Sheela Overseas Private Limited Vs PCIT (Delhi High Court)
Delhi High Court held that that Section 68 of the Act as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds in case of unsecured loans. Accordingly, addition is liable to be deleted and appeal allowed.
Facts- The Assessee is engaged in the business of readymade garments and leather goods. During the year, the Assessee had received unsecured loans aggregating to ₹83,00,000/- from its two directors namely, Mr. R.C. Bhatia and Mr. Hitesh Bhatia. AO treated the sum of ₹51,00,000/- received by the Assessee from its director, Mr. Hitesh Bhatia, as unexplained income and added it to the total income.
CIT(A) found that cash deposits made in the bank account of Mr. Hitesh Bhatia from 13.09.2014 to 22.12.2014 were to the extent of ₹27,50,000/-, which remained unexplained. Accordingly, the CIT(A) sustained the addition of the said amount u/s. 68 of the Act.
Tribunal dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- The amendment to Section 68 of the Act, introduced by virtue of the Finance Act, 2022 also makes it abundantly clearly that Section 68 of the Act as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share capital money, share capital, share premium or any amount of such nature. Thus, the enlargement of the assessee’s onus to explain the source of the source of sums credited as unsecured loans necessitated the amendment to Section 68 of the Act to expressly provide for the same.
