Unsecured Loan Addition Unsustainable After Lenders Confirm Transactions in Response to Statutory Notices: ITAT Upholds Deletion of ₹7.52 Cr Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has upheld the deletion of additions aggregating to ₹7.52 crore made towards unsecured loans and held that the addition could not be sustained once the lenders had confirmed the transactions in response to statutory notices and the Assessing Officer’s own remand report supported the assessee’s claim.

The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] who had deleted additions made under the Income Tax Act 1961 for Prenit World LLP of the Assessment Year 2011-12.

The Revenue department stated that the assessee had failed to discharge the burden of proving the identity, creditworthiness and genuineness of the lenders in respect of unsecured loans received. It was further alleged that certain loan transactions represented the assessee’s own funds routed through entities allegedly engaged in penny stock activities. On this basis, additions amounting to ₹2.50 crore, ₹1.50 crore and ₹3.51 crore were made by the Assessing Officer.

The assessee argued that all requisite documentary evidence had been furnished and that the lenders had duly responded to notices issued by the department under statutory provisions. The assessee also relied heavily on the remand report submitted by the Assessing Officer.

The Tribunal noted that the remand report dated 11 March 2020 categorically recorded that the assessee had furnished confirmations from the concerned parties and that the lenders had responded to the notices issued by the department. Further the remand report contained no adverse observations regarding the impugned credits.

The Tribunal observed that once the Assessing Officer himself had accepted the evidentiary material during remand proceedings, the Revenue could not seek to challenge the deletion of the addition without any contrary material on record.

The Bench comprising Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) held that the Revenue cannot be treated as an aggrieved party where the Assessing Officer has submitted a favourable remand report supporting the assessee’s case.

Accordingly, the Bench dismissed the Revenue’s appeal and upheld the deletion of the ₹7.52 crore addition. The assessee’s cross-objection was dismissed.

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