Genuineness and Creditworthiness of Loans: ITAT Directs AO to Reassess Documents and Decide Matter Accordingly [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer (AO) to reassess documents and decide the matter accordingly concerning the genuineness and creditworthiness of loans received by the assessee.

The Revenue-appellant,appealed against the order dated 18.07.2018  passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the Assessment Year 2013-2014. In this case, Titan Projects Pvt. Ltd,respondent-assessee,was assessed under section 143(3) on 31.03.2016, with an addition of Rs. 32,11,00,000/- made to its returned loss of Rs. 20,238/-, which had been filed on 11.09.2013.

The assessee received loans from four companies totaling Rs. 32,11,00,000/-, which were used to purchase land at Diplomatic Enclave, New Delhi. During the assessment, the AO requested details to verify the loans' genuineness and creditworthiness. The assessee submitted loan confirmations and relevant bank statements.

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Notices under section 133(6) were sent to the lending companies, which replied. However, since the companies did not report substantial income, the AO doubted their creditworthiness and made the addition under section 68 of the Act.

On appeal, the CIT(A) found sufficient evidence to prove the identity, creditworthiness, and genuineness of the loans. The CIT(A) also noted that the AO overlooked the fact that the lending companies' directors were part of the family that had promoted the Indianbulls Group and ignored the companies' balance sheets, which showed they had the capacity to lend. As a result, the CIT(A) deleted the addition.

The revenue aggrieved by this decision appealed before the tribunal.

The two member bench comprising Anubhav Sharma (Judicial Member) and Manish Agarwal (Accountant Member) reviewed the submissions and material on record. It found that the respondent-assessee submitted details on three occasions. The first submission, on 21.12.2015, included loan confirmations and ledger accounts, but some addresses and Permanent Account Number(PAN) details were missing.

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On 21.03.2016, the assessee submitted ITRs, bank statements, and balance sheets of the creditors. The bank statements showed the loan dates, and the creditors submitted their balance sheets.

Read More: AO adds unsecured loans as unexplained credit citing lenders’ lack of creditworthiness: ITAT confirms genuineness by copies of ITR, bank statements

The CIT(A) concluded that the companies had creditworthiness based on their assessment orders and balance sheets. However, the assessee submitted these details late, leaving the AO  little time to review them. The AO had asked for these details months earlier but didn’t receive them until the last minute.

The appellate tribunal found that the AO did not have enough time to examine the documents. It set aside the matter and directed the AO to review all the documents and decide the case according to the law, giving the respondent-assessee a chance to be heard.

In short,the appeal filed by the revenue was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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