2023 (10) TMI 1533 - AT - Income Tax

Addition made towards unsecured loan u/s 68 - Addition made on account of unexplained expenditure u/s. 69C - treating the receipt of unsecured loan as a bogus transaction - HELD THAT - We find that in the case of Flourish Builders Developers Pvt. Ltd. 2018 (11) TMI 1964 - ITAT DELHI under identical circumstances had held that the loan transactions received from M/s. I. Tech Insurance Brokers P Ltd. and Ms/ Tyagi Portfolio Management Ltd. to be genuine among other companies The loans received from two lender companies cannot be treated as accommodation entry and correspondingly the addition made u/s. 68 of the Act thereon is hereby directed to be deleted. Since the loan is treated as genuine there is no scope for sustenance of the addition made towards commission expenditure u/s 69C and accordingly the same is also hereby directed to be deleted. Appeal of assessee allowed.

Summary

ISSUES:

Whether the addition made towards unsecured loan of Rs. 3,25,00,000/- under section 68 of the Income Tax Act, 1961 is justified.Whether the addition made on account of unexplained expenditure of Rs. 3,25,000/- under section 69C of the Act, treating the receipt of unsecured loan as a bogus transaction, is justified.

RULINGS / HOLDINGS:

The loans received from the two lender companies fulfill all three necessary ingredients of section 68 of the Act, namely "identity of the lender, creditworthiness of the lender and genuineness of the transaction," and therefore cannot be treated as accommodation entries; the addition under section 68 is deleted.Since the loan of Rs. 3,25,00,000/- is held to be genuine, the addition of Rs. 3,25,000/- towards commission expenditure under section 69C of the Act is not sustainable and is accordingly deleted.

RATIONALE:

The legal framework applied is section 68 of the Income Tax Act, which requires the assessee to prove the "identity of the lender, creditworthiness of the lender and genuineness of the transaction."The assessee discharged the onus by furnishing bank statements, confirmations from lenders with PAN and signatures, audited financial statements of the lenders showing sufficient own funds, and evidence that the loans were routed through regular banking channels.The sole basis for addition was the statement of the Director recorded under sections 132(4) and 131 of the Act, which was not supported by any collaborative material or adverse findings during the search and seizure operation.No adverse inferences were drawn on the documents furnished by the assessee, nor were notices under section 133(6) issued to verify the documents' veracity.Precedential support includes a coordinate bench decision where similar loans from the same lender companies were held genuine, and a prior Tribunal ruling deleting additions based on similar facts and the same lender companies.The Tribunal distinguished the case from mere reliance on statements by emphasizing the absence of corroborative evidence indicating the loans were accommodation entries.