Dwarkadish Spinners Limited, New Delhi vs. DCIT - (Income Tax Appellate Tribunal) (14 Oct 2022)

When the assessee has proved the initial onus lay upon it by proving the creditworthiness and genuineness of the transaction in the matter, addition cannot be made

MANU/ID/1685/2022

Direct Taxation

The assessee is a company and e-filed it's return of income declaring loss of Rs.1,24,94,251. The case of the assessee company was selected for scrutiny and notice was issued. During the course of assessment proceedings, the A.O. noted that the assessee company has received unsecured loans from Associates of the companies. The A.O. called the assessee to prove the genuineness of the lendor of unsecured loans. Since the assessee failed to furnish any documentary evidences like ITR, Bank A/c, confirmation etc., the A.O. made addition of Rs.32,77,859 on account of unsecured loans under Section 68 of the Income Tax Act, 1961 ( I.T. Act) besides making addition on account of other expenses to the tune of Rs.5,29,973, addition on account of depreciation of Rs.3,12,13,605 under Section 32 of the I.T. Act, 1961 and determined the total income of the assessee at Rs.2,25,35,040 under Section 143(3) of the I.T. Act, 1961 as against the returned loss of Rs.1,24,94,251.

The A.O. also initiated penalty proceedings under Section 271(1)(c) of the I.T. Act separately for furnishing inaccurate particulars of income. Aggrieved by the order of the A.O, the assessee carried the matter in appeal before the Ld. CIT(A) who vide order partly allowed the appeal of the assessee.

The assessee company has filed sufficient documentary evidences before the authorities below such as acknowledgment of return of income, balance sheet as on 31.03.2012 for the impugned A.Y. 2012-13, bank statements, PAN etc., in respect of both the companies and, thus, the assessee company has discharged it's initial onus upon it by proving the creditworthiness and genuineness of the transaction in the matter and meet the requirements of Section 68 of the I.T. Act, 1961. It is a settled position of law, when the assessee discharged it's initial onus lay on it by proving the creditworthiness and genuineness of the lenders, no addition is warranted under Section 68 of the I.T. Act, 1961.

When the assessee has proved the initial onus lay upon it by proving the creditworthiness and genuineness of the transaction in the matter, addition cannot be made under Section 68 of the I.T. Act, 1961. Since the Revenue could not bring out any adverse or cogent material to dispute the creditworthiness of the creditors and genuineness of the transaction in the matter or the amount received by the assessee company was in fact from coffers of the assessee company, no addition could have been made in the hands of the assessee treating the same as unsecured loans under Section 68 of the I.T. Act, 1961.

Present Tribunal therefore, decline to accept the reasoning recorded by the learned CIT(A) while confirming the part addition made in the hands of assessee with regard to two creditors totalling to Rs.32,67,859. The A.O. is directed to delete the entire addition confirmed by the Learned CIT(A). Appeal of the assessee is allowed.

Tags : ASSESSMENT ADDITION LEGALITY