2012 (8) TMI 1129 - HC - Income Tax

Unsecured Loans Deemed Genuine: Tribunal Confirms Creditworthiness and Proper Documentation, Dismissing Tax Appeal.

Commissioner of Income-tax-II, Indore Versus Vaibhav Cotton (P.) Ltd.

The ITAT upheld the CIT (Appeals) decision, affirming that the unsecured loans were genuine and the creditors' creditworthiness was established. The ... Income From Undisclosed Sources - Finding of Fact - Non genuine and creditworthiness of unsecured loan and creditors - HELD THAT:- On perusal of the orders passed by the Tribunal, it is found that the Tribunal has elaborately dealt with this issue. The Tribunal by appreciating the material on record has recorded finding of fact to the effect that the genuineness of the transaction is proved. While reaching to the said conclusion, the Tribunal has taken note of the reasoning of the assessing officer as well as CIT (Appeals) and has also considered the other material on record. The Tribunal on its own independent analysis of the matter has reached to the factual conclusion about the genuineness of the transaction and in this process the Tribunal has taken note of the fact that the detailed account of the concerned parties were filed by the assessee and the entries in the account were through account payee cheques, the source of deposit in the bank was not in dispute and the identity of the parties was established and also that the creditworthiness of the creditors was also established. The aforesaid finding which has been recorded by the Tribunal is essentially a finding of fact. In view of the Division Bench judgment of this Court in the matter of Gyan Chand Anil Kumar v. ITO [2001 (3) TMI 40 - MADHYA PRADESH HIGH COURT] such a finding is a pure finding of fact which does not involve substantial question of law. Learned counsel for appellant has failed to point out any error or perversity in the said finding of fact. Thus, the appeal does not involve any substantial questions of law requiring consideration by this Court which is accordingly dismissed. Issues:Assessment of unsecured loans as non-genuine and creditworthiness of creditors not proved.Analysis:The judgment involves an appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2007-2008. The assessing officer treated an amount of 3,33,09,596/- shown as unsecured loans by the assessee as non-genuine, and the creditworthiness of the creditors was deemed unproven. However, the CIT (Appeals) found that the source of the funds was established from the books of accounts of creditors, leading to the deletion of the addition made by the assessing officer. The Tribunal affirmed this decision, stating that the assessee and creditors explained each entry of inflow of money in bank accounts, payments were made through account payee cheques, and the identity and creditworthiness of the creditors were proven.The appellant contended that the CIT (Appeals) and ITAT were unjustified in deleting the addition made by the assessing officer, arguing that the creditworthiness of the concerned parties was not proven. However, upon review, the Tribunal extensively examined the issue. It considered the material on record and concluded that the genuineness of the transaction was established. The Tribunal independently analyzed the matter and found that the detailed accounts of the parties were filed by the assessee, entries were made through account payee cheques, the source of deposits was undisputed, and the identity and creditworthiness of the creditors were established.The Tribunal's detailed analysis included the fact that the creditors were regular income tax payers, had filed confirmations of their accounts with the assessee company, and their statements were recorded by the Assessing Officer. The Tribunal emphasized that not only the identity and genuineness of the loan transaction but also the creditworthiness of the loan creditor needed to be proved. The Tribunal found that the creditors had proved their capacity to advance loans through various details and that the Department did not bring any material to controvert the findings. As per the Division Bench judgment, such factual findings do not involve substantial questions of law. Therefore, the appeal was dismissed as it did not raise any substantial legal issues for consideration by the Court.