In a significant relief to a taxpayer, the Faceless Appeal Unit has dropped the proposed addition of ₹5 crore under Section 68 of the Income Tax Act, 1961, in connection with an unsecured loan assessed during the Assessment Year (AY) 2014-15.
The issue pertained to a loan of ₹5 crore received from M/s Campbell Advertising Private Limited, which was under scrutiny due to alleged lack of proper documentation regarding the identity, creditworthiness, and genuineness of the lender. The addition was proposed during the first appellate proceedings, raising the spectre of severe financial consequences for the assessee in terms of tax liability, interest, and penalties.
However, during faceless appeal proceedings, CA Pradeep Goyal, representing the assessee, successfully demonstrated through written submissions and virtual oral arguments that the source of the loan was credible and adequately substantiated. The appellate authority accepted that M/s Chandra Prabhu International Limited (CPIL), which had extended the funds to Campbell, had sufficient returned income and tax payment history to establish financial capability.
As per the appellate order, the appellant effectively discharged the onus of proving the identity and creditworthiness of the lender as well as the genuineness of the transaction. The order specifically states:
“In the light of concrete factual findings discussed above, the appellant has indeed discharged its onus of proving the identity, creditworthiness, and genuineness of loan of Rs. 5 Crores… Hence, the proposal for enhancement on this account does not hold good and is dropped.”
The outcome highlights the increasing efficiency and transparency of the faceless appeal system introduced by the Central Board of Direct Taxes (CBDT). CA Pradeep Goyal praised the process in a social media post, expressing gratitude to the Income Tax Department, Finance Ministry, and Prime Minister’s Office for enabling a corruption-free and hassle-free appellate mechanism.
This decision may set a precedent for similar cases involving unsecured loans, especially where sufficient documentary proof of the source of funds is provided.
Read More: CESTAT Upholds Rs. 1.92 Crore Service Tax Demand for Misclassification of Business Support Services
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