The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has upheld the deletion of additions made under sections 68 and 69C of the Income Tax Act, 1961, citing insufficient evidence to justify the claims of unsecured loans being non-genuine.
The appeal was filed by the Revenue against the order dated 19.10.2023 passed by the Commissioner of Income Tax ( Appeals ), Ahmedabad, which arose from the assessment order dated 27.12.2018. The case concerned the assessment year 2016-17, involving Tripoli Management Pvt. Ltd.
During the year under consideration, the assessee-company, engaged in the business of Non-Banking Finance Companies, had disclosed a total income of Rs. 20,48,130/- in its return of income for the A.Y. 2016-17. The case was selected for scrutiny, and notices under sections 143(2) and 142(1) of the Act were issued.
The assessee had taken unsecured loans amounting to Rs. 55,05,27,020/- and paid interest of Rs. 3,94,15,139/-. The Assessing Officer ( AO ) raised concerns about the non-existence of the loan creditors at their provided addresses and treated the peak credit and interest paid to these parties as unexplained under sections 68 and 69C of the Act.
The CIT(A) deleted the additions made by the AO, concluding that the assessee had provided sufficient evidence to establish the identity, genuineness, and creditworthiness of the lenders. The CIT(A) took into account the remand report, which lacked substantial adverse comments on these points. The AO had relied on the principle of preponderance of human probability without concrete evidence, which was deemed insufficient.
Aggrieved, the revenue appealed, arguing that the loans were accommodation entries and emphasising non-compliance to notices during the assessment. Kamlesh Makwana, representing the revenue, stated that the appeal focused on two unsecured loans from M/s. Astha Commtrade Pvt. Ltd. and M/s. Gainwell Mercantile Pvt. Ltd., whose addresses were in Kolkata, adding to the suspicion of their genuineness.
Vartik Chokshi, representing the assessee, countered by demonstrating that the assessee had discharged its onus by providing all necessary documents, including confirmations, bank statements, and tax return details of the loan creditors. The loans had been repaid in subsequent years, which further supported their genuineness. The assessee relied on the judgements of Gujarat High Court, including Commissioner of Income-tax, Rajkot-I vs. Ayachi Chandrashekhar Narsangji, and DCIT vs. Rohini Builders, to substantiate their claims.
The ITAT bench, comprising Siddhartha Nautiyal, Judicial Member, and Makarand V. Mahadeokar, Accountant Member, held that the findings of the AO were based on assumptions rather than solid evidence, and the assessee had satisfactorily demonstrated the identity, genuineness, and creditworthiness of the transactions. The ITAT upheld the CIT(A)’s decision to delete the additions, stating that the Revenue’s appeal lacked merit.
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