DCIT Vs Cloud 9 Infraspace LLP (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad dismissed the Revenue’s appeal, upholding the Commissioner of Income Tax (Appeals)’s (CIT(A)) decision to delete an ₹86 lakh addition to Cloud 9 Infraspace LLP’s income for the Assessment Year 2018-19. The Assessing Officer (AO) had initially disallowed ₹11.20 crore in unsecured loans, citing concerns about the creditworthiness and genuineness of 17 lenders. However, during remand proceedings, the AO accepted the genuineness of loans totaling ₹10.34 crore, leaving only ₹86 lakh in dispute. The CIT(A) found that Cloud 9 LLP had provided sufficient evidence, including PAN details, ledger accounts, loan confirmations, income tax returns, and bank statements, to establish the identity and creditworthiness of the lenders. Furthermore, the CIT(A) noted that most of the disputed loans were repaid within the same or the following financial year.
The ITAT concurred with the CIT(A)’s findings, emphasizing that Cloud 9 LLP had discharged its onus under Section 68 of the Income Tax Act. The tribunal highlighted that the AO had not provided adequate reasons to deem the loans as bogus. Additionally, the ITAT referenced jurisdictional High Court rulings, such as CIT, Rajkot vs. Ayachi Chandrashekhar Narsangji and DCIT v. Rohini Builders, which supported the deletion of additions for loans repaid within a reasonable timeframe and where the assessee had demonstrated the genuineness of the transactions. The ITAT concluded that the Revenue’s arguments lacked merit, as the evidence presented by Cloud 9 LLP sufficiently addressed the concerns raised by the AO. Therefore, the ITAT upheld the CIT(A)’s order and dismissed the Revenue’s appeal, reaffirming that the ₹86 lakh addition was unwarranted due to the evidence of loan repayment and the established creditworthiness of the lenders.
