Florence Nightingale Educational Society Vs DCIT (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, arose from the order of the Commissioner of Income-tax (Appeals) for Assessment Year 2017-18 concerning additions made under Section 68 of the Income-tax Act in respect of unsecured loans received by the assessee, a trust registered under Section 12A/12AA. During assessment proceedings, the Assessing Officer treated the entire outstanding unsecured loans of ₹2,77,67,387 as fresh loans and added them under Section 68 on the ground that the assessee had failed to establish the genuineness of the transactions and the creditworthiness of the lenders through adequate documentary evidence.
On appeal, the Commissioner (Appeals) accepted the assessee’s explanation regarding the opening unsecured loans after considering additional evidence and granted relief to that extent. However, he sustained additions of ₹1,23,00,000 relating to loans received from two lenders, holding that their income disclosed in the income-tax returns was too low to establish their creditworthiness, while granting relief in respect of loans from the remaining lenders.
Before the Tribunal, the assessee contended that earning capacity alone could not determine creditworthiness. It submitted that the loans had been received through banking channels, confirmations, ledger accounts and bank statements had been furnished, interest had been paid, and the loans had subsequently been repaid. The Revenue relied on the findings of the lower authorities and argued that the Commissioner (Appeals) had already granted substantial relief.
