ITAT Mumbai Remits Section 68 Addition for Verification of Loan Closing Balance

Kruti Manufacturers And Traders Pvt Ltd Vs DCIT  (ITAT Mumbai)

Section 68 Cannot Tax the Closing Balance as Though It Were the Year’s Fresh Credit: ₹3.55-Crore Addition Remanded Since Opening Balance Was Already ₹3.73 Crore – ITAT Mumbai

Summary: The assessee-company filed its return for AY 2012-13 declaring Nil income after reporting a loss of ₹1,53,56,815.

During the relevant year, the company had a loan account in the name of Shri Deepak S. Desai, its Managing Director. The AO treated the sum of ₹3,55,66,822 appearing in that account as unexplained cash credit and made an addition u/s 68.

The assessee explained that the loan transactions were routed through regular banking channels by means of account-payee cheques. The identity of the lender was not in dispute, and confirmations and bank statements had been submitted during the assessment proceedings.

Shri Deepak Desai carried on a proprietary business and maintained books of account for that concern. He did not, however, maintain separate personal books of account or a personal balance sheet.

The AO considered the absence of personal books and personal balance sheet significant. According to him, the assessee had failed to satisfactorily establish the lender’s creditworthiness and the genuineness of the transaction. He therefore added the entire closing balance of ₹3.55 crore u/s 68.