DCIT Vs Tripoli Management Pvt. Ltd. (ITAT Ahmedabad)
ITAT Ahmedabad held that addition u/s. 68 on account of unexplained cash credit, being bogus unsecured loan, and u/s. 69C on account of unexplained expenditure, being bogus interest claimed, unjustified as repayment of loans in subsequent year accepted.
Facts- Assessee-company was engaged in the business of Non-Banking Finance Companies. During the assessment proceedings, the AO observed that the assessee-company has taken unsecured loan amounting to Rs.55,05,27,020/- and paid interest thereon amounting to Rs.3,94,15,139/-. Post enquiry, AO concluded that these are mere paper companies operated by entry operator for the purpose of providing accommodation entries. Thus, AO added the peak credit in the total income of the assessee u/s.68 of the Act and treated the interest paid to these parties totalling to Rs.78,97,385/- as unexplained expenditure u/s 69C of the Act.
CIT(A) deleted the additions both u/s.68 and 69C of the Act and allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the assessee has provided substantial evidence to establish the identity, genuineness, and creditworthiness of the loan creditors. The AO’s conclusions were largely based on assumptions and the principle of preponderance of human probability, without substantial evidence contradicting the assessee’s claims. The assessee complied with statutory requirements, including the provision of confirmations, ID proofs, bank statements, and tax return details of the loan creditors. The repayment of loans in subsequent years further supports the genuineness of the transactions. The reliance on the decisions of Hon’ble Gujarat High Court are well placed. The case of Ayachi Chandrashekhar Narsangji is appropriate, wherein the Hon’ble Court held that no addition should be made, if the repayment of loans is accepted by the department in subsequent years.
