Pebble Street Hospitality Pvt. Ltd. Vs ITO (ITAT Mumbai)
Fixed Asset Addition Cannot Be Taxed as Unexplained Investment Because Source Was Never Questioned; Section 69 Addition Quashed Because Conditions for Invoking Deeming Provision Were Not Met; ITAT Remands Loan Addition Because Additional Evidence on Creditworthiness Required Verification; Unsecured Loan Dispute Sent Back Because Lenders’ Tax Returns and Bank Records Were Produced.
The assessee appealed against the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi, challenging two additions sustained by the CIT(A): (i) an addition of ₹2.71 crore under Section 68 relating to unsecured loans, and (ii) an addition of ₹7.77 crore under Section 69 relating to investments in fixed assets.
The assessee had filed its return declaring nil income. The case was selected for scrutiny, and assessment proceedings resulted in additions under Sections 68 and 69. While the CIT(A) deleted the addition relating to alleged undisclosed business receipts, the additions under Sections 68 and 69 were upheld.
Addition under Section 68 – Unsecured Loans of ₹2.71 Crore
During assessment proceedings, the Assessing Officer observed that the assessee had obtained unsecured loans amounting to ₹2.71 crore from four persons. Although the assessee furnished loan ledger confirmations, bank statements and other documents, the Assessing Officer held that sufficient documentary evidence had not been produced and treated the loans as unexplained cash credits under Section 68.
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