Unsecured Loans Amounting to Rs. 6 Cr from Unreliable Companies in Dispute: ITAT Rejects Appeal Following AO's Remand Report [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, rejected an appeal by the Department, whose dispute concerns the deletion of the INR 6,00,00,000/- addition made under Section 68 of the Income Tax Act, 1961 (the Act).

The Assessing Officer, in verification of return of income and financial statements, noted that the assessee, a resident corporate entity engaged in business of real estate, had availed unsecured loans of INR 2,00,00,000/- from Josh Trading Company Pvt. Ltd. an INR 2,00,00,000/- from Viraj Mercantile Pvt. Ltd.

The AO did not deem the creditors reliable due to their huge losses. Both these companies belonged to one Shri Jain who had his materials seized due to bogus shares and sales on 01.10.2013. AO added the amount of INR 4,00,00,000/- to the income of the assessee and treated them as unexplained cash under Section 68.

This was reversed by the Commissioner of Income Tax (Appeals) [CIT(A)] as they were satisfied with the submissions made by the assessee.

Additional evidences were submitted by the assessee in the First Appellate Authority to prove loan transactions. The AO after verifying these, reported in his remand order via letter dated 25.04.2025 that bank statements of Deserve Exim Pvt. Ltd. verified that the two loaning companies have received the unsecured loan amount back in the same assessment year.

The tribunal observed that the lenders responded to the notices issued under Section 133(6) and confirmed loan transactions with the assessee. Both loans availed were repaid within the same year and thus, AO verified the genuineness of loans.

The bench, comprising M.V. Mahadeokar (Accountant Member) and Saktijit Dey (Vice-President), upheld the deletion made by the CIT(A) to the addition made under Section 68 and dismissed the appeal.