ITAT Confirms Deletion of Rs. 25.24 Crore Section 68 Addition After Assessee Proves Full Money Trail:

ITAT Confirms Deletion of Rs. 25.24 Crore Section 68 Addition After Assessee Proves Full Money Trail ITAT Hyderabad upheld the deletion of the Rs. 25.24 crore Section 68 addition because the assessee proved the complete money trail for all unsecured loans from directors and related parties. The present appeal has been filed by the Deputy Commissioner of Income Tax (DCIT) against a company named Rathnamma Infratech Private Limited, located in Hyderabad, in the Income Tax Appellate Tribunal (ITAT) Hyderabad ‘A’ Bench, Hyderabad, Shri Vijay Pal Rao, Honourable (Vice President) and Shri Manjunatha G, Honourable (Accountant Member). The case is related to the assessment year 2022-23, and the final decision was announced on November 07, 2025. The appeal has been filed challenging an order dated September 25, 2024, passed by the learnt CIT(A), NFAC, Delhi.

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The assessee is involved in the business of purchase and sale of land, construction and development of flats and other related activities. On November 07, 2022, the assessee filed its income tax return (ITR) for the assessment year 2022-23, disclosing a total income of Rs. 52,52,850. The case was selected for scrutiny to verify high liabilities vs. low income and unsecured loans. The Assessing Officer (AO) discovered that the assessee had taken large unsecured loans from Shri K.V. Satish Kumar (Director), Smt K. Swapna (Director), SSK Prime Spaces Ltd and K.S.V. Oil Seeds Pvt. Ltd. The assessee did not prove the creditworthiness of these lenders to the AO. Conclusion to which, the AO issued a show cause notice (SCN) dated August 16, 2023, under Section 142(1) of the Income Tax Act, 1961, wherein the assessee was asked to submit relevant evidence, including details of unsecured loans and liabilities, etc. and proposing an addition of Rs. 12.39 crore. The assessee responded to the notice on November 21, 2023. However, still, AO confirmed the addition of Rs. 25.24 crore under Section 68 (unexplained cash credits) to the assessee's income. CIT(A) Decision: Aggrieved assessee then filed an appeal before the CIT(A). It noted that the AO issued an SCN for Rs. 12.13 crore but made an addition of Rs. 25.24 crore without giving a fresh opportunity, which was a violation of the provision of natural justice. CIT(A) examined all the documents submitted by the assessee during assessment and found that all the loan details were properly explained. As a result of all these findings, the CIT(A) deleted the entire addition of Rs. 25.24 crore. The department argued that the directors had low income, so no creditworthiness. Bank loans taken by lenders for agricultural purposes cannot be used to give loans. CIT(A) accepted new evidence without giving AO a chance. CIT(A) deleted the addition mainly on technical grounds. The Revenue, dissatisfied with the action of CIT(A), approached ITAT Hyderabad.

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ITAT Hyderabad Decision: The ITAT closely examined whether the assessee properly explained its unsecured loans. The Tribunal found that all loans were received via proper banking channels. The assessee tracked the money trail for each transaction back to the source, such as proceeds from the sale of agricultural land or loans from banks. Supporting documents (sale deeds, bank statements, confirmations, and loan account details) were submitted. As the conditions of Section 68 (identity, genuineness, creditworthiness) were met, the Tribunal upheld the CIT(A) order deleting the full Rs. 25.24 crore addition. Final Outcome: The Revenue's appeal was dismissed, and the deletion of the addition under Section 68 was confirmed for Rathnamma Infratech Private Limited for AY 2022-23.