ITAT upholds addition made on account of Unverifiable Unsecured loan due to failure to Prove Creditworthiness of Lenders [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench upheld the addition made on account of unverifiable unsecured loan due to failure to prove creditworthiness of lenders.

The assessee Kirat Hotels Pvt. Ltd.is engaged in the Business of Running Restaurants and Bars.After filing the return of income assesses case was selected for scrutiny on the reason that “an unsecured loan from persons who have not filed their return of income (Form 3CD). Thereafter, passed assessment order by making an addition on account of unsecured loan under Section 68 of the Income Tax Act.

Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax Appeal (CIT(A)), who upheld the action of AO. Thus, the assessee filed the appeal before the tribunal.

During the appeallate proceedings, no one appeared for the assessee therefore considering the written submission of the assessee it was stated that all the loans were taken by account payee cheque also assessee before the lower authorities produced all documents and confirmation from lenders relating to the loan.

Anuj Garg, the Counsel for the revenue argued that the assessee did not prove the capacity, identity and the creditworthiness of the lenders before the Lower Authorities and did not provide any documents to prove the genuineness of the transaction. 

Further, the assessee before the CIT(A) failed to substantiate the genuineness and creditworthiness of the lenders.

After reviewing the facts and submission the two-member bench of the tribunal comprising Shamim Yahya (Accountant Member) and Yogesh Kumar U.S, (Judicial Member) held that “assessee has not proved the capacity, identity and creditworthiness of the lenders and also failed to provide any document to prove the genuineness of the transaction which ultimately resulted in making addition by the A.O. and confirmation of the addition by the CIT(A)”.

Therefore, the bench dismissed the appeal of the assessee.

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