· Complete details regarding unsecured loans were submitted to the AO during the course of original assessment as well as reassessment proceedings, such as income tax return, balance sheet, profit and loss account, confirmation and bank statement.
· The AO further issued notices u/s 133(6), which were duly served and replied to by the parties, confirming the transactions.
· The AO, however, made the addition, which was further sustained by the CIT(A), merely on the following grounds:
- The lender companies were incurring losses and as such, did not have the capacity to give loans.
- All the replies received from each creditor were on similar lines.
- The bank statement showed transactions in round figures and there were transfer entries only in the bank statement
· The Tribunal after going through the evidences filed by assessee observed as under:
- Assessee had provided all possible details in respect of each creditor.
- The lender companies have confirmed the transactions by responding to notice issued u/s 133(6).
- Each of the creditor had sufficient net worth so as to lend money to the assessee.
- The loan was taken for short period. Assessee had also paid interest on the same, after duly deduction tax at source.
· Therefore, the Tribunal deleted the addition made by the AO on this ground and concluded as under:
- The income for the year under consideration cannot be the sole criteria to decide the creditworthiness of the lender.
- All that is required to discharge the onus u/s 68 is to show the source from where the payment has been made.
- The AO is duty bound to bring material and evidences to discredit the evidences submitted by the assessee.
- In case the AO was not satisfied, the AO could have made enquiry from the AO of the respective lenders.
- The allegation of CIT(A) that replies received from each of the creditors are identical cannot be a ground for drawing adverse inference against the assessee.
- Without bringing anything adverse, the evidences submitted by assessee cannot be converted into no evidence or bad evidence.
For further reading, refer the attachment.
Further Reading