The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the findings of the Commissioner of Income Tax (Appeals)[ CIT(A) ] regarding unsecured loans for the assessment year (AY) 2015-2016, citing a lack of incriminating evidence.
The Revenue-appellant filed an appeal against the order passed by CIT(A) for the AY 2015-2016.In this case Sarena Pvt. Ltd.,the respondent-assessee,filed a return of income on September 29, 2015, reporting ₹99,15,010. This was processed under Section 143(1) of the Income-tax Act.
The case was later reopened under Section 147 due to information from the Assistant Director of Income-tax (Investigation), indicating that the assessee received accommodation entries of ₹3.11 crores from entities associated with Pradeep Kumar Jindal.
The Assessing Officer ( AO ) issued notices to lenders from whom ₹2.65 crores was received. The AO deemed these amounts as unsecured loans, categorizing them as unexplained cash credits under Section 68, citing the lack of evidence for their legitimacy. Consequently, ₹2.65 crores was added to the income. Additionally, a further ₹5,30,000 was included under Section 69C, based on an inferred commission payment for the accommodation entries.
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The assessee, appealed against the AO addition of ₹2.65 crores under Section 68 for unexplained cash credits. The CIT(A) dismissed the reopening issue but deleted the addition, finding that the AO relied on uncorroborated statements from third parties without allowing cross-examination. The CIT(A) noted that the respondent had provided sufficient documentation supporting the transactions and highlighted that similar loans were accepted in previous years. Consequently, the addition under Section 68 was deleted, along with an additional ₹5.30 lakhs under Section 69C for unexplained commission.
The tribunal reviewed the submissions and the assessment order, noting that the companies that lent unsecured loans had sufficient creditworthiness and were engaged in interest-based lending. These companies responded to notices under Section 133(6), providing evidence of their interest income through audited profit and loss accounts.
The bench confirmed that the appellant recorded the loans in its books and paid interest with applicable Tax Deducted at Source deductions. It found the lending transactions to be genuine business dealings rather than accommodation entries.
The assessee also presented year-wise profit and loss accounts of the lenders, demonstrating that the interest rates were close to market rates and that the loans were repaid in subsequent years. The AO had ignored these facts.
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The two member bench comprising Sudhir Pareek (Judicial Member) and S.Rifaur Rahman(Accountant Member) upheld the findings of the CIT(A) and dismissed the revenue’s ground regarding the addition under Section 68 of the Act.
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