DCIT Vs Praveen Kumar Jolly (ITAT Delhi)
74 Cr Own Capital Shields Assessee: ITAT Deletes ₹8 Cr Peak Credit & ₹49 Lakh Interest Disallowance – Revenue Appeal Dismissed
Assessee was engaged in trading of properties & Govt. securities, director’s remuneration & rental income. Original return was filed u/s 139(1) & Reassessment was initiated u/s 147 on ground of heavy bank transactions in Bank of Rajasthan account. AO made two additions- ₹8.09 Cr u/s 68 (peak credit in bank) & ₹49.54 Lakh (interest disallowance).
CIT(A) deleted both additions on merits but did not adjudicate reopening grounds. Revenue appealed & Assessee filed cross objection on reopening.
Issue 1 – ₹8.09 Cr Peak Credit Addition u/s 68
AO treated the peak balance in Assessee’s bank account as unexplained cash credit. Assessee, however, filed confirmations, bank statements, ITRs & financials of 24 group entities & proved identity, creditworthiness & genuineness. He also had opening capital of ₹72 Cr+, sufficient to justify the transactions. CIT(A) accepted the evidences & found no unexplained money. Revenue could not rebut these findings. ITAT upheld deletion – no addition u/s 68.
Issue 2 – Disallowance of ₹49.54 Lakh Interest
AO disallowed interest on the ground that assessee borrowed funds but gave interest-free loans to group concerns. Assessee proved he had own capital of ₹72–74 Cr (far more than ₹41 Cr advances) & that loans were given for commercial expediency. Applying SC & Bombay HC rulings (Reliance, S.A. Builders, South Indian Bank), the CIT(A) held that when own funds exist, presumption is advances are out of own funds. ITAT agreed – interest disallowance deleted.
