THE PR. COMMISSIONER OF INCOME TAX, LUDHIANA vs. M/S DP VENTURES PVT. LTD.

Facts

The appeals by the Principal Commissioner of Income Tax (Central), Ludhiana, challenge the Income Tax Appellate Tribunal's (Tribunal) order dated April 27, 2023, for Assessment Year 2012-13. The respondent-assessees, M/s DP Ventures Pvt. Ltd. and M/s Silverline Buildtech Pvt. Ltd., had received unsecured loans totaling Rs. 3.5 crores from Gurdip Singh Bath. The Assessing Officer (AO) made additions to the assessees' returned income under Section 153-A of the Income Tax Act, 1961, treating the loan as undisclosed income. The first appellate authority had dropped the demand. The Tribunal, in its order, also dropped the proceedings against the assessees. The appeals were filed with a delay of 77 and 63 days, which were condoned.

Held

The Tribunal held that the addition made by the AO on account of the loan from Gurdip Singh Bath was not sustainable and therefore deleted it. The reasoning was based on several factors: (1) The loan was received from the bank account of Gurdip Singh Bath, an NRI, via foreign remittances, supported by bank statements and banker's certificates. (2) The assessment of Gurdip Singh Bath for Assessment Year 2015-16, completed under Section 153A r.w.s. 143(3), did not draw any adverse inference regarding the source of funds lent to the assessee. (3) The Tribunal noted that the revenue itself had accepted the financial activities and creditworthiness of Gurdip Singh Bath in his own assessment. (4) There was no dispute regarding the transaction itself or the identity of the loan creditor. The Tribunal concluded that the doubt about the creditworthiness of the loan creditor was cleared by the revenue's own order concerning Gurdip Singh Bath. The High Court found no factual or legal infirmity in the Tribunal's order and no substantial question of law arising from it. Consequently, the appeals were dismissed. The operative direction was the dismissal of the revenue's appeals.

Key Issues

1. Whether the Tribunal erred in law and on facts by deleting the addition made by the Assessing Officer on account of unsecured loan of Rs. 4,97,50,000/- received from Gurdip Singh Bath, when the same was treated as undisclosed income of the assessee under Section 68 of the Income Tax Act, 1961? Assessee's Contention (as per Tribunal's order): The assessee argued that the loan was received from the bank account of Gurdip Singh Bath, an NRI, through foreign remittances. The assessment of Gurdip Singh Bath for Assessment Year 2015-16 was completed under Section 153A r.w.s. 143(3) without any adverse inference regarding the source of funds lent to the assessee. The assessee also provided documentary evidence of the transaction, including bank statements and certificates from bankers, demonstrating the money trail. The assessee contended that once the receipt of the loan from Gurdip Singh Bath's bank account was on record and Gurdip Singh Bath's assessment was completed without adverse inference on the loan source, the addition made in the assessee's hands was not justifiable. Revenue's Contention (as per Tribunal's order): The revenue's primary concern, as noted by the Tribunal, was doubt regarding the creditworthiness of the loan creditor, Mr. Gurdip Singh Bath. However, the judgment records that the learned DR (Departmental Representative) did not make any objection to the assessee's submissions during the hearing.