ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, GUWAHATI vs. SRKM STEEL (P) LTD, GUWAHATI
Facts
The assessee received unsecured loans amounting to ₹2,82,00,000/-. The Assessing Officer added this amount, along with interest of ₹4,21,750/-, as unexplained cash credit under Section 68 of the Income Tax Act, alleging failure to prove the identity, creditworthiness, and genuineness of the lenders. The CIT(A) deleted the addition after finding that the assessee had repaid these loans in subsequent assessment years.
Held
The Tribunal upheld the order of the CIT(A), stating that once the assessee provides cogent evidence of repaying the loans in subsequent assessment years, an addition under Section 68 of the Act cannot be sustained. The Tribunal emphasized that such repayment effectively establishes the genuineness of the transactions, identity of the lenders, and their creditworthiness, citing precedents from various High Courts.
Key Issues
Whether unsecured loans, subsequently repaid by the assessee, can be treated as unexplained cash credit under Section 68 of the Income Tax Act.
Sections Cited
Section 68, Section 143(2), Section 142(1), Section 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “Guwahati” BENCH, Guwahati
Per Rajesh Kumar, AM:
This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals)-2, Guwahati (hereinafter referred to as the “Ld. CIT(A)”] dated 03.07.2020 for the AY 2017-18.
The only issue raised by the Revenue is against the order of ld. CIT (A) deleting the addition of ₹2,86,21,750/- as made by the ld. Assessing Officer in respect of unsecured loans and interest thereon by treating the same as unexplained cash credit u/s 68 of the Act.
2.1. The facts in brief are that the assessee filed the return of income on 27.10.2017, declaring total income at ₹2,98,58,010/-. The case of the assessee was selected under scrutiny through Computer Assisted
ANS properties Pvt. Ltd. ₹9.38 lakhs Income ₹0.50 lacs ₹8 lacs 2. M.s. India Pvt. Ltd. ₹9.72 lacs Loss ₹0.58 lacs ₹25 lacs 3. Siddhi Vinayak India Pvt. Ltd. ₹51.24 lakhs Income ₹9.93 lacs ₹38 lacs 4. S.P. India Pvt. Ltd. ₹17.29 lacs Loss ₹0.45 lacs ₹60 lacs 5. Mohan Bansidhari India Pvt. Ltd. ₹2.24 lacs Income ₹0.26 lacs ₹23 Lacs 6. Total 282 lakhs 2.2. The ld. AO noted that the lender company has no creditworthiness to advance such loans as they have very meagre turnover and no credentials. The ld. AO concluded that the assessee has failed to establish the identity, creditworthiness of the lenders and genuineness of the transactions and added u/s 68 of the Act by treating the same as unexplained cash credit. Besides, the ld. AO added ₹4,21,750/- on account of interest paid on these unsecured loans.
2.3. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after recording a finding of fact that the assessee has repaid the loans in the subsequent assessment years.
2.4. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has undisputedly raised unsecured loans from seven parties aggregating to ₹2,82,00,000/-. The ld. AO during the course of assessment proceedings called upon the assessee to furnish the evidences qua with these loans to prove the identity and creditworthiness of the lenders and genuineness of the transactions. Accordingly, the assessee furnished the details qua the loan creditors comprising names, addresses, audited balance
"3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act.
3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions.
3.2 The appellate authority observed that, "In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information."
3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt. The accounts were finally settled with the repayment of the loan to the lender companies. 3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of Durga Prasad More (82) ITR 540 and also in Sumati Dayal (214) ITR 801, to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under Section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 15.12.2025.
Sd/- Sd/- (MANOMOHAN DAS) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 15.12.2025 Sudip Sarkar, Sr.PS
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Guwahati
