Canbara Infra Private Limited Vs ACIT (ITAT Mumbai)
In the case of Canbara Infra Private Limited Vs ACIT (ITAT Mumbai), the assessee challenged the reopening of its assessment under Sections 147/148 of the Income Tax Act and an addition of Rs. 5,01,48,500/- under Section 68, related to loans taken from its directors for the assessment year (A.Y.) 2014-15. The assessment was initially completed under Section 143(3) in 2016, showing a “Nil” income, but was later reopened due to the alleged failure to prove the creditworthiness of the directors from whom the loans were received.
The case centers around Rs. 5,01,48,500/- in unsecured loans provided by three directors—Shri Karunakar Menka Shetty, Shri Shaikh Sajid Aziz, and Shri Rajesh Chintaman Wade. The Assessing Officer (AO) argued that the directors had borrowed funds from various persons and subsequently advanced these loans to the company. The AO pointed out discrepancies in the directors’ balance sheets, noting that unsecured loans were not adequately reflected in certain balance sheets, which led to the addition of the entire loan amount as unexplained credits under Section 68.
The CIT (A) upheld the validity of the reopening but partially deleted the addition. It was concluded that the loan provided by Shri Karunakar Menka Shetty was valid due to his substantial declared income and the clear appearance of the loan in his balance sheet. However, for the other two directors, Shri Shaikh Sajid Aziz and Shri Rajesh Chintaman Wade, the CIT (A) confirmed the addition, as they had provided loans out of funds borrowed from various other persons, the details of which were not sufficiently clarified.
