Mall Hotel Ltd. Vs CIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi has set aside an addition of ₹2.20 crore made under Section 68 of the Income Tax Act, 1961, against Mall Hotel Ltd. The Tribunal ruled that once the identity and creditworthiness of the creditor were established, the assessee was not obligated to explain the “source of source” of the funds, particularly in light of the law prevalent for the assessment year in question (2006-07).
The appeal by Mall Hotel Ltd. challenged the order of the Commissioner of Income Tax (Appeals)-IX, New Delhi, which had upheld the Assessing Officer’s (AO) decision to treat the unsecured loan as unexplained credit.
Case Background
Mall Hotel Ltd. filed a Nil income return for the A.Y. 2006-07 on November 30, 2006. The case was selected for scrutiny. Despite repeated summons and notices from the AO, the assessee reportedly did not respond. Consequently, an unsecured loan of ₹2,20,00,000 reflected in the company’s balance sheet was treated as unexplained cash credit under Section 68 of the Act by the AO, leading to an assessment under Section 144 (best judgment assessment) on December 26, 2008.
Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] called for a remand report from the AO. During the remand proceedings, the assessee provided details and confirmations from the creditor, Shri Jawahar Lal Jaiswal. However, the CIT(A) was not satisfied with the explanation regarding the source of funds and dismissed the appeal, confirming the addition.
