Case Number: ITA 1171/DEL/2020
Appellant: Jindal Quality Tubular Ltd, New Delhi
Respondent: DCIT Circle-13(2), New Delhi
Assessment Year: 2017-18
Result: Favorable to Appellant
Case Filed on: 2020-06-15
Order Type: Final Tribunal Order
Date of Order: 2020-09-28
Pronounced on: 2020-09-28
The case ITA 1171/DEL/2020 revolves around the appellant, Jindal Quality Tubular Ltd, challenging the disallowance made by the DCIT Circle-13(2), New Delhi, under section 68 of the Income Tax Act for the assessment year 2017-18. The case, part of a series involving Jindal group companies, raises significant questions regarding the genuineness and creditworthiness of unsecured loans taken from group entities.
The appellant, Jindal Quality Tubular Ltd, had taken an unsecured loan of Rs. 20,52,00,000 from Danta Enterprises Pvt Ltd, an associate company. The Assessing Officer (AO) disallowed this loan under section 68 of the Income Tax Act, citing failure to prove the identity, creditworthiness, and genuineness of the lender. Additionally, interest paid on this loan amounting to Rs. 3,37,315 was also disallowed.
The appellant argued that the loan was genuine and provided extensive documentary evidence to substantiate their claim. This included:
The AO based the disallowance on a report from a Commissioner appointed under section 131(1)(d) of the Act, which suggested that the lender companies did not exist at their registered address. This report was used to question the physical existence of the lender companies and thus the genuineness of the transactions.
The Tribunal noted several key points:
After considering all the evidence, the Tribunal ruled in favor of the appellant. The addition of Rs. 20,52,00,000 under section 68 was deleted, and the disallowance of interest amounting to Rs. 3,37,315 was also reversed. The Tribunal emphasized the need for Assessing Officers to conduct thorough and direct verifications rather than relying on incomplete reports.
In the light of the detailed examination of evidence and arguments, the Tribunal’s final order pronounced on 28th September 2020 was as follows:
“The appeal of Jindal Quality Tubular Ltd is allowed. The addition of Rs. 20,52,00,000 under section 68 and the disallowance of interest of Rs. 3,37,315 are hereby deleted. The department is directed to amend the assessment order accordingly.”
This case sets a precedent in handling similar cases of disallowance under section 68, highlighting the importance of thorough verification and the acceptance of comprehensive documentary evidence to prove the genuineness of transactions. It reinforces the principle that mere suspicion cannot replace substantive proof in tax assessments.
The detailed analysis and favorable outcome for Jindal Quality Tubular Ltd provide significant insights for taxpayers and practitioners dealing with unexplained cash credits and related interest disallowances.
ITA 1171/DEL/2020: Jindal Quality Tubular Ltd vs. DCIT – A Detailed Tribunal Order
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