ITO Vs R.B. Traders (ITAT Delhi)
Capital Introduced via Mortgage-Backed Loan Held Genuine – Upholds Loan-Based Rs.2 Cr Capital Infusion as Genuine- No Addition on Mere Suspicion
AO had noted that partner, Shri Tarun Dhawan, introduced Rs.2 crores as capital which was explained as loan taken from M/s M.M. Organic Fertilizers Pvt. Ltd. against mortgage of his mother’s property. AO observed that as per agreement, interest @12% was payable but no interest was ever paid. Further, the company had no worthwhile business activity & its creditworthiness was doubtful. On these grounds, AO held that introduction of capital was not genuine & added Rs.2 crores to income of firm.
Before CIT(A), Assessee furnished mortgage agreement, bank statements, audited accounts of the lender company & proof of ownership of mortgaged property. It was argued that source of funds stood explained, loan was routed through banking channels & no adverse material was brought against lender. CIT(A) accepted the explanation & deleted the addition.
On Revenue’s appeal, Tribunal noted that capital was introduced by partner after borrowing from M.M. Organic Fertilizers Pvt. Ltd. against mortgage of his mother’s property. All documents, including balance sheet of lender company, were filed. There was no evidence that money belonged to the firm or that lender was a bogus concern. Non-payment of interest by partner to lender could be due to financial reasons but does not make transaction non-genuine. AO’s addition was based only on suspicion without material proof. Accordingly, Tribunal upheld CIT(A)’s order deleting addition & dismissed Revenue’s appeal.
