White Willow Vs ITO (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT), Surat allowed the assessee’s appeal against the order of the National Faceless Appeal Centre for Assessment Year 2014-15, which had upheld the addition of ₹1.50 crore under Section 68 on account of unsecured loans and the disallowance of interest expenditure of ₹7,18,581.
The assessee, a partnership firm engaged in the construction business, had declared nil income. During scrutiny assessment, the Assessing Officer noted that the assessee had received unsecured loans of ₹70 lakh from Kangan Jewels Private Ltd. and ₹80 lakh from Maniprabha Impex Private Ltd. The Assessing Officer relied upon information received from the Investigation Wing that the Rajendra Jain Group was allegedly engaged in providing accommodation entries and observed that both lender companies were managed by Rajendra Jain and his associates. On this basis, the Assessing Officer treated the loans as accommodation entries, made an addition under Section 68, and disallowed the related interest expenditure.
The assessee contended that the loans had been received through account payee cheques in regular banking channels and furnished PAN details, confirmations, bank statements, income tax returns and other supporting documents of the lenders to establish their identity, creditworthiness and the genuineness of the transactions. It also submitted that interest had been paid through banking channels after deduction of tax at source. Before the Commissioner (Appeals), the assessee further argued that the addition was based on the statement of Rajendra Jain, which had subsequently been retracted, and that no opportunity for cross-examination had been provided. It also pointed out that the loans had been repaid during the subsequent financial year and relied upon judicial precedents in support of its case. The Commissioner (Appeals), however, upheld both the addition and the disallowance of interest.
