Case Law Details
ITO Vs Aashna Developers Pvt. Ltd. (ITAT Ahmedabad)
Introduction: The dispute between the Income Tax Officer (ITO) and Aashna Developers Pvt. Ltd. reached the ITAT Ahmedabad concerning the treatment of unsecured loans from shell companies. The core contention was whether the loans should be treated as unexplained cash credits under section 68 of the Income Tax Act.
Detailed Analysis: The ITO alleged that Aashna Developers Pvt. Ltd. had accepted unsecured loans from paper/shell companies managed by Shri Mukesh Banka, based on evidence found during search proceedings. The AO proposed to treat the loans as unexplained cash credits, totaling Rs. 6,74,81,741/-.
However, Aashna Developers Pvt. Ltd. provided evidence, including ledger copies, confirmation letters, bank statements, ITRs, and annual reports of the loan parties, to establish the genuineness of the transactions. The company contended that the loans were genuine intercorporate deposits, duly repaid with interest through banking channels.
The ITAT noted that the AO failed to provide the material used against the assessee for rebuttal or the opportunity for cross-examination of Shri Mukesh Banka, violating principles of natural justice. Moreover, the AO did not adequately consider the evidence provided by the assessee, treating the loans as unexplained cash credits solely based on Mukesh Banka’s statement.
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