ITO Vs Mahavir Corporation

Parties Involved

Facts Summary

The assessee filed its return of income for assessment year 2015-16 on 27.09.2015 declaring income at Rs.1,30,910/. The case was selected for “scrutiny”. During the assessment, the Assessing Officer noted that the assessee has shown unsecured loan of Rs. 4.96 crores. The Assessing Officer issued show cause notice to the assessee to prove the identity, creditworthiness of creditors and genuineness of transactions of unsecured loans. The Assessing Officer noted that though the assessee furnished reply and confirmation of creditors but no evidence establishing the identity, creditworthiness of depositors and genuineness of transactions were furnished. The Assessing Officer treated the said unsecured loan as non-genuine and added under Section 68 of the Income tax Act, 1961 (in short, the Act). The Assessing Officer also noted that the assessee has debited interest expenses of Rs. 14,64,154/- in its computation of income. On show cause notice, the assessee merely furnished reply without any evidence and valid explanation. The Assessing Officer disallowed the interest expenses of Rs. 14,64,154/-. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). The ld. CIT(A) deleted the addition of interest expenses and the addition of unsecured loan of Rs. 3.53 crores. The revenue filed an appeal against the order of the ld. CIT(A).…

Legal Issues

• 1. Violation of Rule 46A(3) of the Income Tax Rules, 1962
• 2. Violation of principles of natural justice
• 3. Deletion of addition made of Rs. 14,64,134/- for interest expenses
• 4. Deletion of addition made of Rs. 3,53,70,165/- for unsecured loan
• 5. Deletion of addition made of Rs. 3,35,15,869/- for unexplained capital introduction

Judgment Outcome

Decided in favour of Partly Assessee / Partly Revenue.

Precedents Relied Upon

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