The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the addition of ₹1, 30,45,000/- due to the assessee’s failure to disclose the loan of ₹7,25,000/- availed from Pravinbhai Nanjibhai Golaviya HUF, along with the details of repayment or interest to the creditor, and in the absence of such details, the addition on this account was sustained. Similarly, in the case of Shreeji Developers, the unexplained closing balance of ₹12, 50,000/- was also upheld.
The assessee, Nyalkaran Builders, Limited Liability Partnership Firm (LLP) involved in construction and development, filed its income return for the assessment year 2018-19 on October 20, 2018, declaring a total income of Rs. 96,54,550/-. The return was selected for scrutiny due to a significant increase in unsecured loans availed by the assessee. In response to a show cause notice issued by the Assessing Officer (AO), the assessee provided various details concerning 13 unsecured creditors. After reviewing the submissions, the AO determined the total income to be Rs. 2,26,99,550/- and demanded taxes accordingly.
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Dissatisfied with the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT (A)]. The CIT (A) upheld the AO’s decision, concluding that the assessee failed to establish the creditworthiness and identity of the creditors, thereby confirming the addition made by the AO.
The assessee, now appealing before the ITAT contended that the CIT (A) erred in confirming the addition of Rs. 1, 30,45,000/- under Section 68 of the Income Tax Act.
Mr. Chetan Agarwal, representing the assessee, argued that a paper-book containing 43 pages of evidence related to the unsecured loans was submitted. The counsel presented a detailed chart indicating when the loans were taken, repaid, and the evidence filed before the CIT(A). Based on this, the counsel requested the deletion of the addition made by the AO.
On the other hand, Mrs.Mamta Singh, representing the Revenue, supported the CIT (A)’s order and urged the bench to sustain the addition made by the AO and confirmed by the CIT(A).
Upon reviewing the orders of the authorities and the material on record, the bench noted that the unsecured loans from Empire Realty, Shree Swaminarayan Industries, and Prerna Realty were repaid within a short duration of seven days. However, in the case of Pravinbhai Nanjibhai Golaviya-HUF, the loan remained with the assessee, and no details of the interest paid were provided. For Shreeji Developers, the bench observed that while a loan of Rs. 58,76,000/- was fully repaid within 13 days, another loan of Rs. 17,50,000/- was only partially repaid, leaving a closing balance of Rs. 12,50,000/-.
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The bench criticized the CIT (A) for confirming the addition based solely on the creditworthiness of the creditors without considering the loan repayments made within the same assessment year. Consequently, the bench held that the additions related to Empire Realty, Shree Swaminarayan Industries, Prerna Realty, and Shreeji Developers should be deleted. However, the two member bench of the tribunal comprising Annapurna Gupta ( Accountant member) and T.R.Senthil Kumar ( Judicial member) upheld the addition concerning the loan from Pravinbhai Nanjibhai Golaviya-HUF due to the lack of evidence regarding repayment or interest details, as well as the remaining balance of Rs. 12,50,000/- from Shreeji Developers.
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