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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition made by the Assessing Officer (AO) under Section 68 for AY 2017-18. The AO had treated unsecured loans of Rs. 2,94,97,672 and related interest expenses as unexplained.
Held
The Tribunal held that the assessee had furnished sufficient documentary evidence including confirmations, PAN details, and bank statements to establish the identity, creditworthiness, and genuineness of the loan creditors. The AO had failed to provide contrary material to rebut this evidence.
Key Issues
Whether the unsecured loans and interest thereon were genuine, and if the assessee had discharged the onus of proof as per Section 68 of the Income Tax Act.
Sections Cited
68, 115BBE, 271AAC, 270A, 143(3), 143(2), 142(1), 133(6)
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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M BALAGANESH
आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the Ld. CIT(A)-NFAC, Delhi dated 24.11.2023 for the AY 2017-18 in deleting the addition made u/s 68 of the Act.
Heard rival submissions, perused the orders of the authorities below.
The assessee, M/s Samyak Metals Pvt. Ltd., is a private limited company engaged in the business of manufacturing aluminum alloy ingots and aluminum liquid through its plant located at Dharuhera, Haryana. The company holds ISO 9001:2015 certification and was incorporated under the Companies Act, 1956. For the assessment year under consideration, the assessee filed its return of income electronically on 13.10.2017, declaring total income of Rs.55,88,940/-. The return was processed and subsequently selected for complete scrutiny under CASS. Thereafter, Notice under section 143(2) of the Act was issued on 14.09.2018 and Notices under section 142(1) along with detailed questionnaires were issued by the Assessing Officer. During assessment, the Assessing Officer noted that the assessee had raised unsecured loans amounting to Rs.2,94,97,672/- during the year and had also claimed interest expenses of Rs.53,77,127/- on such loans. To verify the genuineness, identity, and creditworthiness of the lenders, notices under section 133(6) were issued to the loan creditors. Based on the replies received and analysis of bank statements, the Assessing Officer held that many creditors had received equivalent funds shortly before advancing loans to the assessee and had low returned income. It was inferred that the lenders lacked independent financial standing to extend such loans. Accordingly, the Assessing Officer treated the unsecured loan of Rs.2,94,97,672/- as unexplained cash credit under section 68 and brought to tax under section 115BBE. Further, interest of Rs.53,77,127/- claimed on these loans was disallowed on the ground that the underlying loans were not genuine. Penalty proceedings under sections 271AAC and 270A were also initiated separately. As a result, total assessed income stood at Rs.4,04,63,740/- against the returned income of Rs.55,88,940/- vide order u/s 143(3) of the Act dated 25/12/2019. The assessee preferred an appeal challenging the assessment order passed under section 143(3) of the Act. The Ld. CIT(A), NFAC by order dated 24.11.2023, allowed the appeal and deleted the addition of Rs.2,94,97,672/- made by the Assessing Officer under section 68 of the Act on account of unsecured loans and the disallowance of interest of Rs.53,77,127/-. The gist of the findings of the Ld. CIT(A)
related to the deletion of the addition is as under: i) “That the assessee had furnished confirmations, PAN details, ITR acknowledgements, and bank statements of the loan creditors to establish identity, creditworthiness, and genuineness of the transactions. ii) That most of the loans had been accepted from directors, shareholders, or past lenders, and similar 3 transactions had been accepted in earlier assessment years without dispute. iii) That the Assessing Officer had not brought any contrary material on record to rebut the documentary evidence or to establish that the amounts represented the assessee’s undisclosed income. iv) That observations made by the Assessing Officer regarding low returned income or pre-deposit bank entries of the creditors were not sufficient to disregard the evidences filed or to shift the burden back to the assessee. v) That the interest of Rs.53,77,127/- was already embedded in the total unsecured loan amount taxed under section 68 and its separate disallowance would amount to double addition. vi) That since the underlying loan transactions were accepted as genuine, the -disallowance of interest was also not sustainable, and the entire addition was liable to be deleted.”
We have carefully perused the order of the Ld. CIT(Appeals). It is the finding of the Ld. CIT(A) that the assessee had furnished confirmations, PAN details, ITR acknowledgement and bank statements of the loan creditors to establish identity, creditworthiness and genuineness of the transactions. All of these documents were also furnished before us by the assessee in the Paper book furnished. The finding of the Ld. CIT(A) is that the most of the loans accepted from the Directors, shareholders are past lenders and similar transactions have been accepted in earlier assessment years without any dispute. The AO had not brought any contrary material on record to rebut the documentary evidences or to establish that the amounts represented the assessee’s undisclosed income. None of the above findings have been rebutted by the Revenue with evidences. The finding of the Ld. CIT(A) that the observations made by the AO regarding low return of income or pre-deposit bank entries of the creditors were not sufficient to disregard the evidences filed or to shift the burden back to the assessee, in our view is properly appreciated by the Ld. CIT(A). Therefore, we see no valid reason to discharge the findings of the Ld. CIT(A) in holding that the assessee has discharged the onus of proving the identity, creditworthiness and genuineness of the creditors and consequently deleting the addition made u/s 68 of the Act and the interest thereon. Thus, we sustain the order of the Ld. CIT(A) and reject the grounds raised by the Revenue.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 30.09.2025