ACIT Vs Kiara Realtors Pvt. Ltd. (ITAT Delhi)
General Investigation Report Cannot Override Transaction-Specific Evidence: Delhi ITAT Upholds Deletion of ₹3.50 Crore Additions
Following a search on alleged entry operators, the AO treated the assessee as a beneficiary of accommodation entries and made six additions aggregating to ₹3,50,48,110. The CIT(A) deleted all the additions after examining the supporting documents. The Revenue challenged the relief before the ITAT.
The Tribunal upheld the CIT(A)’s findings as follows:
- Loans of ₹1.47 crore: The assessee received ₹80 lakh from LVS Financial Services Pvt. Ltd. and ₹67 lakh from Highrise Securities and Trading Pvt. Ltd. Both lenders were active, profit-making RBI-registered NBFCs. Loan agreements, audited accounts, ITRs, bank statements, confirmations, MCA records and TDS certificates were furnished. The loans were interest-bearing, routed through banking channels and subsequently repaid. The requirements of identity, creditworthiness and genuineness were therefore satisfied.
- Commission of ₹4.41 lakh and interest of ₹5.93 lakh: These additions were merely consequential to treating the ₹1.47 crore loans as bogus. Once the loans were accepted as genuine, both consequential additions were rightly deleted.
- Property investment of ₹1.17 crore: The agricultural lands were purchased through registered sale deeds and account-payee cheques. The assessee established the source through business receipts, capital contributions and loan proceeds. Hence, no addition under section 69 was warranted.
- Capital gain of ₹25.46 lakh: The sale deed described the property as agricultural land, and the Patwari’s report certified that it was situated 25 kilometres from Jhajjar Municipality. The land was therefore outside the definition of a capital asset under section 2(14)(iii), and the capital-gain addition was unsustainable.
- Loan of ₹50 lakh: The amount was received through banking channels from Amarendra Financial Pvt. Ltd., an RBI-registered NBFC, and was subsequently repaid with interest. The transaction was genuine and could not be added under section 68.
The ITAT emphasised that the AO had relied upon a generalised Investigation Wing report without independently examining or rebutting the extensive evidence produced by the assessee. Such a report may trigger reassessment but cannot, by itself, justify additions when transaction-specific evidence establishes genuineness.
