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Facts
The assessee company, engaged in investments and real estate, reported a loss for AY 2015 and was selected for scrutiny. The Assessing Officer (AO) disallowed unsecured loans totaling Rs. 20,23,30,682/- from 21 parties, considering them outstanding and time-barred.
Held
The Tribunal held that the law of limitation bars the remedy but does not extinguish the debt itself. The balances of unsecured loans were accepted by the department in previous assessments, and there was no material on record to suggest these loans were waived off.
Key Issues
Whether the addition made by the AO under Section 28(iv) for outstanding unsecured loans, which were not written off by the assessee, is justified.
Sections Cited
143(3), 28(iv), 68
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Income Tax Appellate Tribunal, “B” BENCH, DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
This appeal is preferred by the Revenue against the order dated 18.07.2023 of the Ld. National Faceless Appeal Centre (NFAC) (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN
P a g e | Global Emerging Markets India Ltd.(AY: 2015) &Order No : ITBA/NFAC/S/250/2023-24/1054416012(1)arising out of the order dated 22.12.2017 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, Circle 10(1) for AY: 2015.
The assessee is a company incorporated on 18.03.1994with the main object of investment in shares and securities as well as operation in real estate ventures. As for year under consideration it filed return declaring loss at Rs.55,96,589/-and the case was assessee was selected in scrutiny. During the assessment the Assessing Officer observed from the audit report that assessee has declared unsecured loans of Rs.29,32,98,683/- raised from 24 entities in regard to which assessee was called upon to explain the genuineness of the loans for which assessee had submitted various evidences and has also asserted in response to the contention of Assessing Officer that debt has become time barred that assessee has not written off these debt in the books of account and the liability is still exceeding.
2.1 However, Assessing Officer was not convinced and made the addition of Rs.20,23,30,682/-being loan raised from 21 parties holding that the loans are still outstanding from the dates before 01.04.2020 while interest is being paid and lenders whereupon are not known.
P a g e | Global Emerging Markets India Ltd.(AY: 2015) 2.2 Against this, assessee preferred an appeal before the CIT(A) and the assertion was that provisions of Section 28(iv) of the Act have been wrongly invoked which were sustained by the CIT(A) deleting additions. Against the impugned order of CIT(A) the revenue is in appeal and has raised following grounds:
“1. WHETHER LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF DELETING THE ADDITION MADE BY THE AO OF RS.20,23,30,682/- REPRESENTING BORROWINGSOBTAINED FROM VARIOUS ENTITIES BY THE ASSESSEE WHICH WERE PROVEN NON- EXISTING DURING ENQUIRIES CONDUCTEDBY THE AO.”
The ld. DR has relied the assessment order and it was submitted that CIT(A) has made deletion without appreciating that the loans could not have been standing for such a long period and AO was correct to consider that loans are no more payable and provisions of Section 28(iv) were rightly invoked.
Taking into consideration the contentions as raised and the material on record we find that the loans were raised by the assessee in earlier except one from M/s Zoom Communication Ltd. There is no material on record or in the assessment order showing that any of the loans has waved off and the financials of the assessee establish that assesseehas not written off the loans
P a g e | Global Emerging Markets India Ltd.(AY: 2015) in the books of account. The AO has primarily made the addition on his assumption that as over 12 years has passed the amount are no more repayable or waived therefore, the same becomes time barred without appreciating that law of limitation merely bars the remedy but does not extinguishes the debt itself. The balances of the unsecured loans have been accepted by the department year after year while completing assessmentincluding scrutiny assessment. It also comes up from the impugned order of CIT(A) that assessee asserted before the Ld. First Appellate Authority that in AY: 2013-14 the AO had in fact added the sumof Rs.10,33,41,996/- raised from 6 parties by invoking provision of Section 68 which was deleted by CIT(A) accepting that the unsecured loans were genuine. Assessee has also filed confirmation of loans raised from 6 foreign parties of Rs.42,10,515/-. The director, Shri Manraj Singh Bindra, of M/s Gem Management Ltd. had stated that these 6 companies had merged into M/s Gem Management Ltd. however, AO has considered the amalgamation of companies to be waiver of the loan which is not correct view and the loans still continues to exist as a liability towards resultant amalgamating company.
P a g e | Global Emerging Markets India Ltd.(AY: 2015) 5. Then, we are of the considered that invoking of provision of Section 28(iv) of the Act is completely beyond legal comprehension as assessee had not received any ‘benefit’ but the cash receipts in earlier years in the form of loan still exist in the balance sheet of the assessee and waiver of loan cannot be considered to be a‘benefit’ without specific acknowledgment from the lenders. Though, it is also not acceptable that the waiver of loan would result in a ‘benefit’ so as to be deemed income u/s 28(iv) of the Act. It is unjust to make an addition of deeming income on presumption alone.
In the light of the aforesaid circumstances the ground as raised by the Revenue holds no substance and the appeal of the revenue is accordingly dismissed.
Order pronounced in the open court on 09.01.2026
Sd/- Sd/- (Manish Agarwal) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 09.01.2026 Rohit, Sr. PS