Rajdhani Textiles Private Limited Vs ACIT (ITAT Mumbai)
Section 68 Addition Deleted – Suspicion on Lender’s Finances Cannot Replace Evidence
Mumbai ITAT deleted substantial additions made u/s 68 (₹5.57 crore for AY 2012-13 and ₹10.45 crore for AY 2013-14) along with interest disallowance, holding that mere doubts about lender’s financial strength cannot justify addition without concrete evidence.
The Tribunal observed:
- Additions were made solely based on Investigation Wing inputs and analysis of lenders’ balance sheets, not on any incriminating material or cash trail
- The assessee had furnished complete documentary evidence, including:
- Confirmations
- ITRs and scrutiny assessment orders of lenders
- Bank statements and fund flow
- Ledger accounts and TDS details
- As seen from the loan movement chart (page 4):
- Loans were received and substantially repaid within the same year
- Transactions were through banking channels with running accounts, not accommodation entries
The ITAT held:
- Identity, genuineness, and prima facie creditworthiness were established
- Law does not require lender to be debt-free or financially perfect
- Borrowed funds can be validly lent further
- Suspicion about lender’s financial structure ≠ proof of bogus transaction
Crucially:
- No evidence showed that funds belonged to the assessee
- No entry operator statement, cash trail, or contradiction in documents
- CIT(A) passed a non-speaking order without independent analysis
On interest disallowance:
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