Assesses Failed To File Affidavit Proving Repayment Of Loans: Orissa High Court Sustains Addition On “Unsecured Loan”

The Orissa High Court has sustained the addition of unsecured loans under Section 68 of the Income Tax Act, 1961.

The division bench of Chief Justice S. Muralidhar and Justice M.S. Raman has observed that the direction issued by the ITAT in the first round was to the effect that the AO should verify whether the assessee had repaid the amount "by calling all the creditors". Therefore, it is the AO who should have issued a summons to them to appear. Even assuming that the AO did not do so, the fact remains that the assessee did not ask for a summons to be issued.

The court noted that the assessee did not produce any fresh affidavits from the lender farmers to confirm that their loans to the assessee had been repaid to them. The assessee could have easily done it to satisfy the requirements of the directions of the ITAT in remand.

The appellant/assessee has raised the issue of whether the AO was justified in directing the addition to the taxable income of the assessee under the heading ‘unsecured loan’.

In the second round of the litigation, the ITAT directed the matter to the AO with directions to verify the genuineness of the transaction. The AO was directed to verify, and if the assessee has already repaid the amount, it may be deleted as per law after giving the assessee a due opportunity to be heard.

When the matter went back before the AO, the assessee did not produce the 200 farmers from whom it had borrowed an unsecured loan.

The AO noted that the assessee had neglected to present the farmers, who could have attested to the assessee's claim that they had repaid the loan during the financial year 2013–2014.

The assessee contended that, in terms of the direction issued by the ITAT, it is the AO who should have issued summons to the farmers in question to verify the facts. The direction issued by the ITAT in the first round was to the effect that the AO should verify whether the assessee had repaid the amount "by calling all the creditors". Therefore, it is the AO who should have issued a summons to them to appear.

The Court dismissed the appeal of the assessee.

Case Title: M/s. Unideep Food Processing (P) Ltd. Versus ITAT

Case No: ITA No.50 of 2020

Citation: 2023 LiveLaw (Ori) 34

Date: 14.02.2023

Counsel For Appellant: Prajnaraj Mohanty

Counsel For Respondent: T.K. Satapathy

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