2018 (9) TMI 1872 - AT - Income Tax

ITAT Kolkata upholds deletion of unsecured loan addition, stresses importance of documentation

Income-tax Officer, Wd- 1 (1), Kolkata. Versus M/s. Artlink Vintrade Pvt. Ltd. And Vice-Versa.

The ITAT Kolkata dismissed the revenue's appeal and the assessee's cross objection, affirming the Ld. CIT(A)'s decision to delete the addition of the ... Addition u/s 68 - creditworthiness of the loan creditor - HELD THAT:- Assessee has been able to discharge the onus casted upon it to prove the identity, creditworthiness and genuineness of the loan creditor. For taking such a view we rely on the order in S. K. Bothra & Sons HUF Vs. ITO [2011 (8) TMI 22 - CALCUTTA HIGH COURT] and Crystal Network (P) Ltd. Vs. CIT.[2010 (7) TMI 841 - KOLKATA HIGH COURT] has observed that the creditors cannot be disbelieved merely because they did not respond to summons when all other documents to substantiate the loan transaction has been filed before the assessing authority. The Hon’ble Calcutta High Court in CIT Vs. Dataware (P) Ltd. [2011 (9) TMI 175 - CALCUTTA HIGH COURT] has held that in case if the AO has doubt regarding the creditworthiness of the loan creditor, then the AO in turn had to seek report from the AO of the loan creditor and thereafter only draw adverse inference against the loan creditor. AO has not made any exercise of this nature to discredit the loan creditor. The assessee has discharged the onus by placing all the documents before the AO/Ld. CIT(A); and the Ld. CIT(A) has taken note of all these facts to delete the addition which is supported by relevant material, so the impugned order warrants no interference and, therefore, we dismiss the appeal of the revenue. Thus, the appeal of the revenue and the cross objection of the assessee are dismissed. Issues involved:Challenging reopening u/s. 147/148 of the Income-tax Act, 1961; Addition of unsecured loan u/s. 68 of the Act; Identity, creditworthiness, and genuineness of the loan creditor; Dismissal of appeal by the revenue.Analysis:1. Challenging Reopening u/s. 147/148: The Cross Objection of the assessee challenging the reopening was not pressed and stood dismissed. The revenue's appeal, though time-barred, was admitted for hearing after condonation of a three-day delay due to a filed petition.2. Addition of Unsecured Loan u/s. 68 of the Act: The revenue contested the deletion of the addition of Rs. 5,76,16,000 by the Ld. CIT(A). The AO added the unsecured loan to the total income as the assessee failed to prove the identity, creditworthiness, and genuineness of the lender. However, the Ld. CIT(A) deleted the addition after considering the evidence presented by the assessee.3. Identity, Creditworthiness, and Genuineness of the Loan Creditor: The assessee received unsecured loans from M/s. BMPL, a sister concern of the assessee, and provided substantial evidence to establish the legitimacy of the transaction. The Ld. CIT(A) noted that the loan creditor's identity was verified through documents and past assessments, and the assessee fulfilled the onus of proving the transaction's genuineness.4. Dismissal of Appeal by the Revenue: The revenue's appeal was dismissed as the Ld. CIT(A) had correctly considered the evidence presented by the assessee to establish the legitimacy of the loan transaction. The High Court's precedents were cited to support the assessee's position, emphasizing the importance of providing all relevant documents to substantiate loan transactions.In conclusion, the ITAT Kolkata dismissed the appeal of the revenue and the cross objection of the assessee, upholding the Ld. CIT(A)'s decision to delete the addition of the unsecured loan based on the evidence provided by the assessee to establish the identity, creditworthiness, and genuineness of the loan creditor. The judgment highlighted the significance of presenting comprehensive documentation to support financial transactions and emphasized the need for assessing authorities to conduct thorough investigations before drawing adverse inferences.