The appeal filed by the Revenue was directed against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2022-23, arising from an assessment framed under section 143(3) read with section 144B of the Income-tax Act, 1961.

The assessee, Supreme Lake View Bungalows Private Limited, is engaged in the business of real estate development and had filed its return declaring a loss. During scrutiny proceedings, the Assessing Officer noted that the assessee had reflected short-term loans/borrowings aggregating to ₹55,49,75,562 and, alleging lack of creditworthiness of the lenders, treated the entire amount as unexplained cash credits under section 68 of the Act. The Assessing Officer also made a disallowance under section 36(1)(iii), which was not contested before the Tribunal.

On appeal, the Commissioner (Appeals) deleted the addition under section 68 after conducting a detailed, party-wise factual analysis. It was found that a substantial portion of the amount represented opening balances carried forward from earlier years, in respect of which no addition could be made during the relevant assessment year. Further, in respect of loans actually received during the year, the assessee had furnished confirmations, bank statements, financial statements, and income-tax returns establishing the identity, creditworthiness, and genuineness of the lenders and transactions. The Commissioner (Appeals) concluded that the Assessing Officer had made the addition mechanically, on the basis of closing balances, without proper verification of facts.

The Revenue carried the matter in appeal, contending that the assessee had failed to establish creditworthiness and relying on decisions such as CIT v. Precision Finance (P) Ltd. and ITO v. Diza Holdings (P) Ltd. The Tribunal, after considering rival submissions and examining the record, observed that additions under section 68 can be made only in respect of fresh credits received during the year and not on opening balances. The Tribunal further held that, insofar as the loans received during the year were concerned, the assessee had duly discharged the onus cast upon it under section 68 through cogent documentary evidence.

The Tribunal noted that the Commissioner (Appeals) had carried out a comprehensive factual examination and recorded clear findings demonstrating that the Assessing Officer’s action was based on surmises and conjectures. The reliance placed by the Revenue on Precision Finance and Diza Holdings was held to be misplaced in the facts of the present case, where the assessee had satisfactorily proved the essential ingredients of section 68.

Accordingly, finding no infirmity in the appellate order, the Tribunal dismissed the Revenue’s appeal and upheld the deletion of the addition of ₹55,49,75,562 under section 68 of the Act.

SOURCE LINK:  https://itat.gov.in/public/files/upload/1767782227-EhFaxU-1-TO.pdf

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