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Facts
S.M. Lime Industries, a partnership firm engaged in trading lime, filed a Nil income return for AY 2018-19. The Assessing Officer made an addition of Rs.7,71,74,960/- under section 68 of the Income-tax Act, 1961, for unexplained unsecured loans. The CIT(A) dismissed the assessee's appeal, affirming the addition on the grounds that the assessee failed to discharge the onus regarding the genuineness of the loans.
Held
The Tribunal found an apparent error in the AO's assessment regarding a loan from Shanti Kumar Jain, where Rs.4.00 crore was mistakenly recorded instead of Rs.4.00 lakh, leading to the deletion of Rs.3.96 crore from the addition. For the remaining unsecured loans of Rs.3,75,74,960/-, the matter was remanded to the Jurisdictional Assessing Officer for fresh verification as the details of identity, creditworthiness, and genuineness were not clearly discernible from the lower orders. The Tribunal also directed the rectification of the AO's mistake in showing Nil returned income despite the assessee having declared a loss.
Key Issues
1. Whether the addition of unsecured loans under Section 68 of the Income-tax Act, 1961, was justified. 2. Whether the assessee was entitled to the carry forward of the declared loss.
Sections Cited
Income-tax Act, 1961: Section 250, Income-tax Act, 1961: Section 143(3), Income-tax Act, 1961: Section 144B, Income-tax Act, 1961: Section 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI
Before: DR.MANISH BORAD & SHRI MANOMOHAN DAS
आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal pertaining to Assessment Year 2018-19 at the instance of assessee is directed against the order dated 26.12.2023 passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (in short ‘the Act’) which in turn is arising out of Assessment Order dated 30.06.2021 passed u/s.143(3) r.w.s.144B of the Act.
Assessee has raised following grounds of appeal :
“1. On the facts and in the circumstances of the Appellant's case the learned CIT(Appeals) was not justified in dismissing the Appellant's appeal and confirming the huge addition of Rs.7,71,74,960/- made by the A.O. in the appellant's Returned income u/s.68 of the Income Tax Act, 1961 by treating the Appellant's genuine loans as unexplained income.
2. The Assessment made by the A.O. was contrary to the provisions of law as well as it was contrary to the records submitted by the Appellant and available with the A.O. The assessment had been made without application of mind and was made without considering the Returned figure, explanations and documents submitted and without examining the loan creditors. The entire addition made by the A.O. therefore should have been deleted by the learned CIT(Appeals).
3. In course of assessment proceeding as well as in the proceeding of appeal before the learned CIT (Appeals) the Appellant had submitted proof regarding genuineness of all loans taken by them. Therefore the learned CIT (Appeals) was highly unjustified in holding that the Appellant had failed to discharge the onus regarding these loans.
4. The learned CIT (Appeals) erred in law is not directing the A.O. to allow carry forward of the Returned Loss of the Appellant Rs.33,81,859/-.
5. On the facts and in the circumstances of the Appellant's case it is prayed that the entire addition of Rs.7,71,74,960/- made by the A.O. and upheld by the learned CIT(Appeals) may be deleted and A.O. may be directed to accept the Returned loss of Rs.33,81,859/- as per Appellant’s Return.
6. The appellant further prays for leave to amend/alter the above grounds or/and take any other grounds of appeal before or at the time of the hearing of the appeal.”
Brief facts of the case are that the assessee is a Partnership Firm engaged in the business of trading in lime. Return of income for the A.Y. 2018-19 as claimed by the assessee in the paper book as per Page 2A and 3 has been filed on 07.11.2017 declaring Nil income. The case selected for scrutiny on account of two reasons; i.e. (1) Unsecured loans and (2) Transactions with Company whose Registration has been cancelled by MCA. Various details are called for to which compliance was made to the partial satisfaction of the AO. Ld. AO majorly focused on the issue of unsecured loans and asked the assessee to explain the nature and source of the unsecured loans in light of the provisions of section 68 of the Act. Assessee provided the details of Identity, Credit worthiness and genuineness of the loan transactions. On the basis of these details, ld. AO was partly satisfied and out of the total unsecured loans of Rs.8,89,24,960/- accepted the claim of unsecured loans of Rs.1,17,50,000/- but made addition for the balance amount of Rs.7,71,76,960/-.
Aggrieved assessee preferred appeal before the ld.CIT(A). There was delay which was on account of receiving demand notice at a later date. The assessee also faced problem in e-filing the appeal which resulted into delay. However, the said delay was condoned. Thereafter, even though the assessee has claimed to have furnished all the details but ld.CIT(A) has summarily dismissed the appeal by observing that the submissions made are all well considered but since the assessee failed to discharge the onus on it to satisfy all the three ingredients of section 68 of the Act, the alleged loan credits in respect of 11 of them are held as unexplained credits u/s.68 of the Act.
Now the assessee is in appeal before the Tribunal challenging the impugned order passed by ld.CIT(A).
Before us, referring to detailed paper book containing 222 pages, firstly ld. Counsel for the assessee stated that the AO has taken wrong figure of unsecured loan received by the assessee from Shanti Kumar Jain. The actual loan taken was only Rs.4.00 lakh but the ld. SO has inadvertently mentioned as Rs.4.00 crore in the assessment order and has made addition for the said sum as part of the alleged impugned addition. He submitted that this being an apparent error needs to be rectified and in support he referred to the confirmation of account and the bank statement indicating loan of Rs.4.00 lakh.
As far as the remaining unsecured loans are concerned, ld. Counsel for the assessee referred to the details in the paper book stating that all the creditors are having PAN, filing Income-tax returns regularly and details of the addresses have been provided. He further stated that the loans are genuine and have been utilized for the business and the documentary evidences are sufficient enough to prove the Identity, Creditworthiness and genuineness of the transactions and none of the details have been rebutted by the Revenue authorities at any stage. He also submitted that the ld. AO while concluding the assessment proceedings has mentioned the returned income as Nil whereas the assessee has declared the loss of Rs.36,07,579.71/- in the audited profit and loss account and the said loss deserves to be carried forward for subsequent years.
On the other hand, ld. Departmental Representative vehemently argued supporting the orders of the lower authorities and stated that the assessee failed to explain the nature and source of the alleged unsecured loans. However, ld. DR was fair enough in accepting the fact that the actual loan availed by the assessee from Shanti Kumar Jain was only Rs.4.00 lakh but inadvertently it has been wrongly mentioned as Rs.4.00 crore by the AO.
We have heard the rival contentions and perused the record placed before us. The main issue is regarding addition made by the AO u/s.68 of the Act at Rs.7,71,74,960/-. The alleged unsecured loans have been taken from 11 persons which includes individuals, HUF as well as Private Limited company. Though the assessee is claiming to have furnished the details time and again before both the lower authorities and copies of the same has been filed before us to explain the nature and source of the alleged sum including the Names, Addresses, PAN numbers, Bank details, Income-tax returns etc. Firstly, we notice that in the list of unsecured loans mentioned at page 6 and 7 of the assessment order, loan of Rs.4.00 crore is mentioned against the name Shanti Kumar Jain. Ld. Counsel for the assessee with the help of bank statement, confirmation of account, audited balance sheet and tax audit report has successfully demonstrated that the actual loan from Shanti Kumar Jain is Rs.4.00 lakh and not Rs.4.00 crore. This being an apparent mistake needs to be corrected. Therefore, out of the total addition of Rs.7,71,74,960/-, Rs.3.96 crore deserves to be deleted on account of wrong figure adopted by the AO. We hold and order accordingly.
For the remaining addition of Rs.3,75,74,960/-, even though the assessee has furnished the details of Identity, Creditworthiness and genuineness of the transactions entered into with loan creditors, however it is not discernible from the impugned orders and assessment order as to whether all these were placed before the lower authorities or not. Prima-facie, the assessee has a good case on merits but since these details needs to be verified at the end of the lower authorities, we deem it fit to restore the matter to the file of Jurisdictional Assessing Officer for examining the nature and source of unsecured loans of Rs.3,75,74,960/-. To sum up, Grounds of appeal No.1, 2 and 3 raised by the assessee are partly allowed for statistical purposes as out of the impugned addition, Rs.3.96 crore has been deleted. For the remaining amount, necessary verification has to be carried out by the Jurisdictional Assessing Officer.
As far as Ground of appeal No.4 is concerned, audited profit and loss account clearly indicates that the assessee has suffered loss but the AO has mentioned Nil returned income and the said mistake needs to be rectified in the set-aside proceedings which we have directed while dealing Grounds of appeal No.1 to 3.
12. Other grounds raised by the assessee are being general in nature needs no adjudication.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on this 20th day of January, 2025.