2016 (3) TMI 819 - AT - Income Tax

Tribunal upholds deletion of Rs. 2.21 Crores addition & allows interest on unsecured loan under I.T. Act

Assistant Commissioner of Income Tax, Circle 36 (1), New Delhi Versus Smt. Usha Kapoor and Vica-Versa

The Tribunal upheld the deletion of an addition of Rs. 2.21 Crores under section 68 of the I.T. Act, 1961, as the Assessee proved the creditworthiness of ... Addition u/s 68 - CIT(A) delted the addition - Held that:- AO without making any enquiry and without bringing any material on record to the contrary, was not justified in rejecting the evidence filed by the assessee and adding back the amount of the unsecured loans to the income of the assessee. Therefore, the addition of ₹ 2,21,50,000/- on this account was rightly deleted by the Ld. CIT(A) while passing a well reasoned order, which in our opinion, does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on this issue and dismiss the ground raised by the Revenue. - Decided in favour of assessee Addition of interest debited to P&L account on the unsecured loan - Held that:- . The amount of ₹ 9,99,175/- has been disallowed on the ground that corresponding unsecured loans on which this interest has been credited, had been held as not explained satisfactorily and were added to the income of the assessee. Since we have upheld the decision of the Ld. CIT(A) of deletion of addition, relating to unsecured loans raised during the year which have been held as explained and the addition of unsecured loans was deleted. Therefore, interest amounting to ₹ 9,99,175/- was allowable to the assessee. Hence, the addition on this account was rightly deleted by the Ld. CIT(A) - Decided in favour of assessee Issues Involved:1. Deletion of addition under section 68 of the I.T. Act, 1961.2. Deletion of addition of interest debited to P&L account on unsecured loan.Deletion of Addition under Section 68 of the I.T. Act, 1961:The case involved an appeal by the Department against the deletion of an addition of Rs. 2.21 Crores under section 68 of the I.T. Act, 1961. The Department contended that the assessee failed to prove the creditworthiness and genuineness of the transactions. The Assessee, on the other hand, provided relevant details and documents to establish the identity and creditworthiness of the creditors. The Tribunal observed that the assessee had discharged the initial onus by submitting confirmations, audited accounts, and other relevant documents. The Tribunal found that the Assessing Officer (AO) did not conduct proper inquiries and rejected the evidence without valid reasons. Consequently, the Tribunal upheld the order of the Ld. CIT(A) and dismissed the appeal by the Revenue.Deletion of Addition of Interest Debited to P&L Account on Unsecured Loan:The issue revolved around the disallowance of interest amounting to Rs. 9,99,175 debited to the P&L account on an unsecured loan. The AO disallowed this interest on the grounds that the unsecured loans were not satisfactorily explained and were added to the income of the assessee. However, since the Tribunal had already upheld the deletion of the addition related to unsecured loans, the interest amount was deemed allowable. The Tribunal concurred with the Ld. CIT(A)'s decision to delete the addition of interest, as the unsecured loans were found to be explained satisfactorily. Consequently, the Tribunal dismissed the additional ground raised by the Revenue.In conclusion, the Tribunal dismissed the Revenue's appeal and the Assessee's Cross Objection, upholding the decisions made regarding the deletion of additions under section 68 of the I.T. Act, 1961, and the interest debited to the P&L account on the unsecured loan. The Tribunal found that the Assessee had provided sufficient evidence to establish the genuineness of the transactions and the creditworthiness of the creditors, leading to the dismissal of the Revenue's appeal.