CIT Vs Mahavir Crimpers (Gujarat High Court)
The Gujarat High Court considered an appeal filed by the Revenue against the order of the Income Tax Appellate Tribunal, Ahmedabad dated 18 May 2017. The Revenue challenged the Tribunal’s decision on two principal issues: the deletion of an addition of ₹1 crore made under Section 68 of the Income-tax Act, 1961, and the deletion of disallowance relating to additional depreciation of ₹38,15,241 claimed on crimping of yarn.
On the first issue, the Revenue contended that the identity and creditworthiness of the lender company remained unverified and that the lender had received substantial funds and cash deposits before advancing the loan. The Tribunal had observed that there was no dispute regarding the identity of the creditor company and that the loan was not received in cash. The assessee had furnished relevant details, including assessment records of the lender, source of funds, balance sheet reflecting sufficient reserves, surplus and share premium, and evidence of repayment in the succeeding assessment year. The Tribunal also noted that the assessee had regular loan transactions with the lender and relied on the decisions in DCIT v. Rohini Builders and CIT v. Ayachi Chandrashekhar Narsangji while confirming the deletion of the addition.
