Mukhi Corporation Vs DCIT (ITAT Ahmedabad)
Repayment of Loan is Key Test for Sec. 68 — ITAT Remands Matter to Verify Repayment; If Repaid, Addition of Rs. 10 Lakhs Must Be Deleted
Mukhi Corporation, engaged in real estate development, faced an addition of Rs. 10,00,000/- u/s 68 on account of an unsecured loan received from Shri Shailesh Kalidas. The assessment was completed ex parte u/s 144 due to repeated non-compliance, leading the Assessing Officer to treat the loan as unexplained cash credit for failure to prove identity, creditworthiness & genuineness. The AO also rejected the books u/s 145(3) and estimated net profit at 10% of turnover, resulting in a further addition of Rs. 17,62,808/-.
Before the CIT(A), the Assessee produced complete details of books, WIP, percentage completion method and cost workings, leading to deletion of the estimated profit addition. However, for the section 68 addition, the CIT(A) noted that apart from a self-generated ledger confirmation, no material such as bank statements, ITR of lender or loan repayment evidence was furnished. Thus, the addition of Rs. 10,00,000/- was upheld.
Before the Tribunal, the Assessee argued that the entire loan had been repaid through banking channels on 19.05.2020, and therefore, in light of the binding Gujarat High Court ruling in Ayachi Chandrashekhar Narsangji and other decisions, no addition u/s 68 could survive once repayment was accepted by the Department. Tribunal noted the consistent judicial view—Ambe Tradecorp Pvt. Ltd., Ojas Tarmake Pvt. Ltd., Rajhans Construction Pvt. Ltd., Mieza School Pvt. Ltd., Hit Iron & Steel Pvt. Ltd.—that repayment of loan within a reasonable period is strong corroboration of genuineness & the very basis for a section 68 addition collapses once repayment is established.
However, the key fact of repayment was never verified by the lower authorities. Tribunal held that verification of repayment is essential, since it goes to the root of the addition. It therefore set aside the CIT(A)’s finding & restored the issue to the file of the AO for limited de-novo verification of whether the Rs. 10,00,000/- was indeed repaid on 19.05.2020. If repayment is substantiated through bank statements, confirmations or any supporting evidence, the Tribunal directed that the addition u/s 68 must be deleted in line with judicial precedents.
The matter was thus remanded to the AO with direction to provide adequate opportunity to the Assessee & decide afresh. Appeal allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
