Win for WOW Entertainment: ITAT Deletes ₹1.44 Cr S.68 Addition Over Denial of Cross-Examination and Proven Loan Genuineness [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) ruled in favor of WOW Entertainment and Media Private Limited, deleting a ₹1.44 crore addition under Section 68 of Income Tax Act,1961 over denial of cross-examination and proven loan genuineness

Wow Entertainment and Media Private Limited,appellant-assessee,filed its return of income on 14.03.2019, declaring ₹65,15,970. The case was selected for scrutiny, and notices were issued.During the assessment, the Assessing Officer (AO) found that the company had shown an unsecured loan of ₹1.44 crore (₹1.4 crore as principal and ₹4.67 lakh as interest) from Dhyaneshwari Multistate Urban Cooperative Credit Society Ltd. Several questions were raised regarding the source, purpose, and terms of the loan.

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The company submitted its response, but the AO was not convinced. Relying on the statement of the society’s manager, Shri Nilesh Kamble, who stated that the society mainly handled cash and RTGS/NEFT transactions, the AO held the loan to be non-genuine.

The AO did not allow cross-examination of Shri Kamble and added ₹1.44 crore to the income under section 68. The assessee appealed before the Commissioner of Income Tax (Appeals)[CIT(A)], but the addition was upheld.

The two member bench comprising Anikesh Banerjee (Judicial Member) and Narendra Kumar Billaiya (Accountant Member) examined the orders of the lower authorities and the evidence on record.It noted that the loan agreement was available and the loan was received through RTGS, as shown in the Axis Bank statements. The repayment was made in parts—₹50 lakh on 06.04.2017, ₹90 lakh on 28.04.2017, and the remaining ₹24,260 on the same day, along with interest of ₹4.67 lakh.

The bench observed that the AO had doubted both the receipt and repayment of the loan, despite clear entries in the bank account. It held that under Section 68, the taxpayer must prove the identity, capacity of the lender, and genuineness of the transaction. Once that is done, the burden shifts to the department.

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The tribunal found that the AO relied heavily on the statement of Shri Nilesh Kamble but did not allow cross-examination. It found it odd that Shri Kamble’s statement was recorded at the appellant’s office, yet the AO denied an opportunity to cross-examine him.

Considering all the evidence, the ITAT held that the assessee had discharged its onus under Section 68 and directed the AO to delete the addition. As a result, the other issues were treated as infructuous.

In short,the appeal was allowed.

To Read the full text of the Order CLICK HERE

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