ITAT Upholds Deletion of ₹86 Lakh Addition for Unsecured Loans Due to Sufficient Evidence and Loan Repayment [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) upheld the deletion of an ₹86 lakh addition for unsecured loans, citing sufficient evidence and loan repayment.

The Revenue-appellant, appealed  against the order dated 26.07.2023 passed by Commissioner of Income Tax(Appeals)[CIT(A)] for the Assessment Year (AY)2018-19. In this case,Cloud 9 Infraspace LLP,respondent-assessee,filed its return of income for the AY 2018-19 on October 28, 2018, declaring ₹59,290. The case was selected for scrutiny under Computer-Assisted Scrutiny Selection(CASS).

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During the assessment, the Assessing Officer(AO) questioned the genuineness of loan transactions worth ₹35.20 crore from 49 parties. The AO disallowed loans of ₹11.20 crore from 17 parties, citing lack of creditworthiness, and completed the assessment on September 20, 2021, determining the total income at ₹11.21 crore. The CIT(A) later deleted the addition.

The Revenue appealed against the CIT(A)’s order before the tribunal arguing that the ₹86 lakh loan was wrongly deleted as unexplained cash credits. It claimed that the AO was required to verify the genuineness of the loans under Section 68 of the Act.

Read More: ₹1 Crore Addition for Unexplained Loans: ITAT Deletes Addition due to Sufficient Evidence

The two member bench comprising Suchitra Kamble(Judicial Member) and Narendra Prasad Sinha(Accountant Member) found that the assessee had provided enough evidence to prove the identity, creditworthiness, and genuineness of the loan transactions. During the assessment, the AO initially added ₹11.20 crore for unsecured loans but later reduced the disallowance to ₹86 lakh from 17 parties in the remand proceedings, accepting the rest as genuine.

The appellate tribunal noted that the assessee had submitted Permanent Account Number(PAN) copies, loan confirmations, bank statements, and income tax returns of the creditors. The AO had also issued notices under Section 133(6), and the lenders complied. It observed that the assessee was not required to prove the source of the source, as the amended law applied only from April 1, 2023.

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Since the ₹86 lakh loan was repaid either in the same year or the next, the ITAT  upheld the CIT(A)’s decision to delete the addition, finding no valid reason to interfere with the order.

In short,the appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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