2025 (11) TMI 989 - AT - Income Tax

Taxpayer wins appeal: Sections 68 and 24 deletions confirmed after documentary proof of creditors and loan interest

ITAT (Ahmedabad) upheld the CIT(A)'s order in favor of the taxpayer, deleting additions under section 68 after finding the taxpayer had produced ... Unexplained u/s. 68 - assessee has not furnish complete details called for by the AO to prove the genuineness and creditworthiness of the lenders - HELD THAT:- In view of uncontroverted fact that the assessee filed all documentary evidences proving the identity, genuineness and also the creditworthiness of the cash creditors and the AO found no infirmity in the same, we agree with the Ld.CIT(A) that the assessee had sufficiently discharged its onus of proving the genuineness of the loan creditors. With nothing adverse found in the said documents by the AO, there was no reason to make any further inquiries regarding the genuineness of the transaction. The contention of the DR therefore that the CIT(A) ought to have made inquiries in exercise of his coterminus powers, we hold, is without any merits and reject the same. we uphold the order of the CIT(A) deleting the addition made in the hands of the assessee u/s 68. Decided in favour of assessee. Disallowance of deduction claimed u/s 24 - assessee did not furnished supporting evidences to establish that the said deduction was not claimed in its return co-owner of the House property.” - HELD THAT:- We do not find any merit in the plea raised by the Ld. DR before us. The documents evidencing payments of interest on housing loan undoubtedly was there before the AO. This aspect of the matter needed to be examined by him and the AO having failed to do so, there is no case for giving him a second chance to verify assessee’s claim of expense. In the light of the same, the order of the CIT(A) deleting the addition made on account of disallowance of interest paid on housing loan is confirmed. Ground of appeal no.2 raised by the Revenue is, therefore, dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether unsecured loans totalling Rs. 2,23,10,021/- credited to the assessee are taxable as unexplained cash credits under Section 68 of the Income Tax Act, 1961 where the assessee furnished ledger confirmations, PAN, addresses, returns of income and bank statements of creditors and the Assessing Officer made no adverse finding on those documents. 2. Whether deduction of interest of Rs. 2,00,000/- claimed under Section 24 of the Income Tax Act, 1961 in respect of a housing loan is admissible where the assessee produced the loan sanction letter, repayment schedule and documents evidencing repayment, but the property is co-owned and the Assessing Officer did not examine whether the co-owner had claimed the same deduction. ISSUE-WISE DETAILED ANALYSIS Issue 1: Liability under Section 68 in respect of unsecured loans of Rs. 2,23,10,021/- Legal framework: Section 68 casts on the assessee the onus to prove the identity, genuineness and creditworthiness of persons from whom unexplained cash credits/loans are received; absent satisfactory proof, such credits may be treated as income. Precedent Treatment: No specific judicial precedents are cited or relied upon in the judgment; the Tribunal applied statutory onus principles and factual appraisal of documentary evidence. Interpretation and reasoning: The Tribunal examined whether the assessee discharged the onus under Section 68 by producing: ledger confirmations identifying creditors; PAN and postal addresses; returns of income of the creditors; and bankers' statements of creditors. The Assessing Officer had accepted the identity of creditors but treated genuineness and creditworthiness as unestablished, making an addition. The Commissioner (Appeals) found that all relevant documents were on record and that the Assessing Officer did not point to any infirmity or adverse inference from those documents. The Tribunal noted the assessee's business practice (participation in auctions) necessitating recurring unsecured borrowings and observed a consistent pattern in the preceding year-previous unsecured loan balances and increased turnover in the impugned year supporting the commercial rationale for higher unsecured borrowings. The Tribunal rejected Revenue's argument that the Commissioner (Appeals) could not delete the addition merely because the Assessing Officer had not made further enquiries, holding that deletion was not based solely on the absence of enquiries but on the uncontroverted fact that adequate documentary evidence establishing identity, genuineness and creditworthiness was on record and free from adverse findings by the Assessing Officer. Where AO does not find infirmity in the documents tendered, further inquiries are unnecessary and Commissioner (Appeals) need not remand or exercise coterminous inquiry powers merely because AO did not conduct enquiries. Ratio vs. Obiter: Ratio - Where an assessee furnishes documentary evidence establishing identity, genuineness and creditworthiness of creditors and the Assessing Officer records no adverse findings or infirmities in those documents, addition under Section 68 is not justified; appellate authority may delete such addition without remanding for further enquiries. Obiter - Observations on the assessee's business pattern and past unsecured loan balances serve as corroborative factual reasoning but are subordinate to the documentary compliance required under Section 68. Conclusions: The Tribunal upheld deletion of the addition under Section 68 (Rs. 2.23 Crores), concluding that the assessee discharged the statutory onus and that no further enquiries were warranted in absence of adverse findings by the Assessing Officer; Revenue's ground is dismissed. Issue 2: Admissibility of deduction under Section 24 for interest on housing loan of Rs. 2,00,000/- Legal framework: Section 24 permits deduction from income from house property of interest payable on borrowed capital used for acquisition/construction subject to statutory limits; claimant must substantiate the payment and the entitlement to the deduction. Precedent Treatment: No precedent is cited; the Tribunal applied statutory entitlement principles and the facts as evidenced by documentary record. Interpretation and reasoning: The Tribunal found that the assessee produced the loan sanction letter, repayment schedule and documents evidencing interest and principal repayment from Reliance Home Finance Ltd., thereby establishing payment and the basis for claiming deduction under Section 24. The Assessing Officer disallowed the claim for want of documentary evidence, but those documents were on record before the Commissioner (Appeals). Revenue contended the matter should be restored to the Assessing Officer to verify whether the co-owner (spouse) of the property had claimed the deduction, thereby affecting apportionment. The Tribunal held that since documentary proof of payment and loan particulars were available and the Assessing Officer failed to consider those documents, there was no reason to remit the matter for re-examination; the Assessing Officer was given an opportunity and did not utilize it, and the appellate authority properly allowed the deduction. The Tribunal rejected the proposition that the appellate authority must remit solely because the property was co-owned; any contention regarding co-owner's claim should have been raised and examined by the Assessing Officer. The Tribunal emphasized that the presence of supporting documents and absence of adverse findings justify allowing the deduction without remand. Ratio vs. Obiter: Ratio - Where an assessee furnishes sanction letter, repayment schedule and evidence of interest payment, denial of Section 24 deduction by the Assessing Officer for alleged lack of evidence is unsustainable; appellate authority may allow the deduction if AO has not recorded any adverse finding. Obiter - The suggestion that coterminous powers require remand in every instance of co-ownership is rejected as not obligatory where documentary proof exists and AO had the opportunity to verify but did not. Conclusions: The Tribunal confirmed deletion of the disallowance of Rs. 2,00,000 under Section 24, holding the deduction admissible on the evidence produced; Revenue's ground is dismissed. Overall Conclusion (cross-reference) Both grounds of Revenue's appeal are dismissed: (a) addition under Section 68 deleted because identity, genuineness and creditworthiness of creditors were established on the record and AO made no adverse findings; (b) Section 24 deduction allowed because sanction/repayment/interest evidence was on record and AO's failure to examine those documents does not mandate remand where no infirmity is shown. The Tribunal affirmed the Commissioner (Appeals) conclusions on both issues.