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Facts
The assessee appealed against an order sustaining an addition of Rs. 30,10,000/- under Section 68 of the Income Tax Act for unsecured loans from his wife (Rs. 5,10,000), brother-in-law (Rs. 20,00,000), and a friend (Rs. 5,00,000). The assessee provided confirmations and bank statements for all lenders, and their Income Tax Returns (or Form 16) were also presented, with most loans repaid in the same or subsequent financial years.
Held
The Tribunal found that the assessee had broadly established the bona fides of the lenders as required by Section 68, citing confirmations, bank statements, and the repayment of loans. It held that the mere non-production of Income Tax Returns for two parties (which were otherwise available with the department) did not warrant an adverse inference. Consequently, the Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to cancel the additions.
Key Issues
Whether the assessment proceedings and approval under Section 147/151 were valid; whether the addition under Section 68 for unsecured loans was sustainable given the evidence of identity, creditworthiness, and genuineness of transactions; and the validity of penalty proceedings and interest charged.
Sections Cited
Section 147, Section 143(3), Section 151, Section 68, Section 271(1)(c), Section 234A, Section 234B, Section 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘H’: NEW DELHI
Before: SHRI PRADIP KUMAR KEDIA & SHRI SUDHIR PAREEK
This appeal preferred by the assessee / appellant against the order dated 12.10.2023 of National Faceless Appeal Centre (NFAC)
/ CIT(A) pertaining to Assessment Year 2012-13, on the following grounds of appeal:
ITA No.- 3470/Del/2023 Virender Singh Rana “1. That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has failed to appreciate the fact that the assessment order passed by the Ld. AO under Section 147/143(3) of the Income Tax Act is illegal and bad in law.
That on the facts and circumstances of the case and the provision of the law, the initiation of proceeding u/s 147 is illegal and bad in law and thus assessment made requires to be quashed.
That on the facts and circumstances of the case and the provision of law, the approval obtained u/s 151 of the higher authorities is mechanical, without application of mind and thus illegal and bad in law.
4. That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 30,10,000/- on account of unsecured loan received from three persons being close relative/friend by treating the same as unexplained cash credit u/s 68.
That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has failed to appreciate that the Ld. AO has passed the assessment order without issuing any show cause notice before finalizing the assessment.
6. That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has erred in not deciding the appeal on the basis of the grounds of appeal
raised by the appellant and without considering the documents filed during the assessment proceeding.
7. That on the facts and the circumstances of the case the Ld. CIT(A) has failed to appreciate that the initiation of the penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 is illegal and bad in law.
8. That on the facts and the circumstances of the case the Ld. CIT(A) has failed to appreciate that interest charged by the Ld. AO u/s 234A, 2348 and 234C is illegal and without prejudice it is excessive.
9. That the appellant craves leave to reserve to itself the right to add, alter, amend, vary, modify and/or withdraw any ground(s) of appeal at or before the time of hearing.”
2. When the matter was called for hearing, the Ld. Counsel for the assessee submitted that additions have been made u/s 68 of the Act amounting to Rs. 30,10,000/-. These additions attributed to three lenders, namely, Smt. Kamlesh Wati, (wife of assessee) amounting to Rs. 5,10,000/-, Chandrakant Mukesh Solanki
ITA No.- 3470/Del/2023 Virender Singh Rana (Brother-in-law) Rs. 20,00,000/- and Shri. Rakesh Kumar, (Friend)
Rs. 5,00,000/-.
3. The Ld. Counsel submitted that the amount of Rs. 5,10,000/- was received as a short-term loan from the wife, which was repaid in the same year. The Ld. Counsel pointed out that the confirmation, bank statement as well as the Income Tax Return of the wife were furnished before the lower authorities. As regards, the loans from Chandrakant Mukesh Solanki, the assessee has furnished the copy of the bank statement, but the Income Tax Return, could not be furnished before the AO as well as the CIT(A).
The Ld. Counsel insisted that, when the PAN Number was furnished along with the bank statement, it is for AO to verify the facts, besides, the aforesaid amount of Rs. 20 lakhs have been repaid in the financial year 2013-14. Likewise, loan received from Rakesh Kumar was supported by bank statements and confirmation placed before the AO, but the Income Tax Return could not be filed at the relevant time, but is now produced before the Tribunal.
Form 16 of Chandrakant Mukesh Solanki has also been produced before the Tribunal. The amount of Rs. 5 lakhs from ITA No.- 3470/Del/2023 Virender Singh Rana Rakesh Kumar was repaid on 26.05.2012 in the very next financial year. The Ld. Counsel, thus, pleaded that, based on this evidence and factual repayment, the bonafides of the lenders could not have to be under doubt by the lower authorities. The Ld. Counsel thus sought appropriate relief from the Tribunal.
5, The Ld. DR for the Revenue, on the other hand, relied upon the orders of the lower authorities.
We have carefully perused the material available on record and considered the rival submissions made during the hearing. The controversy revolves around an addition of Rs. 30,10,000/- involving three parties who are close relatives of the assessee as stated on behalf of the assessee. The additions have been made on the ground that the assessee has failed to discharge the onus U/s 68 of the Act. However, on perusal of facts, we find that the assessee has broadly established the bonafides of the lenders in terms of section 68 of the Act. Secondly, not only confirmations and the bank statements of the three lenders are available on record, but the loans have been repaid either in the next financial year or the subsequent financial year. The mere non-production of ITA No.- 3470/Del/2023 Virender Singh Rana Income Tax Returns of the two parties does not provide reasonable grounds to draw the adverse inference, on the face of the factum of repayment or loan.
Ordinarily, when new facts are brought on record, the matter is remanded back to the lower authorities. However, the Income Tax Returns are already part of the Department and as connected with the PAN Numbers, we do not consider it necessary to involve the assessee in litigation by remitting the matter back to the lower authorities. The bonafide of the credit entries in question have been established U/s 68 of the Act. Therefore, we set aside the order of the CIT(A) and direct the AO to cancel the additions.
In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 05.08.2024