Sen Ferro Alloys Pvt Ltd Vs ACIT (ITAT Kolkata)
Following a search, the assessee’s assessments for AYs 2014-15 and 2015-16 were originally completed under section 153A/143(3) after detailed enquiries. During those proceedings the Assessing Officer had specifically called for complete details of unsecured loans, including confirmations, bank statements and source of funds of the lenders, and the assessee had furnished the same (see the detailed loan confirmations and replies .
Subsequently, the AO reopened the assessments alleging that certain loans were accommodation entries routed through shell companies . However, the Tribunal noted that the very same loan transactions had already been scrutinised in the original 153A assessment and all evidences were on record.
Crucially, the assessee demonstrated that every such loan had been repaid by FY 2016-17 and no amount remained outstanding . Therefore, the assessee was no longer a beneficiary of those loans.
Relying on the Gujarat High Court decision in Ambe Tradecorp (P.) Ltd., the Tribunal held that where identity, creditworthiness and genuineness are supported by documents and the loans stand fully repaid, addition under section 68 cannot be sustained merely on suspicion about the lenders. Once the assessee is not the beneficiary of any outstanding credit, section 68 loses its application.
Since the loans had already been examined in the original search assessment and were later fully squared up, the reopening and the consequent additions were unsustainable. The additions confirmed by the CIT(A) for both years were therefore deleted and both appeals of the assessee were allowed
