RK Interiors CFS (India) Private Limited Vs ITO (ITAT Hyderabad)
ITAT Hyderabad Deletes Section 68 Addition on Director Loans Routed Through Partnership Firm
The Hyderabad Bench of the ITAT allowed the assessee’s appeal and deleted an addition of ₹11.66 crore made under section 68 read with section 115BBE on account of unsecured loans received from directors. The Tribunal held that the assessee had successfully discharged the onus of proving identity, creditworthiness, and genuineness of the transactions.
The loans were advanced by the directors out of drawings from a partnership firm (M/s RK Interiors), which were duly recorded in the firm’s audited books, reflected under loans and advances/drawings, and routed through banking channels. The Assessing Officer and CIT(A) did not dispute the existence of withdrawals or bank trails but rejected the explanation merely by comparing the amounts advanced with the directors’ profit shares, which the Tribunal found to be misconceived.
The ITAT clarified that partner withdrawals need not be limited to profit shares and can be sourced from overall fund availability of the firm (including capital, loans, creditors, and accumulated funds). In the absence of any contrary material disproving the books or bank records, the addition was held unsustainable and was deleted
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
