Failure to verify New vs. Renewed Deposits on unsecured loans: ITAT Remits ₹2.62 Cr Issue for Fresh verification [Read Order]
Observing that the CIT(A) had granted relief on unsecured loans merely on the assessee's statement without thorough verification, the Tribunal restored the entire issue of unsecured loans, amounting to ₹2,62,16,000 for fresh adjudication.
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) remitted the matter to the Assessing Officer (AO) for a fresh adjudication of the addition made on account of unsecured loans accepted by the company.
Dalmia Bharat Ltd (assessee) was engaged in the manufacturing and sale of cement, refractories, and sponge iron. During the relevant Financial Year, the assessee had invited Fixed Deposits from the public by issuing an advertisement in the newspaper, as per the provisions of Section 58A of the Companies Act, 1956.
In response, the company received deposits totaling ₹2,62,16,000. During scrutiny proceedings, the Assessing Officer (AO) made an inquiry into the unsecured loans received as Fixed Deposits and Loans from other companies.
The assessee furnished details, including PAN details for depositors where provided, as the terms of the advertisement required PAN only for deposits of ₹50,000 or more. The AO rejected the submissions and made an addition of ₹2,62,16,000 under Section 68 of the Income Tax Act. The AO held that the deposits were unverifiable due to the absence of PAN for all depositors.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee contended before the CIT(A) that out of the total amount, deposits totaling ₹2,17,80,000 represented a renewal of deposits from earlier assessment years, while the balance of ₹44,36,000 were fresh deposits.
The CIT(A) accepted the assessee's statement on renewals and deleted the addition of ₹2,17,80,000 without further examination. However, the CIT(A) confirmed the addition of the remaining ₹44,36,000 due to the absence of PAN details for those fresh deposits.
Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The revenue filed a cross appeal challenging the relief granted by the CIT(A).
The Revenue's counsel argued that the CIT(A) had granted relief on renewed deposits "merely on presumption" without examination if the deposits were accepted in preceding years.
The two-member bench, comprising Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member), noted that the CIT(A) had deleted the addition of ₹2,17,80,000 merely on the basis of a statement made on behalf of the assessee.
The tribunal observed that there was no material placed to substantiate that in the preceding assessment years the assessee has accepted fixed deposits.
Considering the entire facts and documents, the Tribunal concluded that the issue required a fresh adjudication and restored the entire matter of unsecured loans to the Assessing Officer for fresh examination. The assessee’s appeal on this ground and the Revenue's cross-appeal were allowed for statistical purposes.
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