ITO Vs Kedia Builders and Colonizers Pvt. Ltd. (ITAT Jaipur)
In the case of ITO Vs Kedia Builders and Colonizers Pvt. Ltd., the Jaipur bench of the Income Tax Appellate Tribunal (ITAT) examined the validity of an addition of ₹1.75 crore made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The AO contended that the amount represented unexplained credit from shell companies linked to the Banka Group, a known provider of accommodation entries. This conclusion was based on a statement by Shri Mukesh Banka, recorded during a search, which identified these entities as conduits for layering unaccounted funds. However, the assessee contested the findings, arguing that it had fulfilled the requirements under Section 68 by establishing the identity, creditworthiness, and genuineness of the loan transactions.
The assessee provided supporting documents, including loan confirmations, bank statements, audited financials, and evidence of repayment. It argued that the transactions were conducted through proper banking channels, and the lender companies were active entities with filed returns and sufficient financial capacity. The AO, however, relied on the investigation report and statements, claiming the transactions were suspicious without providing independent corroborative evidence.
The ITAT noted that the loans in question had been fully repaid through banking channels, and the repayment aspect was not disputed. Citing precedents such as CIT vs Ayachi Chandrashekhar Narsangji (Gujarat High Court) and Labh Chand Bohra vs ITO (Rajasthan High Court), the tribunal emphasized that once repayment is established, additions under Section 68 are unwarranted. Furthermore, it was held that the source of the source need not be proven by the assessee, as supported by Supreme Court rulings.
The tribunal observed that the AO failed to bring on record concrete evidence to substantiate the claim that the transactions were fictitious. The ITAT highlighted that reliance on mere suspicion or surmise without proper investigation violates principles of natural justice. The assessee had discharged its burden by providing credible documentation, and the absence of any adverse findings in the lenders’ tax assessments further weakened the revenue’s case.
Ultimately, the ITAT upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)], who had deleted the addition, concluding that the assessee satisfied the requirements under Section 68.
Assessee Represented by : Sh. Sidharth Ranka Sh. Saurav Harsh
FULL TEXT OF THE ORDER OF ITAT JAIPUR
