Genuineness of Transactions can’t be doubted since All Payments were made through Banking Channel: ITAT deletes Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT), Kolkata Bench deleted the addition as all payments made through the banking channel.

The assessee, M/s. Sreeleathers had filed return of income disclosing a total income. Thereafter, the case was selected for scrutiny through CASS under limited category.

The AO notes that the assessee is a firm involved in the business of trading/retailing of foot-ware and other leather and non-leather accessories. The AO notes on perusal of the accounts and details submitted during the course of hearing that the assessee has received unsecured loans from various companies out of which according to AO, are paper companies (13 in numbers) the details of which he has given in a chart of the assessment order; and according to AO from these 13 companies assessee had received Rs.4.50 crores and has shown to have made the payment of Rs.74,30,571/- as interest.

The AO held that the purported unsecured loans of Rs.4.50 crores are nothing but the assessee’s own money introduced under the garb of fresh unsecured loans into the assessee’s business. Therefore, he treated Rs.4.50 crore as unexplained cash credit and added back to the total income of the assessee.

Thereafter, he noted that the assessee has incurred expenses on account of interest payment of Rs.74,30,571 on the loans. Therefore, the corresponding interest expenses of Rs. 74,30,571 according to him, cannot be allowed as genuine expenditure. So, he disallowed the same and added to the total income of the assessee.

However, the CIT(A) was of the opinion that the assessment order is bad inter-alia, for violation of natural justice also and therefore according to him additions cannot be sustained. Therefore, he deleted the addition made against the loan of Rs. 4.50 crores and interest thereon of Rs.74,30,571.

The coram consists of J.S.Reddy and A.T. Varkey noted that all the 11 lender companies from which the assessee had taken loan of Rs. 4,50 crore had replied directly to AO pursuant to section 133(6) notice of and all the lender companies are regular income tax assessee’s and having PAN as well as their ROC details were brought to the notice of AO and their respective balance sheet shows that all of them have enough creditworthiness to lend the amounts in question to assessee and the assessee had squared up the loan transaction with all these lenders (except 15 Lakhs) and all the payments/TDS were made nad payments were made through banking channel.

Therefore, the Tribunal while dismissing the revenue’s appeal held that the addition made by AO was untenable and therefore the CIT(A) rightly deleted the addition which action is confirmed.

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