Gheverchand Rikhabchand Jain Vs ACIT (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has strongly criticized the National Faceless Appeal Centre (NFAC) – Commissioner of Income Tax (Appeals) [CIT(A)] for denying natural justice to assessee Gheverchand Rikhabchand Jain. The Tribunal has set aside the CIT(A)’s order dated November 26, 2024, for Assessment Year (AY) 2014-15 and restored the entire case, involving a significant addition of unsecured loans and disallowance of interest, back to the Assessing Officer (AO) for a fresh hearing.
Background of the Case
Gheverchand Rikhabchand Jain, an individual engaged in trading shares and securities, and a partner in various firms, with income from investments, came under scrutiny for AY 2014-15. During the assessment proceedings, the AO identified several unsecured loan creditors in the assessee’s books. The AO sought proof of identity and creditworthiness of these lenders, along with evidence of the genuineness of the transactions, requesting documents such as Income Tax Returns (ITRs), balance sheets, and profit and loss accounts of the lenders.
The assessee provided details, but the AO deemed them “incomplete and not to the satisfaction.” Consequently, the AO concluded that the assessee had failed to discharge the initial onus mandated by Section 68 of the Income-tax Act, 1961 (the Act). This led the AO to make an addition of Rs. 13,47,45,627 as “bogus unsecured loans” to the assessee’s income. Furthermore, the interest paid on these alleged bogus loans, amounting to Rs. 2,85,20,550, was also disallowed.
