2020 (11) TMI 223 - AT - Income Tax

Tribunal rules in favor of appellant on unsecured loans, criticizes authorities for unjustified addition

BMR Polymers (P) Ltd. Versus ITO, Ward-1 (3) Gurgaon, Haryana

BMR Polymers (P) Ltd. Versus ITO, Ward-1 (3) Gurgaon, Haryana - TMI Issues Involved:Appeal against addition of unsecured loan from directors for assessment year 2012-13.Detailed Analysis:1. Addition of Unsecured Loan:The appellant challenged the addition of Rs. 68,72,311 as unsecured loans received from the directors of the company. The appellant contended that the loans were genuine, supported by confirmations, PAN copies, bank statements, and ledger accounts. The appellant argued that the loans were granted through banking channels, and the identity of the creditors was not disputed. The appellant emphasized that no adverse material suggested the funds originated from the company's coffers. The appellant also highlighted that non-compliance with a notice under section 133(6) does not warrant adverse inferences. The appellant further argued that once the source of the loans was disclosed, no addition should be made, citing relevant case laws. The appellant urged for the deletion of the addition and interest levied.2. Assessment Proceedings:The appellant, engaged in manufacturing unsaturated polymers, declared a loss in the return for the assessment year 2012-13. The Assessing Officer later assessed an income of Rs. 67,07,061, adding Rs. 44,74,311 on account of unsecured loans from the directors. The CIT(A) upheld the addition, leading to the appeal. The appellant contended that no defects were found in the books of accounts during the assessment. The appellant argued that the loans were received through the directors' bank accounts, supported by documentary evidence. The appellant highlighted the absence of any evidence contradicting their claims and criticized the Assessing Officer's assumptions. The appellant cited relevant court decisions to support their case.3. Judicial Analysis:Upon review, the Tribunal found that the appellant had provided documentary evidence establishing the genuineness and creditworthiness of the loans received from the directors. Section 68 applied when the assessee failed to explain the nature and source of a sum credited. However, in this case, the Assessing Officer did not justify why the loans fell under Section 68. The Tribunal noted that the appellant had proven the capacity of the directors to provide the loans through ITR details and bank statements. The Tribunal criticized the CIT(A) and the Assessing Officer for ignoring crucial evidence and ruled in favor of the appellant, allowing the appeal.In conclusion, the Tribunal allowed the appeal, emphasizing the failure of the authorities to consider the documentary evidence provided by the appellant regarding the unsecured loans received from the directors. The Tribunal found the addition unjustified and unsustainable in law, highlighting the importance of establishing the genuineness and creditworthiness of transactions in such cases.