SP Coal Resources Pvt. Ltd. Vs ACIT (ITAT Chennai)
ITAT Chennai Strikes ₹1.86 Cr Loan Addition u/s 68, Sends Cash-Payments & TDS Disputes Back for Real-Check
Assessee company, engaged in the coal-trading business, filed its income tax return for AY 2016-17 & came under scrutiny. AO treated unsecured loans of ₹1.86 crore from directors as unexplained cash credits u/s 68, disallowed approximately ₹1.01 crore of cash payments to transporters & suppliers u/s 40A(3), & added ₹1.64 lakh u/s 40(a)(ia) on account of alleged non deduction of TDS. CIT(A) confirmed all these additions & disallowances.
In appeal, Assessee explained that the loans originated from three directors, whose identity, creditworthiness, & financial capacity were demonstrated in the books & bank account records, showing credit balances of ₹2.64 crore. Assessee pointed out that on verification, the genuineness of the loans was acceptable, & that it had itself disallowed a portion in its computation where necessary.
Tribunal accepted Assessee’s explanation. It found that identity, source, & capacity were established & that the genuineness of the loans was satisfactorily demonstrated. Accordingly, the addition u/s 68 was deleted. As to the disallowance u/s 40A(3), Tribunal noted that earlier similar issues in AY 2015-16 were remanded for transaction-wise examination under Rule 6DD & the same approach must apply here. The matter was therefore remanded to AO for fresh detailed scrutiny of each transaction & to allow exceptions if justified. Regarding the TDS disallowance u/s 40(a)(ia), Tribunal held that AO erred in making full addition without verifying whether Assessee had already accounted for or disallowed the relevant portion. Tribunal directed that if Assessee had already made the disallowance, no further addition is permissible; otherwise, the disallowance must be limited to 30 % of the defaulted amount.
