JCIT Vs Khushal Clothing LLP (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income Tax (Appeals) deleting additions made on account of interest expenditure and alleged commission relating to unsecured loans.
The assessee had filed its return of income for Assessment Year 2020-21 declaring a total income of ₹37,74,390. The assessment was reopened based on information that the assessee had allegedly received accommodation entries of ₹1.27 crore in the form of unsecured loans. During the assessment proceedings, the Assessing Officer (AO) found that the entire unsecured loan of ₹1.27 crore had been repaid along with interest of ₹9,93,812. However, the AO treated the loans as accommodation entries and disallowed the interest expenditure of ₹9,93,812. The AO also disallowed ₹2,80,932 as alleged commission paid for obtaining the accommodation entries under Section 69C. The assessment was completed under Sections 147 read with 143(3).
The CIT(A) allowed the assessee’s appeal and deleted both additions. Aggrieved, the Revenue challenged the deletion before the Tribunal.
The Revenue argued that the unsecured loans were obtained from dummy entities providing accommodation entries and that the related interest and commission payments were not genuine. The assessee submitted that the entire loan had been repaid, the identity, creditworthiness and genuineness of the loan transactions had been established, and tax had been deducted at source (TDS) on the interest payments. It also contended that there was no basis for treating the commission expenditure as bogus.
