DCIT CIRCLE 4(1)(1), AHMEDABAD, AHMEDABAD vs. SUKHAM PROPERTIES PRIVATE LIMITED, AHMEDABAD

PDF · subscribers
ITA 607/AHD/2024Status: DisposedITAT Ahmedabad26 March 2025AY 2020-2114 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) had not properly addressed material aspects concerning the loan from Origin Lifecare Pvt. Ltd. Specifically, the Tribunal noted that the operational status and legal existence of the lender, a company struck off the register, were critical. The bank statements did not conclusively demonstrate repayments, and the AR admitted inability to confirm repayments. The pattern of transactions indicated a lack of independent creditworthiness. Therefore, the matter regarding the loan from Origin Lifecare Pvt. Ltd. required proper factual verification by the AO. Similarly, for Fringe Properties Pvt. Ltd., the Tribunal observed that the bank account was opened recently and showed only large receipts and immediate payments, lacking a pattern of sustained operations or independent fund capacity. The source of funds for the lender was not independently explained, raising questions about its creditworthiness and whether it acted as a conduit. The CIT(A) had accepted the genuineness based on subsequent year repayments without examining the lender's financial strength and banking pattern. Consequently, the Tribunal set aside the CIT(A)'s order concerning the unsecured loans from Origin Lifecare Pvt. Ltd. and Fringe Properties Pvt. Ltd. (aggregating to Rs. 4.05 crore) and restored the matter to the AO for fresh verification of actual repayment, status and functioning of lender companies, and independent creditworthiness and genuineness of fund sources. The issue regarding the addition of Rs. 1 crore under section 69A and the loan from Opus Restaurants Pvt. Ltd. were not explicitly decided by the Tribunal in the provided excerpt, but the overall result indicates a partial allowance.

What were the facts?

The Revenue appealed the CIT(A)'s order for AY 2020-21, which deleted additions made by the AO under sections 69A and 68 of the Income Tax Act. The assessee, Sukham Properties Pvt. Ltd., declared income of Rs. 53,10,650/-. The AO selected the case for limited scrutiny. The AO added Rs. 1 crore as unexplained money under section 69A, representing a forfeited advance for a property, as the assessee could not provide supporting documents. Additionally, the AO added Rs. 4.07 crore under section 68 for unsecured loans from three entities: Origin Lifecare Pvt. Ltd. (Rs. 2.02 crore), Fringe Properties Pvt. Ltd. (Rs. 2.03 crore), and Opus Restaurants Pvt. Ltd. (Rs. 2 lakh). The AO found issues with the identity, creditworthiness, and genuineness of these loans, including a struck-off company and circular transactions.

What were the issues?

1. Whether the addition of Rs. 1,00,00,000/- under section 69A of the Act, on account of forfeited advance, was outside the scope of limited scrutiny, as held by the CIT(A)? (Question of mixed law and fact) 2. Whether the addition of Rs. 2,02,00,000/- under section 68 of the Act, in respect of unsecured loan from Origin Lifecare Pvt. Ltd., was justified, considering the assessee's submissions and the AO's findings? (Question of mixed law and fact) 3. Whether the addition of Rs. 2,03,00,000/- under section 68 of the Act, in respect of unsecured loan from Fringe Properties Pvt. Ltd., was justified, considering the assessee's submissions and the AO's findings? (Question of mixed law and fact) 4. Whether the addition of Rs. 2,00,000/- under section 68 of the Act, in respect of unsecured loan from Opus Restaurants Pvt. Ltd., was justified? (Question of mixed law and fact) Assessee's Contentions (before CIT(A)): - The addition of Rs. 1 crore was outside the scope of limited scrutiny. - For unsecured loans, all documentary evidence (PAN, bank statements, confirmations, IT returns of lenders) was submitted. - The three companies were registered entities, and loans were genuine inter-corporate deposits. - Loans were largely repaid, indicating commercial substance. - Short-term fund inflows are commercially normal. - Business losses of lenders do not indicate lack of credibility. - For Origin Lifecare, loans were received through banking channels and substantial repayments were made. - For Fringe Properties, the transaction was genuine, creditworthiness was established, and the bank statement showed its own sources of funds. Revenue's Contentions (before ITAT): - The CIT(A) failed to address material aspects regarding the loan from Origin Lifecare, such as actual repayment, operational status of the lender, and nature of fund flow. - The CIT(A) accepted the genuineness of the loan from Fringe Properties without examining the lender's financial strength and banking pattern. - The Tribunal noted that neither party could satisfactorily explain how a struck-off company (Origin Lifecare) could operate a bank account.

Which sections of the Income-tax Act were involved?

Section 69A,Section 68,Section 115BBE,Section 133(6),Section 271AAC(1),Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR

For Appellant: Shri Pritesh L. Shah, AR
For Respondent: Shri Rignesh Das, Sr.DR

आयकर अपीलीय अिधकरण, अहमदाबाद "ायपीठ “सी“, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD सु"ी सुिच"ा का"ले, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं / Year : 2020-21 DCIT Sukham Properties Pvt.Ltd. बनाम/ Circle-4(1)(1) 101, Devarc Mall v/s. Ahmedabad Ahmedabad City Jodhpur Char Rasta SO Ahmedabad – 380 015 "थायी लेखा सं./PAN: AAQCS 3397 D अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Pritesh L. Shah, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 24 /03/2025 घोषणा की तारीख /Date of Pronouncement: 26 /03/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM:

This appeal by the Revenue is directed against the order dated 05.02.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as “CIT(A)”] for the Assessment Year (AY) 2020–21, whereby the Ld. CIT(A) deleted the additions made by the Assessing Officer [hereinafter referred to as “AO”] under sections 69A and 68 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. DCIT vs. Sukham Properties Pvt.Ltd. Asst. Year : 2020-21 2 Facts of the Case: 2. The assessee is a Private Limited Company engaged in the business of land and property transactions. It filed its return of income for A.Y. 2020–21 on 08.12.2020, declaring a total income of Rs.53,10,650/- under the normal provisions and Rs.1,02,08,725/- under section 115JB of the Act. The case was selected for limited scrutiny under CASS for the issues of High Creditors / Liabilities, and Unsecured Loans.

3.

During the course of assessment proceedings, the AO noted that the assessee had credited a sum of Rs.1,00,00,000/- to its Profit and Loss account under the head “Other Income,” with the narration indicating that the amount represented an advance received against a property that had been forfeited. On further inquiry, it was revealed that no agreement for sale or cancellation was available for verification. The note appended to the financial statements explicitly recorded that the amount was subject to confirmation from the concerned party. The AO, in order to verify the genuineness of this transaction, called upon the assessee to furnish the agreement to sell, the cancellation agreement, confirmation from the party, and supporting documentary evidence. The assessee admitted that the relevant file had been misplaced and was therefore unable to produce any supporting evidence, including the identity or PAN of the counterparty. In the absence of any documentary evidence to substantiate the claim, the AO held that the nature and source of the said sum remained unexplained. Accordingly, the amount of Rs.1 crore was treated as unexplained money under section 69A of the Act and brought to tax under the provisions of section 115BBE of the Act.

3.1. In respect of unsecured loans aggregating to Rs.6.54 crores, the AO particularly examined loans amounting to Rs.4.07 crores, claimed to have DCIT vs. Sukham Properties Pvt.Ltd. Asst. Year : 2020-21 3 been received from three entities—Origin Lifecare Pvt. Ltd. (Rs.2.02 crore), Fringe Properties Pvt. Ltd. (Rs.2.03 crore), and Opus Restaurants Pvt. Ltd. (Rs.2 lakh). The AO called for confirmations and documentary support from the assessee. On verification, it was found that Origin Lifecare Pvt. Ltd. was a company that had been struck off by the

More judgments on Section 69A

All 15,297 judgments and leading authorities on Section 69A →

Recent GST High Court judgments

Search GST case law →