ITO Vs More Marketing Pvt. Ltd (ITAT Mumbai)
Conclusion: In present facts of the case, the Hon’ble ITAT held that ITR and bank statements were sufficient to prove the genuinety and for creditworthiness under Section 68 of Income Tax Act.
Facts: These appeals are filed by the Revenue against different orders of Ld.CIT(A) dated 28.03.2018 for the A.Y. 2013-14 & 2014-15.
Brief facts of the case were that, assessee has filed its return of income on 29.09.2013 declaring total income of ₹.17,11,770/-. The same was processed u/s. 143(1) of Income-tax Act, 1961, notices u/s.143(2) and 142(1) of the Act were issued and served on the assessee along with the questionnaire. Assessing Officer observed that assessee has borrowed unsecured loans of ₹3,89,04,334/-. Since assessee has not filed confirmations in some of the cases, the assessee was asked to submit the details of the parties i.e., name, address, confirmations, loan amount, interest rate etc.,. Assessing Officer issued notice u/s. 133(6) of the Act to the loan creditors calling for confirmation with copy of ITR, bank statement.
Since none of the parties confirmed the transactions nor submitted any documentary evidences, therefore Assessing Officer disallowed the unsecured loans u/s. 68 of the Act. Further, he observed that assessee has debited the interest expenses of ₹.34,99,885/-. No confirmations were filed in some of the cases and since none of the unsecured loan parties responded to the notices issued u/s. 133(6) of the Act he has disallowed interest paid to those parties.
Aggrieved assessee preferred an appeal before the Ld.CIT(A) and assessee has filed grounds of appeal with objection to the additions made by the Assessing Officer relating to unsecured loans, interest and bogus purchases. After considering the same, he has deleted the addition made by the Assessing Officer, therefore aggrieved Revenue appealed before Tribunal.
The Hon’ble Tribunal observed that assessee has filed additional evidences before the Ld.CIT(A) like Copies of acknowledgement of ITR filed by the lenders, Bank statement highlighting loan received/repayment, Bank statement of the assessee company and Bank statement of the lenders. The Hon’ble Tribunal considered the Order passed by the Ld.CIT(A), wherein the additions made by the AO were deleted. The Ld. CIT(A) observed that The appellant has also placed reliance on various decisions including CIT V M/s. Usha Stud and Agricultural Farms ltd. 301 ITR 384 (Del.) to the effect that if there is no fresh credit entry during the year, no addition can be made u/s 68 of the Act. Further, it was observed that that if the AO has issued summons or notices u/s. 133(6), it is his duty to bring the process to a logical conclusion and non-response by such person cannot be held against the assessee. The judgments are applicable to the present case. In the present case the appellant has obtained from these parties the supporting evidences and submitted as additional evidences to prove that genuineness of the transactions. Considering the above facts and the submissions, the addition of Rs.1,82,73,000/- made by the AO on account of loans u/s 68 of the Act is not warranted and therefore the same is deleted and this ground of appeal is allowed. ”
On basis of the above, the Hon’ble Tribunal observed that considering the rival submissions and material placed on record, the assessee has taken unsecured loans from Directors / Shareholders and also from sister concerns. All these loans were taken only through banking channels and Ld.DR argued that assessee has not proved the creditworthiness of these parties. It was observed that Ld.CIT(A) has deleted the addition with the observation that all these transactions are only routed through banking and Assessing Officer has observed in remand report that these people have not filed balance sheet and capital account. However, he observed that these parties are individuals and not having any business income, therefore, there is no need to file any financial statements. By accepting the same he has deleted the additions. After considering the reasons for deletion, it was held that that since these are related parties and they are not required to file any financial statements. However, they have filed ITR and bank statement to prove the genuinety and for creditworthiness. It is argued by Ld. DR that there is no sufficient earning declared by them. But it was observed that, to prove creditworthiness, it is enough to show that they have resources to pay loan and not necessary that it should only earned by the parties. If they can demonstrate that they have source and means to arrange funds and obviously through genuine source. Therefore, on these basis, the Order of Ld. CIT(A) was upheld appeal of the Revenue was dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. These appeals are filed by the Revenue against different orders of Learned Commissioner of Income Tax (Appeals)-5, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 28.03.2018 for the A.Y. 2013-14 & 2014-15.
2. Since the issues raised in both these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 4150/MUM/2018 for Assessment Year 2013-14 as a lead appeal.
3. Brief facts of the case are, assessee has filed its return of income on 29.09.2013 declaring total income of ₹.17,11,770/-. The same was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). subsequently case was selected for scrutiny under CASS and notice u/s.143(2) and 142(1) of the Act were issued and served on the assessee along with the questionnaire. In response AR of the assessee attended and submitted the information as called for.
4. Assessee is engaged in the business of importers/traders of rubber, bearing and steel hardware and also providing operations and maintenance services. During assessment proceedings, Assessing Officer observed that assessee has borrowed unsecured loans of ₹.3,89,04,334/-. Since assessee has not filed confirmations in some of the cases, the assessee was asked to submit the details of the parties i.e., name, address, confirmations, loan amount, interest rate etc.,. Assessing Officer issued notice u/s. 133(6) of the Act to the loan creditors calling for confirmation with copy of ITR, bank statement etc., to the following parties: –
