Tax on Inflated Purchases

Last updated: 23 November 2021

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This Income Tax Appellate Tribunal ruling addresses additions made by the Assessing Officer (AO) concerning unsecured loans. The assessee claimed these loans were funded by cash from inflated purchases made by another company, M/s. Anand Motors Product Private Limited. Although an application was filed with the Income Tax Settlement Commission, the AO considered the source of the loans unexplained and made significant additions to the assessee's income for two assessment years. However, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeals.

Court :
ITAT Delhi

Brief :
ITA No. 7144/Del/2018 and ITA No.7145/Del/2018 are two separate appeals by the revenue preferred against a consolidated order of the CIT(A)-27, New Delhi dated 13.08.2018 pertaining to A.Y.2015-16 and 2016-17.

Citation :
ITA No.7144 & 7145/Del/2018

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘F’, NEW DELHI
BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER
AND
SH. KUL BHARAT, JUDICIAL MEMBER
(THROUGH VIDEO CONFERENCING)

ITA No.7144 & 7145/Del/2018
Assessment Year: 2015-16 & 2016-17

DCIT
Central Circle-14
New Delhi

R B Farms and Estates
Pvt. Ltd. 2686, Kashmere
Gate, New Delhi
PAN No. AACCR7224E

Appellant by Sh. I. P. S. Bindra, CIT
Respondent by Sh. Ashwani Kumar, CA

Date of hearing: 21/10/2021
Date of Pronouncement: 21/10/2021
ORDER

ITA No. 7144/Del/2018 and ITA No.7145/Del/2018 are two separate appeals by the revenue preferred against a consolidated order of the CIT(A)-27, New Delhi dated 13.08.2018 pertaining to A.Y.2015-16 and 2016-17.

2. Briefly stated the facts of the case are that a search and seizure operation was carried out on AMP group and other related cases on 16.09.2015. Search u/s. 132 (1) of the Act was interlia conducted at premises of the assessee.

3. In its reply the assessee contended that the unsecured loan has been met out of the fund/ cash received on account of bogus/ inflated purchase done by M/s. Anand Motors product Pvt. Ltd. The assessee pointed out that an application is filed before the Income Tax Settlement Commission. The AO was of the opinion that application of M/s. Anand Motors Product Private Limited (AMP Private Limited) is still pending for adjudication. The AO concluded by holding that the source of unsecured loan is remained unexplained and accordingly made addition of Rs.10,37,50,000/- in A.Y.2015-16 and Rs.59.40 lacs in A.Y. 2016-17.

4. Considering the totality of the facts we do not find any reason to interfere with the findings of the CIT(A) both the appeals by the revenue are dismissed.Decision announced in the open court in the presence of both the representatives on 21.10.2021.

Please find attached the enclosed file for the full judgement.

FAQ :

The main issue was the taxability of unsecured loans, where the Assessing Officer made additions to the assessee's income, considering the source unexplained.

The assessee contended that the unsecured loans were financed by cash received from 'bogus' or inflated purchases made by M/s. Anand Motors Product Private Limited.

The article mentions that an application was filed with the Income Tax Settlement Commission, but the Assessing Officer proceeded with the addition as the application was still pending adjudication.

The Assessing Officer added Rs. 10,37,50,000/- for AY 2015-16 and Rs. 59.40 lacs for AY 2016-17 to the assessee's income, deeming the source of unsecured loans unexplained.

The Tribunal dismissed both appeals filed by the revenue, agreeing with the findings of the CIT(A) and finding no reason to interfere with the decision.