Prolife Industries Ltd. Vs ITO (ITAT Ahmedabad)
In this case, the assessee company, engaged in the business of chemicals, challenged reassessment orders for Assessment Years 2016-17 and 2018-19 in which additions were made under Section 68 of the Income Tax Act on account of unsecured loans received from M/s. ANR Finance Limited and M/s. Kanungo Financiers Limited. The Assessing Officer treated the loans as accommodation entries allegedly linked to entities controlled by Jignesh Shah and Sanjay Shah and added the loan amounts as unexplained cash credits. Interest paid on such loans was also disallowed.
The assessee contended that it had furnished all necessary documents during reassessment proceedings, including confirmations, bank statements, income tax returns, audit reports, balance sheets, and ledger accounts of the lenders. It further argued that substantial portions of the loans had been repaid before the search conducted on 11 September 2018 and that interest had been regularly paid after deduction of tax at source. The assessee also pointed out that the Assessing Officer had not issued notices under Section 133(6) to verify the lenders despite the supporting evidence submitted.
The Commissioner (Appeals) upheld the additions, primarily on the ground that the lenders had shown comparatively low income and, therefore, their creditworthiness was not established. According to the appellate authority, the assessee failed to prove the creditworthiness of the lenders and the additions were sustainable on that basis.
