2024 (5) TMI 769 - HC - Income Tax

HC upholds Tribunal decision on unexplained credits under Section 68 finding genuine loan transactions

Principal Commissioner of Income Tax And Another Versus M/s. Anshika Consultants Pvt. Ltd.

Principal Commissioner of Income Tax And Another Versus M/s. Anshika Consultants Pvt. Ltd. - TMI Issues Involved:The judgment involves the issue of alleged unexplained credits under section 68 of the Income Tax Act, 1961.Details of the Judgment:Issue 1: Alleged unexplained creditsThe appellant challenged the order of the Income Tax Appellate Tribunal regarding the addition made on account of bogus unsecured loans received by the assessee. The Tribunal partly allowed the appeal by dismissing the appeal of the revenue on this issue. The appellant raised questions of law regarding the genuineness of the transactions and the onus of proving the identity and creditworthiness of the lender lying on the assessee. The Tribunal examined the evidence provided, including loan confirmations, certificates of incorporation, PAN numbers, and bank statements of the creditors, to establish the genuineness of the transactions. The Tribunal found that the loans were interest-bearing, and the related interest income was reflected in the creditor companies' tax returns. It was concluded that the Assessing Officer failed to establish that the money deposited by the creditors was not theirs but had been routed through them by the assessee. The Tribunal held that the deposits received by the assessee were genuine transactions, and no question of law arose.Issue 2: Treatment of undisclosed investmentThe assessee disclosed receiving unsecured interest-bearing loans from three corporate entities. The Assessing Officer disallowed the loan amounts, treating them as undisclosed investment and added them to the assessee's income. Upon appeal, the CIT (Appeals) ruled in favor of the assessee. The Tribunal found that the Assessing Officer had not conducted adequate inquiries to doubt the claim made by the assessee regarding the source of the loans. The Tribunal noted the evidence provided by the assessee, including loan confirmations, certificates of incorporation, PAN numbers, and bank statements of the creditors, to establish the identity and creditworthiness of the lenders. It was emphasized that once the deposits were credited through the banking channel, prima facie evidence existed of genuine transactions. The Tribunal concluded that the transactions of deposits received by the assessee were genuine based on the evidence on record. Therefore, the appeal lacked merit and was dismissed.Conclusion:The High Court dismissed the appeal as the Tribunal's findings supported the genuineness of the transactions and the failure of the Assessing Officer to establish any wrongdoing by the assessee in relation to the alleged unexplained credits and undisclosed investment.