The Income Tax Appellate Tribunal (ITAT), Mumbai, has upheld the deletion of an addition of Rs. 6.14 crore made under Section 68 of the Income Tax Act, 1961, in respect of unsecured loans received by the assessee. The Tribunal held that once the assessee establishes the identity and creditworthiness of the lender and the genuineness of the transaction through documentary evidence, the burden shifts to the Revenue. The Tribunal further observed that the assessee cannot be compelled to prove the source of the lender for the assessment year under consideration.

The assessee, Blueberry Trading Company Pvt. Ltd., is engaged in the business of real estate development, leasing of premises and trading in shares and derivatives. During the assessment proceedings for assessment year 2014-15, the AO noticed that the assessee had received unsecured loans amounting to Rs. 5.63 crore from Kuber Trexim Pvt. Ltd. The AO observed that the assessee had repaid a loan of an identical amount earlier obtained from Wall Street Capital Market Pvt. Ltd. and subsequently received a fresh loan from Kuber Trexim Pvt. Ltd. Since both lender entities allegedly operated from the same address and had common promoters, the AO referred the matter to the Investigation Wing, Kolkata, for verification.

After the investigation and perusal of the survey, report and statements made, the AO found out that the loan was not genuine and the unsecured loan amount, along with related interest expenditure, was treated as unexplained cash credit under Section 68 and an addition of Rs. 6.14 crore was made. The assessee challenged the addition before the NFAC and submitted documentary evidence containing loan confirmations, bank statements, ledger accounts and financial statements of the lender entities along with TDS certificates and evidence of repayment of loans through banking channels. NFAC deleted the addition made on the basis of the evidence.

The Tribunal noted that the assessee had furnished all relevant documentary evidence during assessment proceedings, and the directors of both lender companies had appeared in response to a summons issued under Section 131 and had categorically confirmed the loan transactions. The Bench held that the assessee had discharged the primary burden cast upon it under Section 68 by proving the identity and creditworthiness of the creditor and the genuineness of the transaction. Once such a burden stood discharged, it was incumbent upon the Revenue to bring cogent material on record to establish that the transaction was not genuine.

ITAT has dismissed the appeal and held that the addition made under Section 68 could not be sustained, as there is no material evidence to disprove the documents produced by the assessee. The Tribunal reaffirmed that, for the relevant assessment year, the assessee was not required to establish the source of the lender once the primary ingredients of Section 68 were satisfied. The Tribunal upheld the deletion of Rs. 6.14 crore. The Tribunal further observed that the assessee cannot be compelled to prove the source of the lender for the assessment year under consideration.