2018 (9) TMI 150 - AT - Income Tax

Tribunal rules in favor of assessee, deletes Rs. 19 lacs addition under Section 68

Neelkanth Associates, C/o Manish Rakesh and Co. Versus ITO, Ward -2 (1), Meerut

The Tribunal ruled in favor of the assessee, directing the deletion of the addition of Rs. 19 lacs made under Section 68 of the Income Tax Act. The ... Addition u/s 68 on account of unsecured loans taken from five persons - Held that:- Here in this case, the nature of credit appearing in the books of accounts of the assessee is in the form of loan on which assessee has paid interest to the creditors and also deducted TDS. These loans have come through banking channels i.e., which has been received through account payee cheque in the bank account of the assessee through clearing and the same has been recorded in the books of accounts. To prove the prima-facie source of such credits the assessee had filed; i) PAN and income tax returns alongwith complete address; ii) bank statement of the creditors and that of the assessee; iii) ledger account and other details. Addition aggregating to ₹ 19 lacs made on account of unsecured loans u/s 68 is directed to be deleted. - Decided in favour of assessee Issues Involved:1. Addition of Rs. 19 lacs under Section 68 of the Income Tax Act, 1961, on account of unsecured loans taken from five persons.Issue-wise Detailed Analysis:1. Addition of Rs. 19 lacs under Section 68:Background:The assessee, engaged in the business of sale and purchase of properties, was aggrieved by an addition of Rs. 19 lacs made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. This addition pertained to unsecured loans taken from five individuals, which the AO found unexplained due to insufficient evidence regarding the identity, creditworthiness, and genuineness of the transactions.Findings of AO:- Shri Dev Raj Singh: Rs. 4,00,000/- shown as unsecured loan. The assessee failed to provide sufficient evidence regarding the lender's identity and creditworthiness.- Shri Dhanpal Tomar: Rs. 2,00,000/- shown as unsecured loan. The assessee could not explain the source of a cash deposit in the lender's bank account before the loan was advanced.- Shri Dharmendra Rana: Rs. 5,00,000/- shown as unsecured loan. The assessee did not produce the lender's bank account and ITR.- Dr. D.K. Jain & Sons, HUF: Rs. 5,00,000/- shown as unsecured loan. The lender's bank statement was not provided, and the income shown was insufficient to justify the loan.- Shri Inder Pal Singh: Rs. 4,81,361/- shown as unsecured loan. The lender was not a partner in the assessee firm, and the income shown was insufficient.Findings of CIT (A):The CIT (A) largely confirmed the AO's addition, except for the case of Shri Inder Pal Singh, where the addition was deleted.Assessee's Argument:The assessee contended that all loans were taken and repaid through banking channels with interest after deducting TDS. The assessee provided PAN, complete addresses, bank statements, income tax returns, confirmation ledgers, and other details. The assessee argued that the onus to prove the genuineness of the transactions was discharged.Tribunal's Analysis:- Savita Singh (Rs. 3 lacs): The assessee provided all necessary details, including the sale of land worth Rs. 62.50 lacs by the lender. The Tribunal found that the CIT (A)'s presumption about the lender's capacity was not supported by evidence. The addition was deleted.- D.K. Jain & Sons, HUF (Rs. 5 lacs): The assessee provided PAN, ITR, confirmation, ledger account, and bank statements. The Tribunal found that the lender had sufficient balance before giving the loan. The addition was deleted.- Dhanpal Tomar (Rs. 2 lacs): The assessee provided PAN, ITR, confirmation, ledger account, and agricultural land records. The Tribunal found that the lender's agricultural income was sufficient to justify the loan. The addition was deleted.- Devraj Singh (Rs. 4 lacs): The assessee provided a ledger account and bank statements. The Tribunal accepted the explanation that the lender was residing in Jammu and Kashmir and found the transaction genuine. The addition was deleted.- Dharmendra Rana (Rs. 5 lacs): The assessee provided PAN, confirmation, and ledger account. The Tribunal accepted the explanation that the lender was paralyzed and found the transaction genuine. The addition was deleted.Conclusion:The Tribunal directed that the addition of Rs. 19 lacs made under Section 68 be deleted, allowing the assessee's appeal in full. The order was pronounced in the Open Court on 29th August 2018.