TaxTMI 
TaxTMI 
2026 (7) TMI 547
X X X X Extracts X X X X
X X X X Extracts X X X X
....facts of the case are that the assessee filed its return of income on 26.10.2017, declaring loss of INR 1,07,95,144/-. The case of the assessee was selected for complete scrutiny under CASS and notice u/s. 143(2) of the Act was issued on 16.08.2018. Thereafter, various notices u/s. 142(1) along with questionaries were issued from time to time which were duly replied by the assessee. The AO alleged that assessee has received fresh loan of INR 80.00 Lakhs however, the genuineness of this loan is not proved nor commercial expediency is there for taking high loans. Besides this, the AO further disallowed interest expenses claimed at INR 1,12,02,629/- u/s. 36(1)(iii) of the Act. In first appeal, Ld. CIT(A) has deleted the addition u/s. 68 towards the unsecured loan and restricted the disallowance made u/s. 36(1)(iii) to INR 22,87,300/- as against the disallowance made at INR 1,12,02,629/- by the AO. 4. Aggrieved with the said order of ld. CIT(A), both the parties are in appeal before the Tribunal by taking various Grounds of appeal as per appeal memo. 5. Ground of appeal Nos. 1, 3, 4 & 5 taken by the assessee are with respect to the restriction of disallowance made u/s. 36(1)(iii)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtible and non-cumulative preference shares of INR 100/- each by converting unsecured loans of INR 28.10 crores. Besides this, the assessee was having equity share capital of INR 9.24 crores though the same was eroded out of recurring losses incurred over the years but the fact remained that the fresh funds was received at INR 28.10 crores by converting the interest bearing loans into capital, thus interest liability to this extent stood reduced. It is further observed that assessee is having long term loans and advances of INR 1,23,05,197/- and short term loan and advances of INR 7,50,01,150/-. Besides this, assessee has received interest free loans from Directors of INR 13.65 crores and has interest bearing loans of INR 5.49 crores from related parties where interest @ 8-10 % was paid. If the total interest free funds in the shape of preferential share capital and loans from Directors are taken together, resultant interest free funds available with the assessee were of INR 41.75 crores for making investments/interest free advances. As observed above, assessee has made total investment of INR 38.64 crores and short terms advances were given of INR 7.50 crores thus, as against tota....
X X X X Extracts X X X X
X X X X Extracts X X X X
....akhs made u/s. 68 by the AO is challenged. 15. Before us, ld. Sr. DR vehemently supported the order of AO and submits that AO has discussed this issue at page 2 onwards wherein the AO has discussed the financial position and the business activity of the assessee company and concluded that no effective business was carried on by the assessee and merely, funds received in the shape of unsecured loans/capital were utilized for making non-current investments and interest free advances to the related parties. Ld. Sr. DR further drew our attention to the statements of the Directors of certain companies from whom capital/loans were received where they stated having no knowledge about the business of the assessee company. He further stated that the AO after considering these facts and circumstances, hold the loans taken from M/s Gandhipati Infra Project Pvt. Ltd. of INR 75 lakhs and from M/s. Sungrace Products Pvt. Ltd. of INR 5 Lakhs as bogus. Ld. Sr. DR further submits that Ld. CIT(A) while deleting the addition had admitted the additional evidence filed by the assessee without obtaining Remand Report and therefore, requested that AO has rightly hold the loans taken during the year as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(A) by placing any contrary material. 20. In view of the facts as discussed herein above and after considering the arguments of both the parties, we find that the assessee has duly complied with all the requirements of section 68 of the Act and duly discharged the burden casted upon it and Ld. CIT(A) after examining all the details which were already filed before the AO concluded that loans taken were genuine loans and deleted the addition which order is hereby upheld. The Ground of appeal No. 1 to 3 of the revenue are thus, dismissed. 21. In the final result, appeal of the assessee in ITA No. 6823/Del/2025 for Assessment Year 2017-18 is partly allowed and appeal of the Revenue in ITA No. 7308/Del/2025 for Assessment Year 2017-18 is dismissed. Order pronounced in the open Court on 17.06.2026. ============= Document 1 Conclusion The issue of addition of Rs. 80,00,000/- made under Section 68 relating to unsecured loans received from Ganadhipati Infraproject Pvt. Ltd. and Sungrace Products (India) Pvt. Ltd. has been perused. The Assessing Officer has doubted the genuineness of these loans primarily based on the common registered office address, common directorships,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ord that the statements of the directors of the lending companies were recorded, which establishes that the companies are active and running and therefore, no adverse observations regarding the creditworthiness of the lendersare made out. Legal Position and Burden of Proof: It is well settled that once the assessee discharges the initial onus under Section 68 by providing satisfactory evidence on identity, creditworthiness, and genuineness, the burden shifts to the revenue to produce material disproving the claim. In the present case, the AO has failed to bring any adverse material or allegation on creditworthiness or genuineness to rebut the assessee's evidence. The assessee has also duly explained the source of the source of the impugned loan transactions. The relevant documentary evidences, including confirmations, audited financial statements, bank statements, and income tax return acknowledgments of the creditor companies, were submitted before the Assessing Officer. It is further noted that the Assessing Officer has not cast any doubt or recorded any adverse finding on the evidences so placed on record. Accordingly, once the assessee has discharged the onus unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dy proved - Held, yes [Paras 15 and 16] [Im favour of assessee] Further, the Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax (Central), Surat vs Neotech Education Foundation reported at [2023] 148 taxmann.com 372 (Gujarat) has held as under: It was noted that Commissioner (Appeals) had observed that assessee had discharged its onus by furnishing necessary details such as a copy of PAN, bank details and ITR etc. in support of identity and creditworthiness of creditor and genuineness of transaction - He further noted that payment of loan to assessee as well as repayment of loan and interest by assessee were made by account payee cheques - Further, both lower authorities had concurrently held that initial burden of proof even if not discharged by assessee at level of Assessing Officer but every transaction was explained by production of documents by assessee before Commissioner (Appeals) where two remand mporte ware called for- Whether, on facts, impugned addition on account of loan amount made by Assessing Officer was to be deleted - Held, yes [Paras 9 to 11] [In favour of assessee] Further, the Hon'ble HIGH COURT OF GUJARAT in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 155(14) of the Act.It is a settled position of law that TDS credit is to be given in accordance with section 199 of the Income-tax Act, 1961 read with Rule 37BA of the Income-tax Rules, 1962. The appellant has contended that the said TDS was duly reflected in its books of account and was claimed in the return of income, but the AO failed to allow full credit. Such credit is a matter of factual verification from the Form 26AS and departmental records maintained in the ITD system. If the TDS pertains to income offered by the appellant in the relevant year, then denial of such credit results in double taxation, which is impermissible in law.Accordingly, the Assessing Officer is directed to verify the appellant's claim of TDS credit of Rs.2,04,384/- with reference to Form 26AS and other relevant records, and allow the same in accordance with law. If on verification the TDS is found to have been deducted on the income offered to tax by the appellant, full credit shall be granted. This ground of appeal is therefore treated as allowed for statistical purposes. 4.5 Ground of Appeal No. 6 In this ground, the AR has stated that AO is wrong in fact and bad in law for not allowing In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....round of Appeal No. 8: In this ground, the AR has challenged the jurisdictional validity of the notice issued under Section 143(2) of the Income-tax Act, 1961. it is further submitted by the AR that the issuance of a valid notice under Section 143(2) is a precondition for assuming jurisdiction by the Assessing Officer (AO) and in absence of the same, any subsequent assessment proceedings are rendered null and void in law.As per AR, in the present case, the notice u/s 143(2) dated 16.08.2018 fails to conform to the mandatory requirements laid down by the CBDT Instruction No. F. No. 225/157/2017/ITA-II dated 23.06.2017. As per AR, the Instruction clearly mandates that all scrutiny notices under Section 143(2) must be Issued In one of the prescribed formats, specifying whether the case is selected for limited scrutiny, complete scrutiny, or compulsory manual scrutiny. Further, the AR stated that this requirement is not procedural but jurisdictional and having been issued under the authority of Section 119 of the Act, and is binding on all Assessing Authorities.However, as per AR, the impugned notice merely states "computer aided scrutiny selection" without clarifying the nature of scr....