DCIT Vs Sarena Pvt. Ltd. (ITAT Delhi)
Conclusion: Addition of unsecured loans as unexplained cash credits under Section 68 was unjustified as all the above transactions were duly recorded in the books of account and there was no undisclosed cash credit involved in these transactions.
Held: AO had recorded the reasons to believe based on the information received from Assistant Director of Income-tax (Inv.), New Delhi that assessee had received accommodation entry to the extent of Rs.3.11 crores during the year from the companies controlled by Pradeep Kumar Jindal group. Based on the above information, AO issued notices u/s 133 to certain parties from whom assessee had received Rs.2.65 crores. AO deemed these amounts as unsecured loans, categorizing them as unexplained cash credits under Section 68, citing the lack of evidence for their legitimacy. Consequently, ₹2.65 crores was added to the income. It was held that CIT (A) had gone through the assessment order and the detailed submissions of the assessee and it was noticed that various companies who had lent unsecured loan to assessee had sufficient creditworthiness and had been engaged in the business of lending on interest. All the companies had responded to the notices issued u/s 133 (6) before AO and substantiated before him that they were earning substantial interest on loan which was evident from the audited profit & loss account submitted before AO. Assessee also recorded the above said unsecured loan in its books of account and paid interest by duly deducting TDS as applicable on the payment of interest. CIT(A) observed that the above terms of lending unsecured loan to the assessee was real business transactions and could not be treated as accommodation entries. Further, assessee also submitted year-wise profit & loss account of the of the above said companies i.e. lender companies before the authorities and further assessee had demonstrated that assessee had paid the relevant interest on the borrowed money which was close to the market rate and also duly deducted TDS. It was also observed by CIT (A) that assessee had repaid above said borrowed loan in subsequent years. AO had conveniently ignored all these facts. It was also brought to our notice that all the above transactions were duly recorded in the books of account and there was no undisclosed cash credit involved in these transactions even though AO proceeded to disallow the same u/s 68.
