Case Law Details
Sankpal Developers Vs ITO (ITAT Mumbai)
The case of Sankpal Developers Vs ITO (ITAT Mumbai) pertains to ITA No. 280/Mum/2024, where Sankpal Developers (the assessee) challenged the order dated December 27, 2013, passed by the National Faceless Appeal Centre (NFAC), which upheld the Income Tax Officer’s (ITO) assessment dated December 17, 2018. This assessment was conducted under Section 143(3) read with Section 147 of the Income Tax Act, 1961, for the assessment year 2014-15. The ITO determined the assessee’s total income as ₹40,75,000 against a returned income of nil. The primary contention was the addition of ₹40,75,000 as unexplained cash credit under Section 68 of the Act, stemming from an unsecured loan obtained from Nazar Impex Pvt. Ltd., identified as an accommodation entry provider by the tax authorities.
Sankpal Developers raised several grounds in their appeal. They argued that the NFAC erred in treating the unsecured loan of ₹40,75,000 as unexplained cash credit without proper appreciation of the provided documentary evidence, including the PAN card, income tax returns, confirmation, and bank statements proving the identity, capacity, and genuineness of the transactions. The appellant contended that the transactions were conducted through normal banking channels and were repaid similarly, hence should not have been considered unexplained. They also pointed out that the addition was made based on statements from a search and seizure operation without giving the assessee the opportunity to cross-examine the parties involved, violating the principles of natural justice. The appellant further denied any liability for interest under sections 234A, 234B, and 234C of the Act.
The ITAT Mumbai carefully examined the contentions of both parties and the orders of the lower authorities. It was noted that the assessee had provided substantial documentation to prove the legitimacy of the loan transaction. However, the ITAT pointed out that the assessee failed to produce the lender for examination, which was critical in verifying the genuineness and creditworthiness of the loan. While the lower authorities relied heavily on the search operation findings that identified Nazar Impex Pvt. Ltd. as an accommodation entry provider, the ITAT emphasized the need for independent verification of the transaction under Section 68 of the Act. Considering the case’s specifics, the ITAT decided to remand the matter back to the ITO, directing the assessee to produce the directors of Nazar Impex Pvt. Ltd. for examination. The ITO was instructed to independently evaluate the transaction’s genuineness and creditworthiness without being influenced by the previously retracted statements of accommodation entry providers. The appeal was thus allowed for statistical purposes, providing a procedural victory to the assessee but requiring further scrutiny by the ITO.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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