Banking Channel Records and Interest Paid Proves Loan Transaction: ITAT deletes ₹80.94 Lakh Unexplained Money Addition [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) ruled that clear evidence of a genuine loan transaction, conducted through banking channels and including the payment of interest with TDS, could not be dismissed based on generalized allegations of accommodation entries and deleted the addition of Rs. 80,94,875 made by the Assessing Officer (AO).

Mahadev Shipbreakers Pvt. Ltd. (assessee), engaged in ship recycling, was issued a notice under Section 148 based on information from a search action conducted on the Jignesh Shah Group. The AO alleged the assessee received an accommodation entry of Rs. 80.94 lakhs from M/s Kasturi Commodities Pvt. Ltd. (KCPL).

The assessee clarified that the transaction was a genuine loan of Rs. 80 lakhs granted to KCPL, which was repaid with interest and TDS deducted. The assessee highlighted that this was supported by ledgers, bank statements, and confirmation.

The AO rejected these submissions and added the amount as unexplained money under Section 69A, taxable under Section 115BBEof the Income Tax Act. Aggrieved by the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition.

The CIT(A) observed that the AO failed to explain the "actual nature of the accommodation or the modus operandi" and noted that KCPL was the recipient of the loan from the assessee, not the provider of the loan to the assessee. Aggrieved by the CIT(A)’s order, the Revenue filed an appeal before the ITAT.

The two-member bench, comprising Dr. B.R.R. Kumar (Vice-President) and Siddhartha Nautiyal (Judicial Member), upheld the CIT(A)'s findings. The Tribunal observed that the Revenue failed to bring on record any contrary material to disprove the transaction's genuineness.

The bench noted that the transaction which was a loan given by the assessee and repaid along with interest through banking channels which was also duly reflected in the assessee's books. The bench also observed that the interest had been offered to tax, and TDS had been deducted. The bench further observed that these facts which were undisputed by the Revenue.

The Tribunal concluded that the Assessing Officer failed to establish any nexus between the alleged accommodation entries provided by KCPL and the specific impugned transaction of the assessee.

Therefore, the bench upheld the deletion of the addition of Rs. 80,94,875. The appeal filed by the Revenue was dismissed.

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