KOTADIYA CORPORATION,SURAT vs. ACIT, CIRCLE 2(1)(1), SURAT

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ITA 1399/SRT/2025Status: DisposedITAT Surat23 July 2026AY 2014-155 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had repaid the loans, and the Revenue could not controvert this fact. Following jurisdictional High Court judgments, the Tribunal found the additions unsustainable.

What were the facts?

The assessee, a real estate developer, declared NIL income for AY 2014-15. The Assessing Officer (AO) made an addition of Rs. 54,35,000 for alleged unexplained unsecured loans and disallowed interest of Rs. 95,602. The CIT(A) confirmed the AO's order.

What were the issues?

Whether additions for unexplained unsecured loans and disallowance of interest are sustainable when the loans have been repaid.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: Shri T.R. Sentil Kumar & Shri Ratnesh Nandan Sahay

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT (PHYSICAL HEARING) Before: Shri T.R. Sentil Kumar, Judicial Member And Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 1399/SRT/2025 Assessment Year: 2014-15

Kotadiya Corporation The ACIT 120, F.P. No. 21, Circle-2(1)(1), T.P. No. 58, Vs Surat Rameshwaram Green, Bamroli, Surat-395005, Gujarat (Respondent) PAN: AALFK7894B (Appellant) Assessee Represented: Shri Sapnesh Sheth, Advocate Revenue Represented: Ms. Neerja Sharma, Sr. D.R. Date of hearing : 06-05-2026 Date of pronouncement : 23-07-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 09.10.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “Ld. CIT(A)”), arising out of the order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2014-15.

I.T.A No. 1399//SRT/2025 A.Y. 2014-15 Page No 2 Kotadiya Corporation vs. ACIT

2.

Brief facts of the case are, the assessee is a partnership firm engaged in the business of Real Estate Development and undertaken residential project “Rameshwaram Green”. For the Assessment Year 2014-15, the assessee filed its return on income on 02.10.2014 declaring NIL income. The return was taken for scrutiny assessment. AO called for details of unsecured loans, availed from 29 creditors. The assessee filed confirmation of accounts, copy of the ITR and Bank statement of 29 creditors. The AO issued notice u/s 133(6) of the Act to all 29 creditors out of which 6 creditors notices were returned with postal remark “left/unknown” as follows:-

2.1. It is thereafter, the assessee given the present address of six creditors and also informed the AO that the loans were repaid as follows:-

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2.2. However, the AO was not satisfied with the above reply and, thereby made addition of Rs.54,35,000/- as unexplained income and also denied the interest of Rs.95,602/- and added as the income of the assessee.

3.

Aggrieved against the assessment order, assessee filed appeal before Ld. CIT(A), who has also confirmed the addition made by the AO and dismissed the appeal of the assessee.

4.

Aggrieved against the same, assessee is in appeal before us raising following grounds of appeal:- 1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals), NFAC has erred in confirming the action of the Assessing Officer in making addition of Rs.54,35,000/-as bogus unsecured loans u/s 68 of the I.T. Act 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals), NFAC has erred in confirming the action of the Assessing Officer in disallowing of the interest expense on unsecured loans amounting to Rs. 95,602/-. 3. It is therefore prayed that above addition made by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.

5.

Heard rival submissions and perused the materials available on record including the paper book which is running to 49 pages filed by the assessee. Ld. Counsel submitted before us, confirmation of accounts from six creditors, their respective ITRs and the Bank statement to prove that the loans were being paid through cheque and repaid through banking channels. Thus, ld. Counsel claimed that question of making addition u/s 68 of the Act and also disallowance

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interest thereon does not arise. The ld. Counsel also relied upon Jurisdictional High Court judgment in the cases of CIT Vs. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Guj.), CIT Vs. Ambe Tradecrop (P.) Ltd. [2022] 145 taxmann.com 27 (Guj.) and PCIT Vs. Merrygold Gems (P.) Ltd. [2024] 164 taxmann.com 764 (Guj.) and other case laws, and requested to delete the additions.

6.

Per contra, Ld. DR appearing for the Revenue, supported the order passed by the Lower Authorities and requested to confirm the same.

7.

We have given our thoughtful consideration and perused the materials available on record. It is undisputed fact that the loans are repaid by the assessee firm. The Ld. Sr. DR for the Revenue unable to controvert the repayment of loans and produce any adverse findings. Jurisdictional High Court of Gujarat in the case of Ayachi Chandrashekhar Narsangji (supra), held that the department having accepted the repayment of loan for subsequent year, no addition was to be made on account of cash credit. This view was confirmed in the subsequent judgment rendered by the Gujarat High Court in case of M/s Ambee Tradecorp (P.) Ltd. and Merrygold Gems (P.) Ltd. (Supra). The facts in the present case are similar, and the entire loan is repaid by the assessee in the present assessment year and subsequent years. Therefore, the entire additions made by the AO is not sustainable in law.

7.1. Respectfully following the judgments of Hon'ble Jurisdictional High Court, we are of the considered opinion that additions made by

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the Ld. A.O. are not sustainable in law, and consequential payment of interest. Thus the grounds raised by the assessee is hereby allowed In the result, appeal filed by the assessee is hereby allowed. 10.

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 23-07-2026

Sd/- sd/- (RATNESH NANDAN SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat : Dated 23/07/2026 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, सूरत

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