Facts of the Case

The assessee, Shaurya Developers, filed its return of income for Assessment Year 2017-18 on 31.10.2017 declaring total income of ₹35,95,670. The assessment proceedings were initiated and notice under Section 143(2) was issued on 10.08.2018.

During assessment, the Assessing Officer made additions under Section 68 amounting to ₹11,00,000 comprising ₹10,00,000 received from M/s Olympic Corporation and ₹1,00,000 received from M/s Ritesh Patel & Sons, treating the same as unexplained cash credits. The Commissioner of Income Tax (Appeals), Ahmedabad-12 upheld the additions. Aggrieved, the assessee preferred an appeal before the Tribunal.

Issues Involved

Whether the addition under Section 68 in respect of loans received was sustainable when the amounts were repaid before filing of return of income as well as before completion of assessment proceedings.

Petitioner’s Arguments

The assessee submitted that the amount of ₹10,00,000 was received from M/s Olympic Corporation on 13.07.2016 and repaid on 24.05.2017, and the amount of ₹1,00,000 was received from M/s Ritesh Patel & Sons on 28.07.2016 and repaid on 25.04.2017. It was contended that both loans were fully repaid prior to filing of the return of income and before completion of assessment, and therefore the addition under Section 68 was not justified.

Respondent’s Arguments

The Revenue relied upon the orders of the Assessing Officer and the CIT(A), contending that the assessee failed to satisfactorily explain the nature and source of the credits during assessment proceedings.

Court Order / Findings

The ITAT Ahmedabad observed that it was an undisputed fact that both loan amounts were received during the year and repaid by the assessee before filing of the return of income and before completion of assessment proceedings. The Tribunal held that in view of these facts and circumstances, the addition made under Section 68 treating the loans as unexplained cash credits was not sustainable.

Accordingly, the Tribunal deleted the addition of ₹11,00,000 confirmed by the CIT(A).

Important Clarification

The Tribunal clarified that where loan transactions are completed by repayment within a reasonable time and before filing of return and completion of assessment, and there is no evidence of the amounts being assessee’s own unexplained money, addition under Section 68 cannot be sustained merely on technical grounds.

Final Outcome

The appeal filed by the assessee was allowed. The addition of ₹11,00,000 made under Section 68 was deleted in full.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769062997_SHAURYADEVELOPERSAHMEDABADVS.DCITCENTCIR21AHMEDABADAHMEDABAD.pdf

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