Fact of the Case
The assessee company, M/s. K. P. Manish Global Ingredients Pvt. Ltd. is engaged in the business of dealing in drugs, chemical ingredients, etc. filed its return of income for the assessment year 2009-10 declaring total income.
The Assessing Officer noticed that the assessee has received an unsecured loan to the tune of Rs.9,90,56,567/- from several persons. Therefore, he called upon the assessee to file necessary information including the name and address of persons from whom unsecured loans were taken.
The Assessing Officer thereafter issued letters u/s. 133(6) to all persons calling for information to confirm transactions with the assessee,
The AO opined that unsecured loans in the books of account were nothing but a device adopted to introduce its own unexplained money into the account. The Assessing Officer further observed that just because impugned transactions have been routed through banking channels, the same cannot be considered genuine.
Accordingly, he opined that entire transactions routed through various company accounts are sham transactions and hence, made additions towards unsecured loans received from three companies belonging to Mr. Umed Mehta u/s.68 of the Income Tax Act, 1961.
The assessee being aggrieved by the AO’s order appealed before the CIT(A), wherein it held that payment by account payee cheque is not sufficient to establish the genuineness of transactions.
C.A. T. Banusekar on behalf of the assessee urged that learned CIT(A) has erred in confirming additions made towards unsecured loan received from M/s. C.K. Exports, M/s. Mehta Motors & General Finance Company and M/s. Swastic Trading Corporation, without appreciating the fact that unsecured loans are genuine which is supported by necessary evidence.
Decision of the Case
The coram of Judicial Member V. Durga Rao and Accountant Member G. Manjunatha while quashing the order of the CIT(A) held that assessee has discharged burden caste upon u/s. 68 of the Act to prove unsecured loans received from M/s. C. K. Exports, M/s. Mehta Motors & General Finance Company and M/s. Swastic Trading Corporation.
The Assessing Officer as well as learned CIT(A) without appreciating the evidence filed by the assessee has simply made additions on the suspicious ground that said sum was undisclosed income of the assessee.
Therefore, the ITAT directed the AO to delete the additions made towards unsecured loans received from three entities.