The Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the addition on account of an unexplained loan against the Society for Institute for Professional Studies Ghaziabad.
The assessee, Society for Institute for Professional Studies Ghaziabad is registered with the Registrar of Society, Uttar Pradesh under section 12AA of Income Tax Act, 1961. The assessee society has also been granted an exemption under section 80G of the Income Tax Act, 1961 by the Commissioner of Income Tax, Ghaziabad.
The assessee filed a return of income declaring NIL income. The case was selected for scrutiny assessment and requisite details were called for. The assessee produced books of account and other details which have been test-checked by the AO. During the assessment year under appeal, the assessee society has received an amount of Rs.1,25,78,000 on account of unsecured loans from the various parties.
The assessee was required to verify the identity, capacity, creditworthiness, and genuineness of the transaction. In compliance with the same, the assessee filed complete details of the lenders which has been discussed by the AO.
The assessee contended that where the assessee applied the amount even considering the impugned amount as income, it was more than 85% of the amount spent by the assessee towards the object of the assessee society, therefore, no addition could be made against the assessee.
On the other hand, the department relied upon the Orders of the authorities below and submitted that notices issued for examination were not responded to by the creditors and even if the amount in question has been utilized towards objects of the assessee society, it would not have any impact on the income of the assessee. The balance-sheet of the creditors is on a similar line, therefore, additions have been rightly made by the authorities below.
The coram of B.R.R. Kumar and Bhavnesh Saini noted that all the loans are given through banking channels and the creditors have sufficient bank balance in their bank accounts and net worth as per their balance-sheets. Therefore, the creditworthiness of the creditors is also not in doubt. Therefore, the assessee has been able to prove the genuineness of the transaction in the matter because the amounts in question have been returned subsequently which were subjected to interest and TDS payment on such loans.
However, the ITAT observed that the AO has not brought any evidence against the assessee on record to disbelieve the documentary evidence. Whatever enquiry was conducted through the Income Tax Inspector does not appear to have been confronted to the assessee or explanation of the assessee have been called for.
Therefore, the Tribunal while allowing the appeal of the socied deleted the addition made by the lower authority.