected for limited scrutiny regarding the genuineness of expenses and unsecured loans. The Assessing Officer (AO) found that the assessee failed to prove the genuineness and creditworthiness of unsecured loan creditors, leading to additions under Section 68 and disallowances under Section 37(1). The CIT(A) subsequently dismissed the assessee's appeal.
Held
The tribunal upheld the orders of the lower authorities, concluding that the assessee did not provide cogent documentary evidence to establish the genuineness, identity, and creditworthiness of the unsecured loan creditors. Consequently, the additions under Section 68 and disallowances of interest and other expenses under Section 37(1) were confirmed.
Key Issues
Whether the assessee proved the genuineness and creditworthiness of unsecured loan creditors and the validity of disallowances of interest and other expenses under Section 37(1) of the Income Tax Act.
Sections Cited
143(3), 143(2), 142(1), 133(6), 68, 115BBE, 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI K. NARASIMHA CHARY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order
I.T.A.No.433/VIZ/2024 Zoyeb Hyderabadwala No.ITBA/NFAC/S/250/2024-25/1068814844(1) dated 19.09.2024 for the A.Y.2018-19 arising out of the order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 05.06.2021.
Brief facts of the case are that, assessee filed his return of income on 04.12.2018 admitting a total income of Rs.31,07,860/-. The case was selected for limited scrutiny assessment under the E-assessment Scheme, 2019 on the following issues: -
i. Verification of genuineness of Expenses ii. Unsecured loans
Thereafter, notices under section 143(2) and 142(1) of the Act were issued on 18.12.2019 and 11.02.2020 calling for details. Subsequently, show- cause notice was also issued on 29.04.2021. After examining the assessee submissions, Ld. AO issued further notices under section 133(6) of the Act dated 18.12.2020 to the parties in question for verification and seeking evidences for genuineness and creditworthiness of the lenders. However, only three parties submitted their replies. Ld. AO observed that even the three replies received were found to be incomplete and once again he sent a remainder notice under section 133(6) of the Act on 06.01.2021. After careful analysis of the submission of the parties, Ld.AO observed that the assessee has not proved the genuineness and creditworthiness of the parties from whom the Page No. 2
I.T.A.No.433/VIZ/2024 Zoyeb Hyderabadwala unsecured loans were received. Therefore, the Ld. AO proceeded to frame the assessment by making the following additions: - i. Addition under section 68 r.w.s. 115BBE of the Act Rs.52,99,941/- ii. Disallowance of interest under section 37(1) of the Act Rs.49,000/- iii. Disallowance of excess expenses under section 37(1) of the Act Rs.22,226/-
Aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld.CIT(A). Assessee reiterated the similar submissions before Ld. CIT(A). After examining the submissions, Ld. CIT(A) dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: -
1. That the Learned Commissioner of Income Tax - Appeals ['CIT (A)'] National Faceless Appeal Centre, Delhi has erred on facts and circumstances of the case and in law so far as the first appellate order passed by him is prejudicial to the interest of the Appellant and confirming the demand, ignoring the evidences are bad in law and arbitrary.
2. That the Learned CIT (A) erred in confirming the demand of Rs.60,55,302/- in toto made by the learned AO though the appellant had adduced the evidences in proof of the payments and cash credits. a) Confirmed the addition u/s. 68 - Rs.52,99,941/-; b) Disallowance of interest u/s.37(1) - Rs.49,000/-; and c) Disallowance of expenses u/s. 37(1) - Rs.22,226/-
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I.T.A.No.433/VIZ/2024 Zoyeb Hyderabadwala 3. Each one of the above grounds of appeal is without prejudice to each other.
4. That the appellant craves leave to add/alter any of the grounds of appeal on or before the time of hearing.”
6. Ground No. 1, 3 & 4 are general in nature and needs no adjudication.
7. Ground No. 2 raised by the assessee is relating to the addition made by the Ld. AO for Rs. 60,55,302/-. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] argued that assessee has proved the genuineness, creditworthiness and identity of the creditors for unsecured loans. However, Ld.AR contended that the Ld. AO fully relied on non-submission of bank account and return of income from the parties who granted unsecured loans. Ld.AR reiterated that confirmation letters have been provided from the various lenders which is available in the paper book. He therefore pleaded that since the parties has confirmed payment of unsecured loans to the assessee, no addition can be made under section 68 of the Act.
8. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] drew our attention to Para No. 5.3.4 of the order of the Ld. CIT(A) wherein it was observed by the Ld. CIT(A) that the assessee has not provided any cogent evidences in spite of multiple opportunities provided to the assessee. She therefore pleaded that order of the Revenue Authorities be upheld.
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I.T.A.No.433/VIZ/2024 Zoyeb Hyderabadwala 9. We have heard both the sides and perused the material available on record and orders of the lower authorities. It is an undisputed fact that the assessee has received unsecured loans from the following parties: -
Amount of loan S.No. Name of the lender or or deposit taken Interest PAN depositor or accepted paid during the year 1. Akshay Engineering EKOPS6093D 1,500,000 2. Electromech Engineers AABFE5162G 2,200,000 3. Jumana Qaid Zohar AVVPK0881D 700,000 Shahp urwala 4. Mariya Siraj Bhai AONPS3117D 500,000 5. Priyanka Sharma ASCPD6399R 799,941 39200 6. Sarada Devi Palod AIKPP1773F 200,000 9800 7. Farida Patel 200,000 8. TN Enterprises 700,000 10. However, we find from the observations of the Ld. AO that in response to notice under section 133(6) of the Act only partial information has been submitted by the various parties. Further we also do not agree with the arguments of the Ld.AR that the Ld. AO has not conducted any enquiries. Ld.AO has proceeded based on the replies given by the various parties wherein Ld. AO has recorded his observations party wise in the assessment order. The main contention of the Ld. AO is that the assessee has not proved the genuineness and creditworthiness of the parties by providing various documents as required by the Ld. AO and Ld.CIT(A). The Ld.AR repeatedly argued that the loans were received through banking channels, but has failed to support with documentary evidences beyond doubt to the satisfaction of the Revenue. In the absence of any material available to support the contentions of the assessee,
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I.T.A.No.433/VIZ/2024 Zoyeb Hyderabadwala even before us, stating that the genuineness, identity and creditworthiness of the unsecured loans creditors was established, we find no reason to interfere in the order of the Ld. CIT(A).
Further, with respect to the interest payment which was disallowed by the Ld. AO of Rs.49,000/-. Since the unsecured loans were not established to the satisfaction of the Revenue, we do not see any merit in the argument of the Ld.AR for payment of interest on such unsecured loans, and accordingly confirm the order of the Ld. CIT(A) on this issue.
Similarly, no documentary evidences have been produced before us with respect to disallowance of expenses for Rs. 22,226/- disallowed under section 37(1) of the Act and hence we do not see any merit in the argument of the Ld.AR thereby dismissing the ground raised by the assessee. Accordingly Ground No.2 raised by the assessee is dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 20th February, 2025.