Assistant Commissioner Vs Supreme Lake View Bungalows Private Limited (ITAT Mumbai)
ITAT Mumbai Upholds Deletion of ₹55.49 Crore Section 68 Addition: Opening Balances and Proven Loans Cannot Be Taxed on Suspicion
The Mumbai Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal for AY 2022–23 in the case of Supreme Lake View Bungalows Pvt. Ltd., affirming the order of the CIT(A) deleting a massive addition of ₹55.49 crore under Section 68 on account of alleged unexplained unsecured loans.
The Tribunal noted that a substantial portion of the amount represented opening balances brought forward from earlier years, in respect of which no addition under Section 68 can be made in the current assessment year. Despite this, the Assessing Officer had mechanically added the entire closing balance, which was held to be legally impermissible.
As regards the loans actually received during the year, the Tribunal found that the assessee had fully discharged the onus under Section 68 by establishing the identity, creditworthiness, and genuineness of the lenders through extensive documentary evidence, including PAN, income-tax returns, audited financial statements, bank statements, confirmations, and details of sources of funds. In certain cases, lenders had substantial net worth, exempt income, or borrowings from reputed NBFCs, clearly demonstrating creditworthiness.
The Tribunal approved the detailed, party-wise factual analysis undertaken by the CIT(A), which showed that the Assessing Officer had ignored vital evidence, failed to verify facts, and proceeded purely on surmises and conjectures, including treating closing balances as fresh credits and doubting creditworthiness merely because of low taxable income in a particular year.
Rejecting the Revenue’s reliance on Precision Finance and Diza Holdings, the Tribunal held that those decisions were fact-specific and inapplicable where the assessee had produced cogent evidence and the transactions were through banking channels. Reiterating the settled principle that Section 68 additions cannot be sustained on suspicion alone, the Tribunal found no infirmity in the CIT(A)’s order and dismissed the Revenue’s appeal in entirety.
The decision reinforces that only fresh credits of the year can be examined under Section 68, and where the assessee proves all three ingredients with credible evidence, additions based on conjecture and misreading of balances are unsustainable.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
