Addition u/s 68 Unsustainable Where Loan Transactions Made Through Banking Channels: ITAT Deletes ₹3.30 Cr Unsecured Loan Addition [Read Order]
ITAT Delhi rules that unsecured loan addition cannot be sustained where assessee proves identity, genuineness and repayment through banking channels.
The Income Tax Appellate Tribunal (ITAT),Delhi Bench, has held that the addition under Section 68 of the Income Tax Act,1961 cannot be made solely based on the investigation report for accommodation entries, where the genuineness of the transactions has been substantiated by the assess
Supra Financial Services Limited filed an appeal against the order passed by the Commissioner of Income Tax who had passed an order upholding the addition made by the Assessing Officer (AO) under section 68 of the Income Tax Act.
The reassessment proceeding was initiated on the basis of information received from the Investigation Wing of the Income Tax Department after a search operation on the Himanshu Verma Group who were allegedly providing accommodation entries through shell companies.
The AO had alleged that the assessee had received accommodation entries to the tune of ₹3.30 crores in the form of unsecured loans from entities allegedly controlled by the entry operator and had treated the same as unexplained cash credits.
The case of the assessee was that they had furnished complete documentary evidence before the AO to show the identity of the lenders and the genuineness of the transactions. It was also their case that the amount had been received through the banking channel and had been repaid with interest which clearly showed the authenticity of the transactions.
The case of the Revenue, however, was that the lenders were entities allegedly controlled by accommodation entry operators and therefore the transactions were not genuine.
The Tribunal observed that the addition was made by the AO based solely on the investigation report without scrutinizing the documentary evidence furnished by the assessee. It was also observed by the Bench that these loans were received through the banking channel and also paid back through the banking channel in subsequent years.
The Bench comprising Sudhir Kumar, [Judicial Member] and S. Rifaur Rahman [Accountant Member] held that merely because these lending companies are alleged to be linked with entry operators these transactions cannot be treated as bogus without any confirmation.Therefore, the addition under Section 68 was deleted by the Tribunal.
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