Addition towards unsecured loans unsustainable as genuineness established

Shital Builders Vs ITO (ITAT Ahmedabad)

ITAT Ahmedabad held that all necessary details and evidences to establish genuineness of the unsecured loans duly furnished by the assessee, accordingly, addition towards the same unsustainable.

Facts- The assessee firm is engaged in the business of construction work as developer of buildings, commercial complex, residential complex, bungalows, road projects etc. During the year under consideration, the assessee had constructed a commercial complex “Shital Varsha-V” at Shivranjani Cross Road, Ahmedabad, and shown gross receipt of Rs.3.75 crores on which net profit declared, before remuneration to partners, was Rs.23,70,039/-. The total income returned to tax was Rs.9,18,841/-. During assessment proceedings several additions were made to the income of the assessee totaling in all to Rs.13,15,38,617/- which majorly included addition of Rs.11,86,87,480/- being current liabilities reflected in the books of the assessee, added for the reason that the genuineness of the credit balance remained unexplained. Minor additions made were on account of disallowance of building construction expenses & depreciation on motor cars amounting to Rs.59,10,574/-& Rs.14,79,549/- respectively.

The matter was carried in appeal before the ld.CIT(A) who deleted the entire addition made on account of unexplained credit balance of Rs.11.86 crores except for an amount of Rs.70,000/-.With respect to the disallowance made of building construction expenses the ld.CIT(A) deleted majority of the disallowance of Rs.50,46,501 and confirmed only the balance of Rs.8,64,073/-; so also, with respect to the disallowance of car depreciation the ld.CIT(A) deleted disallowance of Rs.8,63,961/- and upheld the balance of Rs.4,67,633/-. Aggrieved by this order of the ld.CIT(A) both the Revenue and the assessee have come up in appeal before the Tribunal.

Conclusion- We have noted that the ld.CIT(A) has deleted the addition with respect to the aforesaid unsecured loans finding that all necessary details and confirmation of the parties was filed by the assessee and nothing adverse was found by the AO. The ld.CIT(A) has also, we have noted, dealt with the remand report of the AO wherein he had noted no information, details or confirmations being filed with respect to the said parties, stating that the AO had incorrectly noted the said facts. The ld.DR was unable to controvert this factual finding of the ld.CIT(A) that the assessee had furnished all necessary details and evidences to establish genuineness of the unsecured loans relating to the aforesaid three parties with evidences. In view of the above, we see no reason to interfere in the well reasoned order of the ld.CIT(A), passed after appreciating all relevant facts relating to the issue. Ground no.2 raised by the Revenue is dismissed.

Please become a Premium member. If you are already a Premium member, login here to access the full content.