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Facts
The assessee received unsecured loans totaling Rs. 2,25,40,000 from twenty-two individuals and three HUFs. The Assessing Officer (AO) disallowed this amount under Section 68 of the Income Tax Act, 1961, citing a lack of creditworthiness from the lenders after notices under Section 133(6) yielded limited replies. The CIT(A) subsequently deleted this addition, leading the Revenue to appeal before the ITAT.
Held
The ITAT affirmed the CIT(A)'s decision, ruling that the assessee had discharged its onus by submitting comprehensive documentation, including confirmations, bank statements, and ITRs, which established the identity, genuineness, and creditworthiness of the loan parties. The Tribunal noted that the AO had arbitrarily disregarded the provided evidence without proving its falsity. Consequently, the addition made under Section 68 was deemed unjustified.
Key Issues
Whether the CIT(A) correctly deleted the addition made by the AO under Section 68 concerning unsecured loans, and whether the assessee had adequately proven the identity, genuineness, and creditworthiness of the lenders.
Sections Cited
Section 68, Section 133(6), Income Tax Act, 1961
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Shri Challa Nagendra PrasadDr. B. R. R. Kumar
ORDER Per Dr. B. R. R. Kumar:- The present appeal has been filed by the revenue against the order of ld. CIT-34, Delhi dated 30.07.2019 for the A.Y. 2012-13. 2. The Revenue has raised the following ground of appeal:- 1. “On the facts and in circumstances of the case and in law, the ld. CIT(A) has erred in deleted the addition made by the AO of Rs. 2,25,40,000/- u/s. 68 on account of unsecured loans”
3. The brief facts of the case are that return declaring an income of Rs. 11,28,235/- was filed on 17.09.2012. The case was selected for scrutiny under CASS. During the year the assessee received unsecured loan from twenty two individuals and three HUF to the tune of Rs. 2,25,40,000/-. The Assessing Dayal Steel P Ltd. Officer issued notice u/s. 133(6) to all the parties and only five parties have replied. The AO held that, the parties do not have creditworthiness to extend unsecured loans to the assessee. Hence, relying on the judgment of the Hon’ble High Court of Delhi in the case of Titan Securities Ltd. in the Assessing Officer held that, the assessee failed to establish the creditworthiness of the parties and made addition of Rs.2,25,40,000/- u/s 68 of I.T Act.
4. Aggrieved, the assessee filed appeal before the ld. CIT(A), who deleted the addition made by the AO.
5. Aggrieved with the order of the ld. CIT(A), the Revenue filed before the Tribunal.
6. During the arguments before us, the ld. DR referred to para 2 of the Assessment Order page no. 1,2 & 3 and argued that it is responsibility of the assessee to prove identity, genuineness and creditworthiness of the loan parties failing which the amount be treated as undisclosed income of the assessee. The money is being credited to their account either by depositing cash or through RTGS from unexplained sources and money is being immediately transferred to the appellant which reflects that these are merely accommodation entries and lack genuineness. The ld. DR argued that the notices issued by the Revenue Authorities have not been complied by the loan parties and hence there is an absolute failure on the part of the assessee to prove the credential of the loan parties.
Dayal Steel P Ltd. 7. On the other hand, the ld. AR submitted that they have provided each and every detail before the Revenue Authorities based on which the remission has been given by the ld. CIT(A). The ld. AR argued based on the order of the ld. CIT(A) page no. 4 to 46.
Heard the arguments of both the parties and perused the material available on record.
The appellant has filed the confirmation of few parties and copy of acknowledgement of their income tax return for various assessment year to prove the genuineness of the transaction and creditworthiness of the parties. The ld. CIT(A) called remand report from the Assessing Officer on the additional evidences filed and also examined the submission of the assessee on the comments of the Assessing Officer on the remand report.
The evidences filed comments of the AO and the submissions of the assessee with regard to all the twenty five parties are as under:
S No. Name of the Amount Comments from Assessee’s lender received AO submission PARTIES WHERE AO HIMSELF AGREES ABOUT TIL CREDITWORTHINESS 1 Abhinav 6,50,000 ITR for AY 2011- The AO himself Kumar 12, 2012-13 and has stated that HUF 2013-14. As per the party has (Family ITR, the party creditworthiness HUF) has And has still creditworthiness disallowed the however, no loan amount egible copy of which is entirely bank statement prejudicial to the has been assessee. The AO provided to has erred in Dayal Steel P Ltd. ascertain the matter of fact in amount of stating that no transfer of confirmation was unsecured loan to provided when the assessee the same has company. No duly been confirmation from provided as party. additional evidence filed on 25.03.2019. 2 Udai 6,90,000 As per ITR for AY The Ld AO has Agarwal 2012-13 and AY followed a HUF 2013-14, the skewed approach (Family party has income in his own HUF) Of Rs 8,96,668/- analysis. In the and Rs case of this 9,04,580/- party, the Ld AO respectively. No himself states the legible copy of taxable income of bank statement R$ 8,96,668 for provided to AY 2012-13 which ascertain the is much more name of account than the loan holder and disbursed and has amount still disallowed transferred to the the loan amount. assessee Such an approach company. is blatantly contradictory and prejudicial. PARTIES WHO HAVE ADVANCED LOANS OF LESS THAN RS 7,50,000/- 3 Bhavabhai 5,00,000 As per the only The Ld Assessing Trikmaji ITR, for officer has erred in Chaudhari AY 2011-12 the matter of fact by party has shown stating that bank income at Rs statements or 1,42,575. No confirmations were legible copy of not provided. All the bank statement documents including to ascertain bank statements and whether, the confirmation were bank statement duly provided either pertains to him. to the AO during The party has assessment creditworthiness proceedings vide to submission dated extend such 19.02.2015 or amount of loan through additional to the assessee evidence. company 4 Bhaveshb 5,00,000 As per ITR for AY hai 2010-11 and 2011- Talshaji 12, the party has Dayal Steel P Ltd. Patel shown income at Rs 1,55,000 The ld Assessing and Rs 1,56,655 Officer has respectively. The erroneously relied party has no only on taxable creditworthiness and income for evaluating even no bank the creditworthiness. statement Taxable income of the or confirmation assessee is arrived at provided. after giving effect to various exemptions 5 Geetaben 5,00,000 Only ITR provided and allowances and Chiragbhai for AY 2010-11, the does not in any Patel party has filed manner depict the income at Rs funding 1,28,905. No bank capacity of a creditor. statement or The Ld confirmation Assessing provided. The party has no Officer has himself creditworthiness to without complete extend such amount information attempted of loan. to make a fund flow of 6 Govabhai 5,00,000 As per ITR of AY the creditors which Harchandbh 2011-12 and 2012- is ai Choudhari 13, the party has shown income at Rs completely based on surmises and 1,56,375 and conjectures. 1,78,129 respectively. The assessee Funding capacity of a Has no creditor is much creditworthiness beyondtaxable income to extend such and is also a function amount of loan. As of assets, access to per bank statement, funds on demand. most of the amount Restricting analysis to has been deposited only taxable income is in bank through the a skewed approach cash deposit or and not justifiable. received from third party and transferred Even if one was to to the assessee adopt the company. approach of the Ld 7 Laljibhal 5,00,000 As per ITR for AY Assessing Officer, a Sagarbhai 2011-12 and 2012- sum up of last 5 years Trambadia 13, the party has taxable income will shown income at Rs make it amply clear 1,56,706 and Rs that the creditors did 1,78,050 have capacity to respectively. As advance the amount per bank statement of loan. an amount of R$ 5,00,000 has been received on Dayal Steel P Ltd. 19.10.2011 and on the same date the amount has been In most of these transferred to the cases, the ld. assesee company. Assessing Officer has 8 Mahendra 5,00,000 As per ITR for AY relied on the ground Kumar 2011-12 and 2012- that the money was Ganpatram 13, the party has received by the Raval shown income at Rs creditor and the transfer made to the 1,57,603 and assessee were in close Rs 1,78,600 proximity of time, respectively. No some even on the legible copy of bank very next day. This is statement has been a factual matter and provided. there is nothing in law Confirmation barring a accounts of both the person to transfer parties were provided. As per ITR, money even on the the party has no very same day as is creditworthiness to received by them extend such amount of loan. 9 Prakashbhai 5,00,000 As per the only ITR Ishvarbhai provided for AY lad 2011-12, the party has shown income at Rs 1,57,153. As per the bank statement the party has received money on 18.10.2011 from unknown entity and transferred the entire amount on 19.12.2011. 10 Ramesh 50,00,000 As per ITR for AY Kumpaji 2011-12, 2012-13 Patekl and 2013-14, the party has shown income at Rs 1,51,635, Rs 1,78,250 and Rs 1,98,100 respectively. As per bank statement, party has received money of Rs Income of the 5,00,000 transfer depositor are mainly from unknown entity interest income on and transferred the money advance. entire amount to the assessee company Dayal Steel P Ltd. 11 Shivrambjha 5,00,000 As per the only ITR i Chamanji provided for AY Patel 2012-13, he shown income at Rs 1,76,934. As per bank statement, the party has received money of Rs 5,00,000 through RTGS to unknown entities on 18.10.2011 and transferred the entire amount to the assessee company on 19.10.2011. The party has no creditworthiness to extend such amount of loan to the assessee company. 12 Vaghabhai 5,00,000 As per ITR provided Ratnabhai for AY 2011-12 and Patel 2012-13 the party has shown income at Rs 1,54,709, Rs 1,78,640. As per Bank statement Legible (по сору), appears that the party has received money of Rs 5,00,000 unknown From entity and transferred next day to the company. The party has no creditworthiness to extend such amount of loan to the assessee company. 13 Ramesh 4,50,000 As per the only ITR bhai Hiralal provided for AY Mandaliya 2012-13, the party has shown income at Rs 1,53,910. As per bank statement, the party has received money from unknown entity on 21.12.2011 and transferred the Dayal Steel P Ltd. entire amount of Rs 4,50,000 the assessee company on 22.12.2011. The party has no creditworthiness to extend such amount of loan to the assessee company. 14 Geetika 7,50,000 ITRs have Gupta been provided for (Relative) 2009-10, 2010-11. The parly has shown net income at Rs 4,11,850 and Rs 4,94,200/-. No legible copy of . ITR for AY 2011-12. As per bank statement, the party has transferred Rs 2,10,000 on 21.09.2011. Therefore it may be construed that the rest amount has been given in cash. 15 Jaimin 7,00,000 As per ITR for AY Mahindra 2010-11 and 2011- Kumar Shah 12, the party has shown income at Rs 1,31,419 and Rs 1,52,900 respectively. This shows that the party has no creditworthiness to extend such amount *of loan. Also, no legible copy of bank statement has been provided HIGH LOAN PARTIES 16 Arvind 11,08,000 As per ITR provided The assessee provided ITR for Pukhran for AY 2010-11 and AY 2010-11, 2011-12, Jain 2013-14, the income 2012-13 and 2013- is shown at Rs 14. The Ld AO has only stated 1,55,619 and Rs income of AY 2010-11 and 3,04,120. This shows 2013-14 while the income that the party has no for the relevant assessment creditworthiness to year which is Rs 2,90,422 has extend such amount been conveniently missed out Dayal Steel P Ltd. of loan. No legible which was filed before A.O. copy of ITR has been vide submission dated provided for AY 2012- 19.02.2015. Not only that, 13. As per bank the Assessing Office has also statement,the disregarded that this is only assessee company taxable income which has received money IS computed after certain on 08.10.2011. The deductions and allowances. major amount of The Ld AO has also relied on money has been the fact that the amount was credited to the received by the creditor account of Mr Arvind through cash deposit or Pukhran Jain through RTGS from unknown entity. cash deposit This reliance does not justify on 05.10.2010 an addition in the case of the and through RTGS assessee. If the Ld AO had from the unknown doubts about the source of entity. source, nothing in law precludes him from using his powers to verify the creditor directly. 17 Mahasukh 10,.00,000 No details filed The ld AO has completely Jayantibhai erred in matter of fact in this Rohit case, the assessee has submitted ITR for Al 2012-13, 2013-14 and 2014-15, relevant bank statement and confirmation vide submission dated 19.02.2015. Without providing any specific basis, the Ld A0 has simply disallowed the amount arbitrarily. 18 Manjitbhai 10,00,000 As per ITR for AY The disallowance in this case Dondabhai 2011-12, 2013-14 is simply arbitrary and without Gamit and 2014-15, the any basis. The La AO himself party has shown provides the source of the income at Rs creditor being amount 1,61,048, Rs received from Raju Enterprise 1,94,580 and Rs and Bariya xports. If the La 1,98,244 respectively. AO is attempting to go into As per the bank source of source of source, it statement, the party is a never ending process and has received Rs highly prejudicial to the 10,00,000 through assessee company who RTGS from Raju has noknowledge of the enterprise and R funding of the creditor. Bariya Exports and On 22.12.2011, the whole amount Of Rs 10,00,000 Was transferred to the assessee Dayal Steel P Ltd. company. This shows that the party has no creditworthiness to extend such amount of loan and money received by him were from unknown entities.
Nilesh 10,00,000 As per ITR filed for AY The disallowance in this case Rasikbhai 2011-12, and AY is simply arbitrary and without Bariya HUF 2013- 14 the HUF has any basis. The Ld AO himself shown income at Rs provides the source of the 1,54,080 and Rs creditor Being amount 1,85,690 respectively. received by RTGS from Ranjit As per the bank Corporation and R Bariya statement the party Exports. If the Ld has received money AO is attempting to go into through RTGS 3199 source of source of source, it (Ranjit Corporation is a never ending process and and R Bariya highly prejudicial to the Exports) amounting assessee company who has to Rs10,00,000 on no knowledge of the funding 21.12.2011 and of the creditor. transferred the entire amount on 22.12.2011. The HUF has reditworthiness. to extend such amount of loan to the assessee. 20 Hardik 15,00,0000 As per ITR for AY The Ld Assessing Kumar 2010-11 and 2013- officer has erred in matter of Kitilal 14, the party has fact by stating that bank Morvadiya shown income at Rs statements or confirmations 1,52,440 and were not provided. All the 2,20,340 respectively. documents including The party has no bank statements and creditworthiness to confirmation were duly extend such amount provided either to the AO of loan to the during assessment assessee company. proceedings vide submission 21 Mukesh 10,00,000 As per ITR for AY dated 19.02.2015 or through additional evidence. Rajendra 2013-14 and 2014-15 PRasad provided, the party has shown income at Rs 1,73,290 and Rs 1,93,290 respectively. No other details have been provided. The party has no creditworthiness The disallowance made by ld. extend such amount AO is simply arbitrary and of loan to the without any basis. In most Dayal Steel P Ltd. assessee company. cases, the AO himself 22 Narpit As per ITR for AY provides the source of the Mahipat 2012-13, AY2013-14 creditor being amount Chodhri and 2014-15, the received from RTGS. There is party has shown nothing in law precluding the income at Rs AO to enquiring the creditor 1,60,411, Rs about his source but if the Ld 1,93,280 and AO is expecting the assessee Rs 1,94,580 to know the source of source of source, it is a never espectively. As per ending process and highly bank statement the prejudicial to the assessee party has received company who has no money through knowledge of the funding of RTGS/transfer from the creditor. unknown entity on 21.12.2011 and on 22.12.2011 the money was transferred to the assessee company. The party has creditworthiness to extend such amount of loan to the assessee company. 23 Narsibhai 25,00,000 The only ITR provided The Ld Assessing Office has Ravdabhai by the assessee for erroneously only used taxable Patel AY income for his analysis which 2013-14 shows is computed after certain that the party has deductions and allowances filed income at Rs and the financial capacity of 1,97,282. No other the creditor is based on details have been factors more than provided. The party taxable income. The credit has creditworthiness capacity of a creditor cannot to extend such appropriately judged from the amount of loan to the taxable income of the assessee company. creditor. The only ITR provided by the assessee for AY 2013-14 shows that the party has filed income at Rs 1,97,282. No other details have been provided. The party has creditworthiness to extend such amount of loan to the assessee company. 24 Pankaj 16,92,000 As per ITR for AY Kumar 2012-13 and 2013- Chaandulal 14, the party has Gandhi shown income at Rs Dayal Steel P Ltd. 2,49,292 and Rs 2,91,000 respectively. As per the bank statement the party has received money Rs 17,00,000 from Citi Co-operative Bank Itd through unknown entity and transferred an amount of Rs 16,92,000 to the assessee company. The party has creditworthiness extend such amount of loan to the assessee company. 25 Vikas 25,00,000 As per only ITR Naginbhai provided for AY 2010- Barot 11, the party has shown income at Rs 1,60,216. No bank statement has been provided or copy of confirmation has been provided. The party has no creditworthiness to extend such amount loan to the assessee company. This shows that the assessee company through cash or through unknown third party.
In this background, we have examined the decision of the ld. CIT(A). The ld. CIT(A) held that, “the appellant has filed the confirmations, copy of bank accounts and ITRs etc. during the assessment proceedings and certain documents related to unsecured loan during the appellate proceedings as additional evidences. The AO has disallowed the unsecured loan as appellant failed to establish genuineness of the transaction and creditworthiness of all the parties from whom loans have been received by the appellant during the year. During the course of appellate proceedings, appellant has submitted that appellant had Dayal Steel P Ltd. submitted the copy of accounts, ITR acknowledgement and bank statement of all the parties. The bank accounts of the lenders showed sufficient transactions to be able to lend it to other parties. The appellant has discharged its onus by furnishing necessary evidences to prove the identity and creditworthiness of the persons with whom the transactions have been entered into”.
The ld. CIT(A) categorically held that, the assessee has explained in respect of each unsecured loan. 13. On going through the entire details, we find that the assessee has furnished all the required documents during the course of assessment proceedings and additional evidences in appellate proceedings. The AO has disregarded the creditworthiness of the lenders stating that they did not have sufficient sources or that their income is disproportionate to the loan advanced without making any verification in the case of the depositors. During the course of assessment proceedings and through additional evidence, the appellant has submitted the ITR reflecting the PAN and address details, relevant bank statement and confirmation of the creditors. Thus the assessee can be said to have discharged the onus laid upon them. The ld. CIT(A) has rightly held that, AO has rejected the evidences furnished by the appellant without establishing falsity of the documents filed by the assessee. The personal identities of these investors were proved, the sources have been proved, the ITRs and the subsequent repayments has been examined. Having so examined the ld.CIT(A) came to a conclusion that the AO is not justified treating the unsecured loans received u/s. 68 Dayal Steel P Ltd. of I.T Act 1961. Hence, we decline to interfere with the order of the ld. CIT(A).