The two member bench of the Income Tax Appellate Tribunal ( ITAT ) Delhi, upheld the deletion of addition under Section 68 of the Income Tax Act, 1961, confirming the personal identity of depositors.
The brief fact of the case revealed that a return declaring an income of Rs. 11,28,235/- was filed on September 17, 2012. The case underwent scrutiny under the Computer Assisted Scrutiny Selection ( CASS ) process. During the fiscal year, the assessee obtained unsecured loans from twenty-two individuals and three Hindu Undivided Families ( HUFs ) amounting to Rs. 2,25,40,000/-. Notices under Section 133(6) of the Income Tax Act, 1961, were issued by the Assessing Officer ( AO ) to all parties involved, but only five parties responded.
The AO concluded that the parties lacked the creditworthiness to provide unsecured loans to the assessee. Relying on the judgment of the High Court of Delhi in the case of Titan Securities Ltd., the AO determined that the assessee failed to establish the creditworthiness of the parties. Consequently, the AO made an addition of Rs. 2,25,40,000/- under Section 68 of the Income Tax Act.
The counsel for the revenue Vivek Kumar Upadhyay argued that it was the responsibility of the assessee to prove the identity, genuineness, and creditworthiness of the loan parties. Failing to do so, the amount should be treated as undisclosed income of the assessee. The funds were credited to their accounts either by depositing cash or through RTGS from unexplained sources. Furthermore, the money was immediately transferred to the appellant, indicating that these were merely accommodation entries lacking genuineness.
Further pointed out that the notices issued by the revenue Authorities have not been complied by the loan parties and hence there was an absolute failure on the part of the assessee to prove the credential of the loan parties
The counsels for the assessee Sampath and V. Rajkumar submitted that they have provided each and every detail before the Revenue Authorities based on which the remission has been given by the ld. CIT(A)
The bench found that the assessee provided all the necessary documents during the assessment proceedings and additional evidence during the appellate proceedings. The Assessing Officer ( AO ) disregarded the creditworthiness of the lenders, claiming they lacked sufficient sources or that their income was disproportionate to the loans granted, without conducting any verification of the depositors’ cases. Throughout the assessment proceedings and with additional evidence, the appellant submitted Income Tax Returns ( ITRs ) reflecting PAN and address details, relevant bank statements, and confirmation from the creditors. Therefore, it can be concluded that the assessee fulfilled their obligations.
The tribunal comprising C.N.Prasad ( Judicial member ) and Dr. B.R.R.Kumar ( Accountant member ) determined that the AO rejected the evidence provided by the appellant without proving the falsity of the documents submitted by the assessee. The personal identities of these investors were established, their sources were proven, and their ITRs and subsequent repayments were examined. After thorough examination, the CIT(A) concluded that the AO was unjustified in treating the unsecured loans received under Section 68 of the Income Tax Act, 1961.
In the result, the appeal of the Revenue was dismissed.
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