ITAT Mumbai Remands ₹32.67 Crore Unsecured Loan Addition and WIP-Based Estimation; Calls for Fresh Verification

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has set aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)] and remanded multiple issues to the Assessing Officer (AO) for fresh adjudication in the case of Pushpa Construction Company for Assessment Year 2018–19. The case involved substantial additions made by the AO, including ₹32.67 crore under Section 68 on account of unsecured loans, ₹7.76 crore as estimated income at 10% of work-in-progress (WIP), and ₹11.10 crore relating to sale of flats.

During assessment, the AO observed that the assessee had received loans from 201 parties amounting to ₹39.83 crore but had furnished confirmations only for 67 parties. For the remaining 134 parties, no supporting documentation was submitted, leading to addition under Section 68. Before the CIT(A), the assessee submitted additional evidence, including details of loan creditors during appellate and remand proceedings. Despite the AO’s remand report noting incomplete documentation—particularly lack of bank statements, ITRs, and confirmations for several parties—the CIT(A) deleted the entire addition.

The Tribunal found this approach unsustainable, observing that the assessee had not discharged the primary onus under Section 68 for all creditors. It noted that complete details were missing for several parties, including five creditors for whom no documentation was furnished. Accordingly, the issue was remanded for fresh verification. On the issue of WIP, the AO had estimated income at 10% of ₹77.61 crore WIP due to absence of revenue recognition. The assessee contended that it followed the Project Completion Method and had offered income in a subsequent year. The Tribunal held that this claim required factual verification and remanded the issue.

Similarly, the addition relating to sale of flats was also restored for reconsideration in light of the assessee’s accounting method.

Legal Analysis

The Tribunal reaffirmed that under Section 68, the assessee must establish identity, creditworthiness, and genuineness of each creditor with complete documentary evidence. Partial or incomplete compliance cannot discharge this statutory burden. It further emphasized that where accounting methods such as the Project Completion Method are invoked, taxability must be examined across relevant years to avoid double taxation.