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Facts
The Revenue filed an appeal against the order of the CIT(A) who had deleted additions made by the Assessing Officer (AO) under sections 68 and 69 of the Income Tax Act. The AO had made additions on account of an increase in unsecured loans and repayments to creditors, alleging lack of proper source or explanation.
Held
The Tribunal found that the Rs.7,00,98,081/- liability to Net Net Web was regrouped from current liabilities to unsecured loans, and no actual repayment occurred. Regarding the repayment to Mr. G. Amarender Reddy, the assessee provided evidence that the AO and CIT(A) allegedly overlooked. The issue of increase in unsecured loans from other creditors was remitted back to the AO for verification.
Key Issues
Whether the CIT(A) was justified in deleting additions relating to (i) regrouping of liabilities without repayment, (ii) alleged unproven repayment to a creditor, and (iii) unsecured loans from other creditors.
Sections Cited
68, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI RAVISH SOOD & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2018-19) Asst. Commissioner of Income Tax, M/s. Net Net Ventures Pvt. Ltd., Vs. Hyderabad. Circle 5(1), Hyderabad. PAN:AABCN2106L (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri V. Siva Kumar, Advocate रधजस् व द्वधरध/Revenue by: Ms. U Mini Chandran, CIT-DR सुिवधई की तधरीख/Date of hearing: 28/08/2025 घोर्णध की तधरीख/Pronouncement: 10/09/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by the Revenue (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 09.01.2025 for the A.Y. 2018-19.
The Revenue has raised the following grounds of appeal :
3. The brief facts of the case are that, Net Net Ventures Pvt. Ltd. (“the assessee”) is a company engaged in the business of real estate. It filed its return of income for AY 2018–19 on 29.09.2018, declaring a total loss of Rs.2,14,050/-. The case was selected for scrutiny to verify income from real estate business, and accordingly, notice under section 143(2) of the Income Tax Act, 1961 (“the Act”) was issued on 22.09.2019. After considering the submissions of the assessee, the Learned Assessing Officer (“Ld. AO”) made an addition of Rs.1,73,51,631/- under section 68 of the Act on account of increase in closing balance of unsecured loans of Net Net Biz Pvt. Ltd., Net Net Web Pvt. Ltd. and GAR Corporation Pvt. Ltd. (“other loan creditors”) as on 31.03.2018 as compared to the closing balance as on 31.03.2017. The Ld. AO also observed that the assessee had an closing balance as on 31.103.2017 of Rs.7,00,98,081/- under the head “Other Current Liabilities” from M/s. Net Net Web Com Pvt. Ltd.- Demerger (“ Net Net Web”), which was repaid during the year. The Ld. AO further observed that the assessee repaid an amount of Rs.1,47,00,000/- to Mr. G. Amrender Reddy. Thus, there was a total repayment of Rs.8,47,98,081/- during the year under consideration, for which according to the Ld. AO no proper source or explanation was furnished. Out of this, Rs.1,73,51,631/- was already added under section 68 of the Act of the Act. The Ld. AO reduced this from Rs.8,47,98,081/- and accordingly made an addition of Rs.6,74,46,450/- under section 69 of the Act. Accordingly, the Ld. AO completed the assessment by making two additions of Rs.1,73,51,631/- under section 68 of the Act and Rs.6,74,46,450/- under section 69 of the Act, by order dated 10.04.2021, assessing the total income at Rs.8,45,84,031/-.
4. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the assessee.
5. Aggrieved with the order of Ld. CIT(A), the Revenue has filed the present appeal before this Tribunal. The Ld. Departmental Representative (Ld. DR) submitted that three issues are involved in this appeal (i) related to repayment of Rs.7,00,98,081/- to Net Net Web (ii) related to repayment of Rs.1.47 crores to Mr. G. Amrinder Reddy and (iii) related to increase in unsecured loans of Rs.1,73,51,631/- from other loan creditors.
6. As far as the first issue regarding repayment of Rs.7,00,98,081/- to Net Net Web is concerned, the Ld. DR submitted that the assessee had repaid this amount during the year without furnishing any proper explanation. The Ld. AO had therefore rightly made the addition under section 69 of the Act. The Ld. CIT(A) erred in deleting the addition by holding that there was no repayment and that the balance was merely regrouped. The Ld. DR argued that regrouping from “Other Current Liabilities” to “Unsecured Loans” was not in line with acceptable accounting principles, and therefore the addition should be restored.
7. Per contra, the Ld. Authorised Representative (Ld. AR) invited our attention to Note No.4 (“Other Current Liabilities”) in the audited statements and demonstrated that Rs.7,00,98,081/- was shown as payable to Net Net Web as on 31.03.2017, which comes to Rs. Nil as on 31.03.2018. The Ld. AR further submitted that there is no actual repayment during the year and the same amount was regrouped under “Unsecured Loan” as on 31.03.2018. He further referred to para 7.1 to 7.6 of the order of the Ld. CIT(A), where clear findings has been given by the Ld. CIT(A) in this regard. The Ld. CIT(A) has clearly stated that there was no repayment to M/s. Net Net Web and there is only regrouping of balance under Other Current Liabilities into Unsecured Loans. Further, after perusal of bank statements also, the Ld. CIT(A) has stated that no such repayment was found. Therefore, the Ld. AR prayed before the bench to upheld the order of Ld. CIT(A) on this issue.
We have heard the rival submissions and gone through the material available on record. There is no dispute about the fact that the alleged amount of Rs.7,00,98,081/- payable to M/s. Net Net Web was pending as on 31.03.2017 under the head of Other Current Liabilities and the same has been regrouped under Unsecured Loans during the year under consideration. We have gone through para 7.1 to 7.6 of the Ld. CIT(A)’s order, which is to the following effect :
On perusal, it is evident that the Ld. CIT(A) has given the clear findings in this regard and deleted the addition of Rs.7,00,98,081/-. The Ld. CIT(A) has clearly stated that there was no repayment during the year to M/s. Net Net Web and there is only regrouping of balance under Current Liabilities into long term borrowings. Further, on perusal of bank statements also, the Ld. CIT(A) has stated that no such repayment was found. The contention of the Ld. DR that as per the accepted accounting standard, the assessee is not entitled to regroup the amount from Other Current Liabilities to Unsecured Loans is not acceptable in the absence of any actual repayment to M/s. Net Net Web. Therefore, we find no infirmity in the order of Ld. CIT(A) on this issue. Accordingly, we uphold the order of Ld. CIT(A) and dismiss the appeal of the Revenue on this issue.
As far as the second issue of the Revenue regarding repayment of Rs.1.47 crores to Mr. G. Amrender Reddy is concerned, the Ld. DR relied on the order of the Ld. AO and submitted that the assessee had not placed any evidence before the Ld. AO to substantiate the repayment.
Per contra, the Ld. AR submitted that the assessee had filed before the Ld. AO (a) ledger account of Mr. G. Amarender Reddy (page no. 12 of the paper book), (b) confirmation from Mr. G. Amarender Reddy (page no. 13 of the paper book) and (c) bank statements evidencing acceptance of Rs.1 lakh and repayment of Rs.1.48 crores during the year through banking channels. The Ld. AO ignored these documents and made the addition. Accordingly, the Ld. AR submitted that the matter may be set aside the Ld. AO for reverification.
We have heard the rival submissions and gone through the material available on record. We have also perused the ledger account, confirmation, and bank statements placed in the paper book by the assessee. These prima facie show receipt and repayment through banking channels. However, the Ld. AO did not verify these documents, and the Ld. CIT(A) has not given any findings on this issue. Therefore, in the interest of justice, we remit this issue to the file of the Ld. AO for fresh examination. The Ld. AO shall verify the documents already filed and may call for any additional evidence/explanation, and decide the issue afresh after giving due opportunity to the assessee.
As far as the third issue of the Revenue regarding increase in unsecured loans of Rs.1,73,51,631/- from other loan creditors are concerned, the Ld. DR argued that the assessee failed to discharge the onus under section 68 of the Act to establish identity, creditworthiness, and genuineness of transactions. The Ld. CIT(A) wrongly deleted the addition only because the Ld. AO had not verified documents. The deletion, according to the Ld. DR, is not justified.
Per contra, the Ld. AR submitted that the assessee had filed ledger accounts and confirmations of all three loan creditors (page nos. 4 to 11 of the paper book). The Ld. AO, without verifying them, made the addition. Hence, the Ld. AR submitted that the issue may be remitted to the Ld. AO for proper verification.
We have heard the rival submissions and gone through the material available on record. We note that the assessee had filed ledger accounts and confirmations of the creditors (page nos. 4 to 11 of the paper book), but the Ld. AO did not carry out verification. The Ld. CIT(A) deleted the addition only because of such lapse on the part of Ld. AO, without recording any findings on the issue of requirements of section 68 of the Act. We therefore set aside this issue to the file of the Ld. AO for verification of the documents already filed and to call for any additional evidence as may be required. The Ld. AO shall examine the issue afresh after affording due opportunity to the assessee.
In the result, the appeal of the Revenue is partly allowed for statistical purposes.