DCIT vs. Tripoli Management Private Limited - (Income Tax Appellate Tribunal) (01 Aug 2024)

Mere non-compliance of summons by some creditors cannot be a ground to treat the loans as non-genuine

MANU/IB/0343/2024

Direct Taxation

The assessee-company was engaged in the business of Non-Banking Finance Companies. The assessee company furnished its return of income for the A.Y. 2016-17 on 17.10.2016 disclosing a total income of Rs. 20,48,130. The case was selected for scrutiny and notices under Sections 143(2) and 142(1) of the Act were issued to the assessee. The assessee filed required documents online. During the assessment proceedings, the AO observed that the assessee-company has taken unsecured loan amounting to Rs.55,05,27,020 and paid interest thereon amounting to Rs.3,94,15,139.

The Learned CIT(A) deleted the additions made by Assessing Officer both under Section 68 and 69C of the Act and allowed the appeal of the assessee. While doing so, the Learned CIT(A) recorded his satisfaction on genuineness, creditworthiness of the lenders. Aggrieved by the order of the Learned CIT(A), the revenue is in appeal.

In case of DCIT Vs. Rohini Builders, GujaratHigh Court held that, mere non-compliance of summons by some creditors cannot be a ground to treat the loans as non-genuine, the Department should have pursued further investigation, if necessary. The Hon'ble High Court also discussed Section 68 of the Act highlighting that the unsatisfactoriness of the explanation does not automatically result in deeming the amount credited as the income of the assessee.

The assessee has provided substantial evidence to establish the identity, genuineness, and creditworthiness of the loan creditors. The AO's conclusions were largely based on assumptions and the principle of preponderance of human probability, without substantial evidence contradicting the assessee's claims. The assessee complied with statutory requirements, including the provision of confirmations, ID proofs, bank statements, and tax return details of the loan creditors. The repayment of loans in subsequent years further supports the genuineness of the transactions. The reliance on the decisions of Gujarat High Court are well placed. The case of Ayachi Chandrashekhar Narsangji is appropriate, wherein the Court held that no addition should be made, if the repayment of loans is accepted by the department in subsequent years.

The Learned CIT(A) has rightly noted that the AO's remand report did not provide substantial adverse comments on the identity and genuineness of the transactions. The AO's reliance on the principle of human probability without concrete evidence does not warrant the additions made under Sections 68 and 69C of the Act. The appeal of the Revenue lacks merit and the LearnedCIT(A)'s order deleting the additions under sections 68 and 69C of the Act is upheld. Revenue's appeal dismissed.

Tags : ASSESSMENT DELETION LEGALITY