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Facts
The assessee filed its return for AY 2016-17 and the original assessment was completed. The case was later re-opened under Section 147 on the grounds that loan transactions were not verified. The re-assessment completed under Section 147 r.w.s.144B made an addition of Rs. 52,42,402/- on account of unexplained unsecured loan.
Held
The Tribunal held that the Assessing Officer incorrectly treated the difference of Rs. 52,42,402/- as unexplained. This amount represented accrued interest on unsecured loans, which was added to the closing balance. The AO failed to consider this accrued interest and made an incorrect addition.
Key Issues
Whether the addition made by the AO on account of unexplained unsecured loan, which represented accrued interest, was justified and if the reopening under Section 147 was valid.
Sections Cited
147, 144B, 143(3)
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
"ी टी.आर. से""ल कुमार, "ाियक सद" एवं "ी नरे! "साद िस#ा, लेखा सद" के सम%। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं / Year : 2016-17 Shivam Developers The Dy.CIT बनाम/ 1, Shivam Monreve Bungalows Circle-3(1)(1) v/s. Opp. Baabul Baag Party Plot Ahmedabad Sindhu Bhavan Road Bodakdev, Ahmedabad–380 054 "थायी लेखा सं./PAN:ABVFS 1174 R (अपीलाथ'/ Appellant) ("( यथ'/ Respondent) Assessee by : Shri S.N. Soparkar, Sr. advocate and Shri Parin Shah, AR Revenue by : Shri B.P. Srivastava, Sr.DR सुनवाई की तारीख/Date of Hearing : 16/04/2025 घोषणा की तारीख /Date of Pronouncement: 25/04/2025 आदेश/O R D E R
PER NARENDRA PRASAD SINHA, AM:
1. This appeal by the Assessee is directed against the order dated 01.11.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as ‘CIT(A)’], for the Assessment Year (AY) 2016-17, arising from the assessment order dated 23.03.2022 passed under Section 147 r.w.s.144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] by the Assessing Officer [hereinafter referred to as ‘AO’]. Shivam Developers vs. Dy.CIT, Cir-3(1)(1) Asst. Year : 2016-17 2
Brief facts of the case are that the assessee has filed its return of income for AY 2016-17 on 15/10/2016 declaring total income of Rs.16,40,720/-. The original assessment was completed u/s.143(3) of the Act on 09/12/2018 at total income of Rs.16,40,720/-. Thereafter, the case was re-opened for the reason that the loan transactions were not verified and no loan confirmation was filed by the assessee. The re-assessment was completed u/s.147 r.w.s.144B of the Act on 23/03/2022 at total income of Rs.68,83,122/-, wherein the AO had made addition of Rs.52,42,402/- on account of unexplained unsecured loan.
Aggrieved with the order of the AO, assessee had filed an appeal before the first appellate authority which was decided by the Ld.CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
Now the assessee is in second appeal before us by raising following grounds of appeal:
1. Ld. CIT(A) has erred in law and on facts in upholding the reopening of the case u/s.147 without any fresh information, when the required information under limited scrutiny is furnished and duly verified by the predecessor Assessing Officer.
2. Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs.52,42,402/- being interest on unsecured loans taken during previous year as well as earlier previous years, though he has accepted the genuineness of the unsecured loans on which interest is paid.
The appellant craves leave to add, amend, alter, edit, delete, modify or change the ground of appeal at the time of or before the hearing of the appeal.”
5. Shri S.N. Soparkar, Ld.Sr.Counsel appearing for the assessee did not press Ground No.1 and, hence, the same is dismissed as such. Shivam Developers vs. Dy.CIT, Cir-3(1)(1) Asst. Year : 2016-17 3
6. As regards Ground No.2 in respect of addition of Rs.52,42,402/- on account of unsecured loan is concerned, the Ld.Sr.Counsel submitted that the matter was duly explained by the assessee before the AO. The assessee had taken fresh unsecured loan of Rs.2.31 crores from 20 persons, the details and confirmation of which were produced by the AO. The AO had also accepted these fresh unsecured loans. However, there was increase in total unsecured loan balance by Rs.2,83,42,402/- during the year. The AO had treated the difference of Rs.52,42,402 (Rs.2,83,42,202 – Rs.2,31,00,000) as unexplained and made the addition. The Ld.Sr.Counsel explained that the amount of Rs.52,42,402/- represented interest credit during the year on the unsecured loans which were added to the closing balance. He submitted that the AO had failed to consider the accrued interest which remained unpaid during the year. According to the Ld.Sr.Counsel, there was no difference in the unsecured loan account and the addition made by the AO was not called for.
Per Contra, Shri B.P. Srivastava, Sr.DR appearing for the revenue relied upon the orders of authorities below.
We have considered the rival submissions and perused the material available on record as well as the orders of the authorities below. We find that, in the instant case, the assessee had explained the increase of Rs.2,83,42,402/- in the unsecured loan balance before the AO vide letter dated 11/03/2022 and made the following submissions:
“Point No. 2 In respect of increase in unsecured loans by Rs.2,83,42,402, as per your notice, the break-up of the same is as under: Shivam Developers vs. Dy.CIT, Cir-3(1)(1) Asst. Year : 2016-17 4 Sl.No. Particulars Amount Rs.
Unsecured loans as per Groupings 2,92,14,262 (Credits) 2. Less: TDS on interest 6,11,425 Sub-total 2,86,02,837 3. Less: Repayment of unsecured loans 2,60,435 4. Net increase in unsecured loans as per 2,83,42,402 your notice Break-up of unsecured loans as per Groupings is as under.
Sl.No. Particulars Amount Rs. 1. Fresh Unsecured loans received during the 2,31,00,000 year 2. Add: Interest credited for the year 6,11,262 3. Unsecured loans as per Groupings 2,92,14,262 (Credits)
Party-wise amount of interest of Rs.61,14,262/- and TDS of Rs.6,11,425/- appearing in the above tables is given in Annexure B to our reply dated 21/02/2022. We have furnished confirmation of 40 parties in Annexure B-1 to our reply dated 21/02/2022. As stated above, we have received fresh unsecured loans to the tune of Rs.2,31,00,000/- from 20 parties. A copy each of groupings of unsecured loans from our books, details of unsecured loans containing particulars of documentary evidences, acknowledgement of return of income of last 3 years and bank statement reflecting loan entries of the lenders as indicated in the details of unsecured loans is enclosed and collectively marked as Annexure B. Due to paucity of time, we are still in the process of collecting the required information in respect of pending parties and will submit the same at the earliest.”
8.1. As explained by the assessee, the interest credit during the year was Rs.61,14,262/- on which TDS of Rs.6,11,425/- was made. Further, the assessee had made re-payment of loan of Rs.2,60,435/-. Thus, the TDS amount and re-payment amount adjusted with the interest credit of Rs.61,41,262/- explained the difference of Rs.52,42,402/- as noted by the AO. It appears that the AO has only considered the fresh loan of Rs.2.31 crores received during the year. The interest credit, the TDS on the interest and part re-payment as explained by the assessee was not at all considered by the AO. Shivam Developers vs. Dy.CIT, Cir-3(1)(1) Asst. Year : 2016-17 5 When we take into account the interest credit reduced by TDS and the re- payment, we do not find any difference in increase in unsecured loan balance of Rs.2,83,42,402/-. Therefore, the addition of Rs.52,42,402/- as made by the AO on account of difference in unsecured loan balance was not correct. Accordingly, the addition made by the AO is deleted.