2024 (5) TMI 956 - AT - Income Tax

Additions under section 68 for unsecured loans deleted after assessee proves creditor identity and genuineness with complete documentation

DCIT, Circle, Hisar, Haryana Versus Gawar-Ciegall (J. V.).

ITAT Delhi upheld CIT(A)'s decision deleting additions under section 68 regarding unsecured loans, finding AO made additions on surmises and wrong facts ... Addition u/s 68 - creditworthiness of unsecured loans - AO issued notice u/s 133(6) to the creditor to verify the genuineness of loan, but no reply was received directly from the creditor in response to notice - CIT(A) deleted the additions - HELD THAT:- In the instant case, it is not the case of the AO that no explanation was offered as regards the nature and source of the sum credited in books of the Appellant. On the other hand, it is the case of AO that the genuineness of loan and credit worthiness of creditors has not been proved. The assessee has submitted the entire details about the unsecured loans received from Pradik Impex Pvt. Ltd. and all the relevant details to prove the identity, genuineness and creditworthiness of the parties. AO has made addition entirely on surmises and on wrong facts. The summons have been issued at wrong address and the details given by the assessee have been totally ignored. Having gone through the facts narrated above and the rationale given by the CIT(A), we find no reason to interfere with the order of the ld. CIT(A). The appeal of the revenue on this ground is dismissed. Ad-hoc Disallowance of expenses - assessee furnished the detail of some of the expenses, but did not produce bills/vouchers in support of his contention - HELD THAT:- AO has made ad-hoc disallowance inspite of the fact that all the evidences such as material purchase, payment of VAT, insurance expenses, sub-contractor expenses and power & fuel expenses alongwith the ledgers are submitted before the authorities below. CIT(A) has gone through the entire details and rightly deleted the addition. Hence, we decline to interfere with the order of the ld. CIT(A). The appeal of the Revenue on this ground is dismissed. Deduction u/s 80IA - claim denied as assessee was not an Indian company and was given civil contract work of balance work/part of the work and comes under the category of Works Contract - HELD THAT:- Keeping in view the settled judgment of ABG Heavy Industries Ltd. [2010 (2) TMI 108 - BOMBAY HIGH COURT], BMW Industries Ltd.[2017 (1) TMI 1200 - ITAT KOLKATA] the deduction claimed by the assessee u/s 80IA has been rightly allowed by the ld. CIT(A). Issues Involved:1. Deduction u/s 80IA(4)2. Unsecured loans of Rs. 77,00,000/- u/s 683. Ad-hoc disallowance of Rs. 10,00,000/-Summary:1. Deduction u/s 80IA(4):The Revenue contended that the deduction under section 80IA(4) is only available to enterprises owned by an Indian company or a consortium of Indian companies engaged in infrastructure facilities. The assessee, a partnership firm with two Indian companies as partners, was not eligible. Additionally, the assessee was awarded a civil contract work, which falls under the category of 'Works Contract' and not 'Developer of Infrastructure.' The Tribunal upheld the CIT(A)'s decision, allowing the deduction based on settled judgments in similar cases.2. Unsecured loans of Rs. 77,00,000/- u/s 68:The Assessing Officer (AO) made an addition of Rs. 77,00,000/- as unsecured loans from M/s Pradik Impex Pvt. Ltd., alleging it to be a paper company with dummy directors. The AO's conclusion was based on non-receipt of a reply directly from the creditor and incorrect addresses. The CIT(A) found that the assessee had provided sufficient evidence, including PAN, address, bank statements, and confirmations, proving the identity, creditworthiness, and genuineness of the transaction. The Tribunal upheld the CIT(A)'s decision, stating that the AO's enquiry was flawed and based on incorrect facts.3. Ad-hoc disallowance of Rs. 10,00,000/-:The AO made an ad-hoc disallowance of Rs. 10,00,000/- due to the assessee's failure to produce complete bills/vouchers for expenses debited in the profit & loss account. The CIT(A) deleted the disallowance, noting that the assessee had furnished ledger accounts, bank details, and other supporting documents. The Tribunal agreed with the CIT(A), stating that the ad-hoc disallowance was not justified as the assessee had provided substantial evidence.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all issues, including the deduction u/s 80IA, the addition u/s 68, and the ad-hoc disallowance. The order was pronounced in the open court on 17/05/2024.