SMG Estates (P) Ltd. appealed against the addition of Rs. 1 crore under Section 68 of the Income Tax Act, related to unsecured loans from two parties. This case highlights issues of due process in tax assessments and the importance of substantiating the genuineness of transactions.
The appeal focuses on loans from M/s Awasthi Medi Equipments Pvt. Ltd. and M/s Regal Infotech Pvt. Ltd., which the Income Tax Officer deemed bogus due to insufficient evidence of the companies’ operations and creditworthiness. The tribunal reviewed the substantial evidence provided by SMG Estates, including audited financial statements and tax details of the lending companies.
The tribunal noted the Assessing Officer’s failure to serve notices and conduct adequate inquiries. It found that the lending companies had significant business operations and financial capacity, contrary to the Assessing Officer’s claims. Moreover, the tribunal highlighted procedural errors in how the notices were handled and the reliance on incorrect assumptions about the lenders’ addresses.
The tribunal decided in favor of SMG Estates, deleting the additions made under Section 68. This case underscores the need for thorough and fair investigations by tax authorities and the importance of proper documentary evidence in substantiating financial transactions.
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