ITAT Mumbai Sets Aside Deletion of ₹2.56 Crore Addition Over Unsecured Loans; Matter Remanded 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)] deleting an addition of ₹2.56 crore made on account of unsecured loans, and remanded the matter to the Assessing Officer (AO) for fresh adjudication. The case pertains to Assessment Year 2022–23 involving EV Homes Construction Private Limited. During scrutiny assessment, the AO observed that the assessee had received unsecured loans amounting to ₹3 crore. While confirmations and income tax returns of lenders were furnished, the assessee failed to provide complete bank statements establishing the source of funds for most lenders, except in one case involving ₹44 lakh.

Consequently, the AO treated loans aggregating ₹2.56 crore as unexplained and made an addition under the Act. On appeal, the CIT(A) deleted the addition, holding that the assessee had furnished sufficient documentary evidence including income tax returns, financial statements, loan confirmations, and bank statements of the lenders. It concluded that the assessee had discharged the onus of proving identity, genuineness, and creditworthiness of the transactions.

However, the Tribunal found that the CIT(A)’s conclusions were not supported by adequate verification. It noted that the assessee failed to correlate loan transactions with corresponding bank entries and had not placed complete bank statements for certain lenders on record. The Tribunal also observed that multiple loan transactions during the year were not properly reconciled. In view of these deficiencies, and considering the assessee’s request for an opportunity to furnish complete documentation, the Tribunal restored the matter to the AO for de novo adjudication.

Legal Analysis

The Tribunal reiterated that mere submission of basic documents such as confirmations and income tax returns is insufficient to establish genuineness and creditworthiness of unsecured loans without proper correlation with banking transactions. It emphasized that each loan transaction must be substantiated through verifiable evidence, including complete bank statements and clear linkage between fund flows and ledger entries. The absence of such reconciliation undermines the evidentiary value of the documents.

The decision also underscores that appellate relief cannot be granted without thorough verification of additional evidence. Where such verification is lacking, remand for fresh examination is warranted to ensure proper adjudication in accordance with law.