ITAT finds Unsecured Loans from Related Party on Account of Takeover Genuine as Actual Transaction Happened [Read Order]

The Raipur bench of the Income Tax Appellate Tribunal ( ITAT ) held that the unsecured loans from related parties, arising from the business takeover, are genuine as the transactions actually took place.

In this case, the revenue had appealed against the order of the CIT(A) which had ruled in favor of the assessee.

Coming to the facts of the present case, the assessment proceedings were completed, making an addition of Rs. 9.06 lakhs on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961. Also, an addition under Section 40a(ia) was made for non-deduction of TDS for Rs. 58,000.

The assessing officer made the additions on unsecured loans received from related parties.

The observation made by the CIT(A) with regard to Unsecured loans from related parties are as follows:

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1. Rakesh Agrawal HUF (Rs.10,42,443) – The AO considered ₹9,40,833, but the actual amount is ₹10,42,443. This is an old unsecured loan from the proprietorship concern, taken over by the company. Required confirmations, ITR, and computations were submitted, but the AO questioned its genuineness due to the absence of a bank statement. Since this loan existed before 01.04.2017 and is merely a book entry, it cannot be treated as unexplained cash credit.
   
   
2. Rakesh Agrawal (Rs.25,00,000) – Shri Rakesh Agrawal, a director, had provided the necessary confirmations, ITR, and income details. The AO doubted its genuineness due to the missing bank statement, which has now been submitted. The loan was actually received in FY 2018-19, not FY 2017-18, as confirmed by ledger accounts. Thus, the addition is unjustified.
   
   
3. RM Developer (Rs.18,00,000) – An old loan taken over from the proprietorship concern, appearing as a book entry. Confirmation, ITR, and computations were provided, and since the loan existed before 01.04.2017, it cannot be treated as unexplained cash credit.
   
   
4. Smt. Shalu Agrawal (Rs.25,00,000) – As a director, she provided all necessary confirmations, ITR, and income details. The AO questioned the loan due to the missing bank statement, which has now been submitted. The amount was received in FY 2018-19, not FY 2017-18. Therefore, the addition is unjustified.
   
   
5. Agrawal Infra-Shree Balaji JV (Rs.5,00,00,000) : The AO questioned the creditworthiness of the JV as its ITR showed zero income. However, the JV had received Rs. 5 crore as a mobilization advance from the Jharkhand government, which was transferred to the appellant. The bank statement confirms this, and all supporting documents were provided. Hence, the addition is unwarranted.
   
   

The CIT(A) concluded that all these loans are genuine, supported by proper documentation, and should not be treated as unexplained cash credits under Section 68 of the Income Tax Act.

The ITAT upheld the findings of the CIT(A) that actual transactions had taken place.

The bench comprising Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member) dismissed the appeal filed by the revenue. 

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