Kolluri Indu Sekhar Vs DCIT (ITAT Bangalore)
Calling ₹1 Crore a “Customer Advance” Is Only the Opening Entry: Identity, Creditworthiness & Genuineness Still Matter u/s 68-Bangalore ITAT Orders Fresh Verification
Summary: The Bangalore ITAT restored to the AO an addition of ₹1 crore u/s 68, claimed to represent an advance received for supplying palm oil. Since no goods were ultimately supplied, the amount was repaid after nearly three years with interest & adequate evidence regarding the creditor’s creditworthiness & genuineness of the transaction had not been furnished, the true nature of the credit required fresh examination. The connected addition arising from estimation of profit at 1% of turnover was also restored for verification of quantitative records.
Unsecured Loans of ₹2.23 Crore Added u/s 68
The assessee was an individual carrying on palm-oil trading business as proprietor of Sidhi Oil Traders. He filed his return for AY 2017-18 declaring total income of ₹14,58,870.
The return was selected for scrutiny to examine cash deposits made during the demonetisation period & unsecured loans. The AO noticed an increase of approximately ₹2.22 crore in unsecured loans.
The assessee furnished confirmations from various parties containing their names, addresses, PANs, amounts advanced & assessment particulars. However, the AO was not satisfied about the creditworthiness of 11 creditors or the genuineness of the transactions. He accordingly made an addition of ₹2,23,50,000 u/s 68.
