Case Law Details
Valley Iron And Steel Co. Ltd. Vs PCIT (Delhi High Court)
Introduction: In a recent verdict, the Delhi High Court, in the matter of Valley Iron And Steel Co. Ltd. vs. PCIT (ITA 776/2023), addressed an appeal concerning the Assessment Year 2018-19. The appellant/assessee sought to challenge the order dated 27.04.2023, passed by the Income Tax Appellate Tribunal (“Tribunal”). The court, after careful consideration of the facts and arguments presented, upheld the Tribunal’s decision, refusing to interfere with the impugned order.
Background: The crux of the case revolved around a loan transaction of Rs.14,00,000/- credited to the account of the appellant/assessee. The loan was purportedly received from Gee Wire Pvt. Ltd. (“GWPL”). The appellant/assessee presented a loan agreement printed on its letterhead, titled “unsecured term loan agreement,” dated 01.07.2017. Notably, the purpose of the loan was stated as the remission of liabilities against fixed assets/capital goods, raising suspicions about the nature of the transaction.
Court Proceedings: The Assessing Officer (AO) doubted the genuineness of the loan transaction and invoked Section 68 of the Income Tax Act, 1961, adding the amount to the income of the appellant/assessee. The Commissioner of Income Tax Appeals (“CIT(A)”) and the Tribunal upheld the AO’s decision. The appellant/assessee, represented by Mr. Abhimanyu Jhamba, contended that the “triple test” for discharging the onus was satisfied, emphasizing the loan agreement and arguing that the AO could have taken steps to verify GWPL’s details.
Court’s Analysis: The court, however, found the loan agreement to be questionable, noting that it imposed no burden on the appellant/assessee regarding interest, allowing repayment after four years on mutually agreed terms. The court observed that the borrower could have produced the erstwhile directors of GWPL to establish the transaction’s genuineness. In the absence of such steps, the court was unconvinced by the appellant/assessee’s argument that the onus should shift to the revenue.
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