ITO Vs Narpatchand Devichandji Mehta HUF (ITAT Mumbai)
ITAT Mumbai upholds deletion of ₹5.73 Cr addition u/s 68 – Assessee proved identity, creditworthiness & genuineness of loans; repayment with interest clinched the issue
Assessee, a HUF, filed its return declaring income of ₹22.42 lakh for AY 2022-23. The case was selected for scrutiny due to high liabilities & substantial loans appearing in Form 3CD despite low income. During assessment, AO noticed unsecured loans aggregating ₹5.71 crore from multiple parties. He asked for confirmations, bank statements & supporting details. Assessee furnished PAN, confirmations, ITR acknowledgments, bank statements & audited accounts of the lenders.
Despite this, AO concluded that Assessee failed to establish creditworthiness & genuineness of some creditors & made an addition of ₹5,71,82,289 u/s 68 r.w.s. 115BBE treating the loans as unexplained cash credits.
Before CIT(A), Assessee argued that it had discharged its primary onus by filing all necessary documents proving identity (PAN & ITRs), genuineness (banking channel transactions) & creditworthiness (bank statements & balance sheets). Importantly, Assessee demonstrated that the loans were subsequently repaid to the creditors along with interest, on which TDS was deducted & deposited. These repayments were not disputed by Department in subsequent assessments.
CIT(A) held that once Assessee had provided all evidence, the burden shifted to AO to disprove the claim by bringing contrary material. AO made no further enquiry, did not summon any creditor, nor pointed out any defect in the documents. He simply rejected the loans without investigation. CIT(A) further observed that repayment of loan with interest is a strong corroborative evidence of genuine loan transactions, & if the Department accepted TDS & interest in later years, it cannot deny the loan in this year. Accordingly, CIT(A) deleted the entire addition of ₹5.73 crore u/s 68.
