2019 (1) TMI 105 - AT - Income Tax

ITAT allows appeal, deletes Rs. 10,00,000 addition by AO. Assessee proved transaction genuineness & lender creditworthiness.

The ITAT allowed the appeal, deleting the addition of Rs. 10,00,000/- made by the AO, concluding that the assessee had sufficiently established the ... Addition on account of unsecured loan - Held that:- In the present case, it is not in dispute that the creditor was regularly filing the return of income. The creditor was having opening balance of ₹ 57,85,186/- in the books of the assessee’s account and an amount of ₹ 10,00,000/- was received by the assessee on 03.11.2009 through RTGS. The assessee has also paid interest of ₹ 3,10,684/- on the said loan which has been accepted by the department since no disallowance has been made for the said interest paid to the creditor by the assessee on which TDS of ₹ 31,069/- was deducted. Thus the amount of ₹ 10,00,000/- was received by the assessee through RTGS and interest paid on the outstanding balance in the name of the creditor was accepted by the department as genuine, so there was no question for doubting the genuineness of the transactions. No addition to be confirmed - decided in favour of assessee. Issues Involved:1. Sustenance of addition of Rs. 10,00,000/- made by the AO on account of unsecured loan received from M/s Shashank Financial Services (P) Ltd.Issue-wise Detailed Analysis:1. Sustenance of Addition of Rs. 10,00,000/-:The assessee filed its return of income declaring Rs. 2,30,05,088/-. During scrutiny, the AO noticed an unsecured loan of Rs. 10,00,000/- from M/s Shashank Financial Services Pvt. Ltd. The AO required verification of the identity, capacity, and creditworthiness of the lender and the genuineness of the transaction. Despite submitting ledger accounts and bank statements, the AO observed a deposit entry just before the issuance of the cheque and made the disallowance under Section 68 of the Income Tax Act, 1961, referencing several Supreme Court decisions.The assessee contended that there was an opening balance of Rs. 57,85,186/- from SFSPL, and during the AY 2010-11, Rs. 2,85,186/- and Rs. 5,00,000/- were repaid. Interest of Rs. 3,10,684/- was also paid to SFSPL. The assessee argued that the Rs. 10,00,000/- was transferred mistakenly and refunded immediately. Various documents, including loan account statements, bank statements, and ITRs of SFSPL, were submitted. The director of SFSPL could not appear due to a severe accident, which was communicated to the AO with supporting evidence.The AO, however, added Rs. 10,00,000/- to the income under Section 68, stating that the assessee failed to produce the lender and doubted the genuineness of the transaction.On appeal, the CIT(A) upheld the AO's decision, emphasizing the failure to produce the director and questioning the creditworthiness of the creditor, noting a negative bank balance and low income of SFSPL. The CIT(A) concluded that the assessee failed to prove creditworthiness and genuineness, referencing the case of Ganeshwari Metals, which was deemed not applicable.The assessee appealed to the ITAT, reiterating the submissions and highlighting the documents provided, including ITRs, confirmation letters, and balance sheets. The ITAT noted that the creditor was regularly filing returns and had an opening balance of Rs. 57,85,186/-. The loan was repaid within 7 days, and interest paid on the loan was accepted by the department, indicating genuineness.The ITAT concluded that the addition of Rs. 10,00,000/- was not justified as the transaction's genuineness was established, and the assessee had provided sufficient evidence. Thus, the addition was deleted, and the appeal was allowed.Conclusion:The ITAT allowed the appeal, deleting the addition of Rs. 10,00,000/- made by the AO, concluding that the assessee had sufficiently established the genuineness of the transaction and the creditworthiness of the lender.