ITAT Rules Addition Under Section 28(iv) on Unsecured Loans Unsustainable

Case Details: Deputy Commissioner of Income-tax v. Hotel Surbhi Palace India (P.) Ltd - [2025] 178 taxmann.com 180 (Delhi - Trib.)

Judiciary and Counsel Details

• Yogesh Kumar U.S., Judicial Member
• Manish Agarwal, Accountant Member
• Dr Rakesh Gupta, Adv & Somil Aggarwal, Adv. for the Appellant
• A.S. Rana, Sr DR for the Respondent

Facts of the Case

The assessee was a private limited company engaged in the business of hotels, restaurants, and Hospitality Services. The assessee’s case was selected for scrutiny, during which the Assessing Officer (AO) noted that the assessee had taken unsecured loans from five companies.

The AO treated such loans as a benefit or a perquisite and made additions to the assessee’s income under section 28(iv). On appeal, CIT(A) deleted the additions made by AO. Aggrieved by the order, the AO preferred an appeal to the Delhi Tribunal.

Tribunal Held

The Tribunal held that the AO observed that the said lenders were nothing but Jama-Kharchi companies from whom certain loans were taken in the previous assessment year. Neither the loans were repaid, nor was any interest paid on such loans. Therefore, the AO, by doubting the loan transactions, added under section 28(iv).

Before the CIT(A), the assessee contended that there had been no benefit or perquisite of any kind, which was received in monetary terms, arising from the business of the assessee, which can be equated with the receipt of unsecured loans from these parties. The assessee emphatically stated that there is absolutely no basis, material, or evidence on the basis of which the impugned amounts can be said to be the income, benefit, or perquisite to the assessee.

Moreover, the assessee also stated that all these loans have been recorded in the credit section of the balance sheet of the assessee for many past years, and during the year, the assessee did not receive any fresh loans from the said companies, whose creditworthiness is in doubt according to the AO.

It is found that, except for observing that the lenders have no creditworthiness, the AO has failed to bring any evidential proof. Nothing has been brought to the AO’s attention to suggest that such loans are bogus, and the AO has conducted no investigation regarding the lenders’ credentials. CIT(A) has specifically observed that all the companies’ status is active on the Ministry of Corporate Affairs website.

Thus, the observation by the AO that those companies have a suspicious relationship with Jama-Kharchi Companies, no material has been brought to record to prove the same. CIT(A) also observed that those lenders are registered with ROC, Delhi, and the names of those Companies do not appear in the list of apparent shell companies as prepared by the Investigation Wing at Kolkata. Accordingly, the addition was deleted, as it requires no interference in the absence of any contrary material or facts brought to the department’s attention.