Opening Balance of Unsecured Loan cannot be treated as ‘Unexplained’: ITAT deletes Addition u/s 68 [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench has held that the opening balance of the unsecured loan cannot be treated as "unexplained" and deletes addition under section 68.

The assessee, Rahul Kantilal Shah is an individual and is a partner in partnership firms engaged in real estate and the development of properties. During the scrutiny assessment, the Assessing Officer observed that the assessee failed to prove the identity, genuineness, and creditworthiness of the lenders and made the addition of unsecured loans and interest on loans under section 68 of the Act.

On appeal, the CIT(A) considered the facts and circumstances and based on the remand report deleted the additions made by the AO and allowed the appeal. Aggrieved by the order of the CIT(A), the revenue has filed an appeal before the Tribunal.The counsel for the appellant submitted that the A.O. has made the addition of the opening balances of loan accounts carried forwarded from earlier years and also disallowed the interest paid on loans by invoking the provisions of section 68 of the Act.

The Tribunal observed that the assessee has received the unsecured loans from 9 parties aggregating to Rs.9.46 lakhs, who are having the opening balance of unsecured loans with the assessee. The Tribunal further observed that the provisions of section 68 of the Act cannot be invoked on the opening balance of an unsecured loan.

The Coram of Mr. M Balaganesh, Accountant Member,and Mr. Pavan Kumar Gadale, Judicial Member has held that “we find that the CIT(A) relied on the judicial decisions and also the facts, additional evidence, remand report and provisions of 68 of the Act has passed a reasoned order. Accordingly, we are not inclined to interfere with the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue”.

Mr. T. Shankar and Mr. Anuj Kishnadwala appeared on half of the revenue and assessee respectively.

To Read the full text of the Order CLICK HERE

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