Unsecured loan accepted as genuine; addition under Section 68 deleted as books, banking records and TDS proved credibility

ITAT Kolkata allowed the assessee's appeal against addition made as unexplained cash credit u/s 68 on account of an unsecured loan of Rs. 5,00,000/-. The Tribunal held that the loan transaction was duly recorded in the assessee's books, repayment was made through banking channels, and TDS was deducted, with no material on record to suggest the transaction was sham. ITAT observed that the AO had not brought any contrary evidence to discredit the genuineness of the loan and directed deletion of the entire addition u/s 68.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether delay of 92 days in filing the appeal before the Tribunal deserved to be condoned.

1.2 Whether the unsecured loan of Rs. 5,00,000/- received from M/s. Pushker Trading & Holding Pvt. Ltd. could be treated as unexplained cash credit under section 68 by characterising the transaction as a sham transaction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay in filing the appeal

Interpretation and reasoning

2.1 The Tribunal examined the affidavit explaining that the assessee's management was pursuing rectification under section 154 against the appellate order under section 250, which was ultimately rejected after the limitation period for appeal had expired, and that there were issues regarding treatment of the appeal fee challan.

2.2 The Tribunal accepted that the assessee was bona fide pursuing an alternative remedy and that the delay arose due to circumstances beyond the control of the management while prosecuting such remedy and arranging to file the appeal thereafter.

Conclusions

2.3 The Tribunal held that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time and condoned the delay of 92 days.

Issue 2: Taxability of unsecured loan of Rs. 5,00,000/- as unexplained cash credit under section 68

Legal framework (as discussed)

2.4 The addition was made and confirmed under section 68 on the ground that the transaction with M/s. Pushker Trading & Holding Pvt. Ltd. was a sham transaction and the lender was a shell company, thereby treating the sum of Rs. 5,00,000/- as unexplained cash credit in the books of the assessee.

Interpretation and reasoning

2.5 The Tribunal noted as admitted facts: (i) the assessee received Rs. 5,00,000/- as loan from M/s. Pushker Trading & Holding Pvt. Ltd. by account payee cheque on 24.06.2010; (ii) the same was repaid on 16.11.2013; and (iii) all transactions were recorded in the assessee's books of account.

2.6 The Tribunal considered the assessee's contention that the loan transaction was genuine, was routed through banking channels and duly accounted for, and that there was no material brought on record by the Revenue to show that the transaction was sham.

2.7 The Tribunal found that, apart from the information received from the Investigation Wing and the failure to produce the director of the lender company in person, there was no substantive material on record to establish that the loan transaction of Rs. 5,00,000/- was non-genuine or a sham transaction.

2.8 Emphasis was placed on the absence of any contrary material to disbelieve the recorded loan and its subsequent repayment through banking channels.

Conclusions

2.9 The Tribunal held that there was no material to conclude that the loan transaction of Rs. 5,00,000/- between the assessee and M/s. Pushker Trading & Holding Pvt. Ltd. was a sham transaction.

2.10 Consequently, the amount of Rs. 5,00,000/- could not be treated as unexplained cash credit under section 68, and the Assessing Officer was directed to delete the addition.

2.11 In view of this finding on merits under section 68, the grounds raised by the assessee in the appeal were allowed, and the assessment order stood modified to the extent of deletion of the said addition.

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