Delhi HC Dismisses Section 68 Loan Addition Appeal as Assessee Proved Loan Genuineness

PCIT Vs Jagmag Builders (Delhi High Court)

The Delhi High Court considered an appeal against the ITAT order dated 25 October 2023 concerning additions under Sections 68 and 37 of the Income Tax Act, 1961.

The Assessing Officer had made additions of Rs.2,67,05,957 under Section 68 concerning unexplained unsecured loans and Rs.50,05,512 under Section 37 relating to interest expenses on those loans. The Revenue challenged the deletion of these additions by the CIT(A), which had been affirmed by the ITAT.

The ITAT recorded that the entire loan amount had been repaid either during the relevant year or in subsequent assessment years. The transactions relating to obtaining and repaying the loans were conducted through banking channels. The assessee had furnished details of the loans and repayments, along with bank statements, income-tax returns and confirmations of the lenders.

The ITAT held that the assessee had discharged its onus of establishing the identity and creditworthiness of the creditors and the genuineness of the loan transactions. It therefore upheld deletion of the Rs.2,67,05,959 addition under Section 68. Since the Section 68 addition was deleted, the ITAT also deleted the related disallowance of interest.

Before the High Court, the Revenue raised questions concerning the unexplained unsecured loans, interest disallowance, and the assessee’s failure, as alleged in the grounds, to establish the sources and genuineness of the lenders.