Case Law Details
U Toll Corporation Ltd Vs ACIT (ITAT Varansi)
Introduction: The case of U Toll Corporation Ltd vs ACIT (Income Tax Appellate Tribunal, Varanasi) revolves around the assessment year 2013-14 and concerns the addition of unsecured loans by the Assessing Officer. The appellant challenges the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] regarding the addition of Rs. 40,00,000 and Rs. 30,00,000 in the names of Kumar Nagendra and Munna Kumar, respectively.
Detailed Analysis:
1. Unsecured Loan Dispute: The crux of the matter lies in the unsecured loans claimed by the appellant. The Assessing Officer contended that the appellant failed to prove the identity, creditworthiness, and genuineness of the loan transactions, leading to the additions under section 68 of the Income Tax Act.
2. Kumar Nagendra’s Loan: Regarding the Rs. 40,00,000 loan from Kumar Nagendra, the authorities noted cash deposits preceding the issuance of a Demand Draft (D.D.) in favor of the assessee. The appellant, while providing bank statements, struggled to prove the creditworthiness, especially considering multiple cash deposits shortly before the D.D.
3. Munna Kumar’s Loan: The appellant argued a typing error in wrongly attributing Rs. 30,00,000 to Kumar Nagendra instead of Munna Kumar. The CIT(A) accepted this claim, and the corresponding addition was deleted, providing relief to the appellant.
4. Lack of Substantial Evidence: Despite assertions, the appellant failed to furnish substantial evidence supporting the legitimacy of the loans. The absence of confirmations, returns, or bank statements from Munna Kumar raised doubts about the identity and creditworthiness of the loan creditors.
5. Upholding CIT(A) Decision: The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s decision, stating the appellant did not discharge the onus of proving creditworthiness and genuineness of the transactions. Cash deposits preceding the D.D. issuance remained unexplained, leading to the affirmation of the addition by the ITAT.
Conclusion: In summary, the ITAT, in its decision on the U Toll Corporation Ltd vs ACIT case, upheld the additions made by the Assessing Officer regarding unsecured loans. The lack of substantial evidence proving the creditworthiness and genuineness of the transactions resulted in the dismissal of the appeal. This case emphasizes the importance of thorough documentation and evidence in substantiating claims during tax assessments.
FULL TEXT OF THE ORDER OF ITAT VARANASI
This appeal by the assessee is directed against the order dated 23.08.2018 of CIT(A) for the assessment year 2013-14. The assessee has raised the following grounds:-
“1. Because, learned Commissioner of Income Tax (Appeals) has erred on facts and in law in making addition u/s 68 of the I.T. Act, 1961 under the head of unsecured loan of Rs. 40,00.000.00 in the name of Kumar Nagendra merely on the basis of presumption and surmises although no defect / discrepancies were found with respect to the details furnished in this respect.
2. Because, the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in making addition u/s 68 of the I.T. Act, 1961 under the head of unsecured loan of Rs. 30,00.000.00 in the name of Munna Kumar merely on the basis of presumption and surmises although no defect / discrepancies were found with respect to the details furnished in this respect.
3. Because, the order is bad both on facts and in law and is not maintainable.
4. Because, the assessee craves leave to put forward further grounds of appeal and / or to amend / alter the same before or at the time of hearing.”
2. The solitary issue arises in this appeal of the assessee is regarding the addition made by the Assessing Officer under section 68 of the Act in respect of unsecured loan from two loan creditors of Rs. 40 Lac and Rs. 30 Lac, respectively which was upheld by the CIT(A).
3. None has appeared on behalf of the assessee when this appeal was called for hearing despite the notice for hearing was issued through RPAD as well as Email at the Email ID given in the Form No. 36 filed by the assessee. The assessee was also given one more opportunity and the hearing was postponed from 23.5.2022 to 25.5.2022. Despite this opportunity was given by the Bench, none has appeared on behalf of the assessee and therefore, we propose to hear and dispose of this appeal ex parte.
4. We have heard the learned DR who has referred to the assessment order and submitted that the assessee has shown unsecured loan in the name of one Munna Kumar of Rs. 30 Lac and in the name of Kumar Nagendra of Rs. 40 Lac. The assessee has failed to discharge its onus as required under section 68 of the Act to prove the identity of the loan creditor, creditworthiness of the loan creditor and the genuineness of the transaction. Accordingly, the Assessing Officer made this addition. He has further pointed out that the Assessing Officer made total addition of Rs. 1 Crore which includes a second loan of Rs. 30 Lac from Kumar Nagendra which was deleted by the CIT(A) on the ground that this is nothing but loan taken from Munna Kumar and inadvertently shown in the balance-sheet in the name of Kumar Nagendra. Thus the learned DR has submitted that when the assessee has failed to discharge its onus during the assessment proceedings as well as before the CIT(A) then this addition made by the Assessing Officer and confirmed by the CIT(A) is justified.
4.1 The assessee has stated in the statement of fact as under:-
“1.3 That, the assessee has got its books of accounts audited U/s 44A B of the I.T. Act, 1961 and has obtained the report well within the prescribed time. A copy of the said report has been furnished with the return of total Income. There is no adverse comment in the audit report.
2.1 That, as regard addition of Rs. 30,00,000.00 in the name of Shri Munna Kumar in the Balance Sheet the name was wrongly typed a Shri Kumar Nagendra and it can be verified from Balance Sheet itself. In the time of assessment proceeding the assessee filed confirmation and bank statement but learned Assessing Officer ignored the same added to the income of the assessee. That, the amount has been returned to Munna Kumar. The detailed copy of account with copy of bank statement is enclosed herewith for your kind perusal and verification.
2.2. That, as regard addition of Rs. 40,00,000.00 in the name of Shri Kumar Nagendra in the time of assessment proceeding the assessee filed copy of account and bank statement of party but learned Assessing Officer ignored the same added it to the income of the assessee due to various cash deposited in the bank of the Kumar Nagendra. Kumar Nagendra also engaged in the business of Toll collection and cash deposited in his bank account was out of Toll collection itself.
2.3. That, as regard addition of Rs. 30,00,000.00 in the name of Shri Kumar Nagendra the Learned Assessing Officer accepted the Kumar Nagendra was wrongly typed and after the same Learned Assessing Officer made addition of Rs. 30,00,000.00 in the name of Shri Munna Kumara and also again made addition of Rs. 30,00,000.00 in the name of Kumar Nagendra.”
5. The main thrust of the assessee to explain the cash credit in the shape of unsecured loan is that its account are audited under section 44AB of the Act and Audit Report was filed alongwith the return of income. The assessee further explained that the loan of Rs. 40 Lac from Kumar Nagendra is explained by the assessee by filing a copy of account and bank statement of the party but the same was ignored by the authorities. Except this explanation the assessee has not brought anything on record to prove the identity of the loan creditors, creditworthiness of the loan creditor and genuineness of the transaction. The CIT(A) has considered this issue in para 4 and 5 as under:-
“4. During the course of appellate proceedings, it was submitted that the loan of Rs. 30,00,000/- in the name of Shri Munna Kumar was wrongly typed as Shri Kumar Nagendra in the balance sheet. In the assessment proceedings, the confirmation with bank statement of Shri Munna Kumar was filed but the A.O. has not accepted the same and has made the addition to the income u/s 68 of the IT Act. It was further submitted that from Shri Kumar Nagendra, only the loan of Rs. 40,00,000 /- have been taken. Thus, total loan of Rs.70,00,000/- have been taken during the year. The copy of balance sheet alongwith annexure was filed during the course of appellate proceedings and Schedule of unsecured loan has been placed as page-36 of the paper book, which clearly show that loan of Rs. 40,00,000/- has been received from Kumar Nagendra and there is no entry in the name of Munna Kumar in the Schedule of unsecured loan. In fact, the loan of Rs. 30,00, 000/- has been again shown in the name of Kumar Nagendra which is, in fact, in the name of Munna Kumar. The A.O. has made total addition of Rs. 1,00,00,000 /- u/s 68 of the I.T. Act whereas in fact as per schedule of unsecured loan, loan of Rs. 70,00,000 /- only has been accepted.
5. During the course of appellate proceedings also, the appellant could file only the unconfirmed copy of account of Shri Munna Kumar as well as bank account of appellant maintained with ICICI Bank showing amount received from Munna Kumar. However, no confirmation or copy of return or bank statement of Shri Munna Kurnar was enclosed. Similarly in the case of Kumar Nagendra from whom Loan of Rs. 40,00,000/- been claimed to have been received through DD, the copy of account has not been confirmed by the creditor. The bank statement of Kumar Nagendra maintained with Union Bank of India has been enclosed as per page-53 of paper-book, which show cash deposits of Rs. 5,07,815/-, Rs. 6,47,200/-, Rs. 3,38,590/-, Rs. 3,71,120/-, Rs. 7,00,000/-, Rs. 10,00,000/- and Rs. 6,44,830/- on 28.01.2013, 29.01.2013, 04.02.2013, 06.02.2013, 01.03.2013, 07.03.2013 and 11.03.2013 immediately before the issue of Draft favoring U Toll Corporation, the appellant. It is also important to mention here that before the deposit of cash there was ‘0’ brought forward balance in this account. The copy of return of income or confirmation of this creditor has also not been filed. Thus it is not clear as to from which sources cash has been deposited in the bank account of Kumar Nagendra before issue of Demand Draft favouring the appellant.t It is also important to mention here that in the schedule of unsecured loan alongwith name of Kumar Nagendra, name of P.K. Shukla is also mentioned as Kumar Nagendra & P.K. Shukla, whereas the bank account is in the name of Kumar Nagendra only and confirmation from P.K. Shukla has also not been filed. In view of these facts, it is clear that identity, creditworthiness as well as genuineness of both cash credits have not been satisfactorily explained by the appellant either during the course of assessment proceedings or appellate proceedings and accordingly, the addition of Rs. 70,00,000/- made on account of unexplained cash credit u/s 68 of the I.T. Act is sustained. Since the addition of Rs. 30,00,000/- made on account of loan from Kumar Nagendra has been made merely on the basis of typing mistake in the schedule of unsecured loans, whereas the appellant has not claimed any loan of Rs. 30,00,000/- from this creditor, the addition made by the A.O. to this extent is deleted and the appellant gets a relief of Rs. 30,00,000/- on this account.”
6. So far as the addition of Rs. 30 Lac made by the Assessing Officer towards the unsecured loan shown in the name of Kumar Nagendra in the balance sheet which was not shown in the ledger account is concerned, the CIT(A) has deleted this addition by considering the correct facts that inadvertently this amount has been shown in the balance sheet in the name of Kumar Nagendra instead of in the name of Munna Kumar which is recorded in the ledger. Since the assessee has not produced any documentary evidence in respect of the unsecured loan of Rs. 30 Lac from Munna Kumar, we find that the assessee failed to discharge its primary onus to prove the identity and creditworthiness of the loan creditor as well as genuineness of the transaction. As regards the unsecured loan of Rs. 40 Lac from Kumar Nagendra is concerned, the Assessing Officer as well as the CIT(A) has recorded this fact from the bank statement that a cash was deposited immediately prior to issuing of D.D. in favour of the assessee. Merely filing the bank statement by the assessee would not discharge the onus cast upon it to prove the creditworthiness of the loan creditor and genuineness of transaction particularly when the cash was deposited in tranches within a short spam of about ten days before issuing a D.D. in favour of the assessee. In the absence of any material brought on record before us to counter the finding of the Assessing Officer as well as the CIT(A), we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. Accordingly, the impugned order of the CIT(A) is upheld.
7. In the result, the appeal of the assessee is dismissed.
Order pronounced on 07/06/2022 at Allahabad, U.P., in accordance with Rule 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.
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