ITAT Mumbai Remands Case on Unsecured Loans After CIT(A) Fails to Consider Documentary Evidence

The assessee filed its return for AY 2012-13, declaring income of Rs. 67.26 lakh. During scrutiny, the Assessing Officer noted unsecured loans totalling Rs. 9.45 crore during the year with a closing balance of Rs. 5.49 crore as of 31/03/2012, on which interest of Rs. 19.11 lakh had been paid. The assessee failed to provide satisfactory confirmations, bank statements, and ITRs of lenders for 12 parties.

The AO on assessment treated Rs. 67,00,000 as unexplained cash credits under Section 68 and disallowed interest of Rs. 6,08,751.

Appeal Before CIT(A): On appeal, the assessee submitted additional evidence before the CIT(A), who obtained a remand report but still upheld the additions, stating that the assessee had not substantiated the loans. The assessee then approached the Tribunal, contending that its evidence was ignored.

Issue Raised: Whether the CIT(A) was wrong in confirming additions under Section 68 without properly taking into account the complete evidence submitted before it by the assessee for unsecured loans.

ITAT’s Ruling in the Case: The Tribunal allowed the appeal on statistical grounds, holding that the CIT(A)’s order was silent on the evidence produced by the assessee. It stressed that the appellate authority was duty-bound to examine the documents for each of the 12 loan creditors before affirming additions.

The Income Tax Appellant Bench restored the matter to the file of the CIT(A), directing a fresh adjudication of each loan creditor based on the documents submitted. It also mandated that a reasonable opportunity of hearing be given to the assessee. The court, therefore, remanded the matter back for reconsideration of the interest disallowance.

The appeal was thus allowed in favor of the assessee on statistical grounds.

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