Assessee Fails to Prove Genuineness and Creditworthiness: ITAT upholds ₹75.6 Income Tax Disallowance Lakh against Interest on Unsecured Loans [Read Order]

Income Tax Tribunal Affirms ₹75.6 Lakh Disallowance Amid Loan Legitimacy Concerns

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) has upheld a disallowance of ₹75.6 Lakh against an assessee. The decision centers around the assessee’s failure to adequately demonstrate the genuineness and creditworthiness of unsecured loans obtained during the Assessment Years 2017-18 and 2018-19.

Scrutiny of Unsecured Loans

The case revolved around the interest claimed on unsecured loans. Tax authorities raised concerns about the origin and authenticity of these loans, prompting a detailed investigation into the assessee’s claims.

Assessee’s Burden of Proof

Under Indian tax law, the onus lies on the assessee to prove the legitimacy of financial transactions, including unsecured loans. This includes demonstrating:

• The identity of the lender.
• The creditworthiness of the lender to advance the funds.
• The genuineness of the transaction.

ITAT’s Ruling and Rationale

After reviewing the evidence presented, the ITAT concluded that the assessee failed to provide sufficient documentation and information to satisfy these requirements. The Tribunal emphasized that mere submission of documents is not enough; the assessee must actively demonstrate the veracity of the loan transactions.

Implications for Taxpayers

This ruling serves as a crucial reminder for all taxpayers in India to maintain meticulous records and be prepared to substantiate claims made in their income tax returns, particularly those related to unsecured loans. Failure to do so can result in significant disallowances and potential penalties.