DCIT Vs Supreme Holdings & Hospitality (India) (ITAT Mumbai)
ITAT Mumbai Upholds Deletion of Section 68 Additions on Unsecured Loans Despite Search Allegations of Circular Trading
The Mumbai Bench of the ITAT dismissed the Revenue’s appeals for AYs 2013-14, 2014-15, 2015-16 and 2016-17 and upheld the CIT(A)’s order deleting additions made under Section 68 in the hands of Supreme Holdings & Hospitality (India). The additions related to unsecured loans aggregating to about ₹14.62 crore received from group companies such as Asuti Trading Pvt. Ltd. and Lloyds Steel Industries Ltd., which were alleged by the Assessing Officer—based on search proceedings in the Jatia Group—to be shell entities involved in circular trading and misuse of LC facilities.
The Tribunal noted that the entire addition was founded mainly on statements of third parties recorded during search, which neither referred to the assessee nor established that the assessee had received accommodation entries. The assessee had furnished complete documentary evidence to prove identity, creditworthiness, and genuineness of the lenders, including confirmations, audited financials, income-tax returns, and bank statements showing sufficient funds prior to advancing loans. All transactions were through banking channels, and the loans were subsequently repaid, leaving no outstanding balance.
Significantly, the ITAT observed that in the lenders’ own assessments—often by the same Assessing Officer—no adverse view was taken regarding the source of funds or the loans advanced. Relying heavily on its earlier decision in the assessee’s own case for AY 2017-18 and consistent coordinate bench rulings in other group cases, the Tribunal held that mere allegations of circular trading within searched groups, without incriminating material linking the assessee, cannot justify additions under Section 68. Accordingly, the Revenue’s appeals were dismissed and the assessee’s cross-objections were held to be infructuous.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
