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of <h1>Loan Balance Scrutiny Overturned: Tax Tribunal Validates Assessee's Financial Reporting and Rejects Unwarranted Income Additions</h1> <h3>KG Housing Projects Pvt. Ltd. Versus ITO, Ward-14 (3), Delhi.</h3> ITAT Delhi allowed assessee's appeal, deleting additions made under section 68 of Income Tax Act. The tribunal found that opening loan balances from prior ... Addition u/s 68 - unsecured loans - assessee has taken unsecured loans from various entities for which enquiries were raised and notices were issued u/s 133(6) to the concerned parties and based on the fact of non-return of the notices and non-compliance to these notices and to the summons u/s 131 AO doubted the genuineness of the loan/advances - HELD THAT:- We find that during the year even a sum of Rs. 9 lakh is paid to one of the parties and further Rs. 1 lakh is borrowed with the actual borrowing of Rs. 1 lakh only from M/s Kabeer Enterprises Pvt. Ltd. This amount is also explained to be received by the assessee out of repayment of the loan of Rs. 8 lakhs. Thus, we are of the considered view that as for the purpose of section 68 for the year under consideration, there can be no addition on the basis of opening balances of the loans. Consequently, the remaining addition on the basis of disallowance of interest paid also cannot be sustained. The appeal of the assessee is allowed. The Appellate Tribunal (ITAT Delhi) allowed the assessee's appeal against the Commissioner of Income-tax (Appeals) order dated 24.05.2024, which had upheld additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961. The AO had doubted the genuineness of unsecured loans totaling Rs. 84,00,000/- due to non-compliance with summons and notices under sections 133(6) and 131, making additions accordingly.The assessee contended that Rs. 83,00,000/- of the disputed loan amount pertained to earlier years and represented opening balances from 17 parties, supported by documentary evidence and undisputed by the Revenue. The Tribunal held that 'for the purpose of section 68 of the Act, for the year under consideration, there can be no addition on the basis of opening balances of the loans.' Further, the disallowance of interest paid of Rs. 19,37,832/- under section 40A(2)(b) was also not sustainable.The Tribunal concluded: 'The appeal of the assessee is allowed. The impugned additions are deleted.'
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