ITAT: Grants deletion of Addition On Unexplained Loan against Society for Institute for Professional Studies

ITAT: Grants deletion of Addition On Unexplained Loan against Society for Institute for Professional Studies

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, coram consisting of B.R.R. Kumar and Bhavnesh Saini, noted on 2 March 2021, in the case titled the Society for Institute for Professional Studies (Appellant/ Assessee) v. The JCIT (Respondent/ Revenue) that all the loans are given through banking channels and the creditors have sufficient bank balance in their bank accounts and net worth as per their balance-sheets.

The ITAT observed that the Assessing Officer (AO) has not brought any evidence against the assessee on record to disbelieve the documentary evidence. Whatever inquiry was conducted through the Income Tax Inspector does not appear to have been confronted to the assessee or explanation of the assessee has been called for.

The factual background of the case is that the assessee is registered with the Registrar of Society, Uttar Pradesh under Section 12AA of Income Tax Act, 1961 (IT Act).

The assessee society has also been granted an exemption under Section 80G of the IT Act by the Commissioner of Income Tax [CIT].

The assessee filed a return of income declaring NIL income. The case was selected for scrutiny assessment and requisite details were asked. It produced books of account and other details which have been test-checked by the AO.

During the assessment year under appeal, the assessee society has received an amount of Rs.1,25,78,000 on account of unsecured loans from the various parties.

The assessee was required to verify the identity, capacity, creditworthiness, and genuineness of the transaction. The assessee filed complete details of the lenders which have been discussed by the AO.

It was urged by the assesse that it had applied the amount even considering the impugned amount as income, it was more than 85% of the amount spent by it towards the object of the assessee society; therefore, no addition could be made against it.

The revenue department relied upon the orders of the authorities below and submitted that notices issued for examination were not responded to by the creditors and even if the amount in question has been utilized towards objects of the assessee society, it would not have any impact on the income of the assessee. The balance-sheet of the creditors is on a similar line; therefore, additions have been rightly made by the authorities below.

The ITAT observed that the creditworthiness of the creditors is also not in doubt. The assessee has been able to prove the genuineness of the transaction in the matter because the amounts in question have been returned subsequently which were subjected to interest and tax at deducted source (TDS) payment on such loans.

While relying on the judgment of the Supreme Court in the case titled Kishanchand Chellaram v. CIT 125 ITR 713 (SC). It stated that considering the totality of the facts and circumstances, we do not find any justification to sustain the addition. The ITAT deleted the entire addition made as per the orders of the authorities.