The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has set aside an addition of Rs. 4.90 lakh made under Section 68 of the Income Tax Act, 1961, and affirmed the genuineness of a business transaction involving a loan from the company’s director. Rani Sati Surajgarhia Infrastructure Ltd. (assessee) filed return of income declaring a total income of Rs. 1,78,000. The case was selected for limited scrutiny through the Computer Assisted Scrutiny Selection (CASS) to examine unsecured loans, including those from Kamdhenu Buildcon Pvt. Ltd. and Shri Amit Mittal, the director of the company. Standardize Accounting Policies – Specimen Drafts at Your Fingertips! Perfect for internal reference and client consistency- Click here The AO observed that the assessee had taken unsecured loans of Rs. 1,02,92,932 from Kamdhenu Buildcon Pvt. Ltd. and Rs. 4,90,000 from Shri Amit Mittal. The AO issued a show-cause notice under Section 144 of the Income Tax Act. Read More: ITAT Sets Aside Rs.1.25 Crore Penalty on UP State Bridge Corp, Orders Fresh Review Linked to Pending Quantum Appeal [Read Order] The assessee submitted the Income Tax Return (ITR) and financial statements, which the AO found insufficient. The AO disallowed the loans and made an addition of Rs. 1,07,82,932 under Section 68 of the Act. Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee submitted confirmations, ITR copies, balance sheets, and profit & loss accounts of the lenders to establish the identity, creditworthiness, and genuineness of the transactions. The CIT(A) upheld the AO’s addition made by the AO. Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the case was under limited scrutiny, and the AO’s addition of Rs. 4,90,000 concerning Shri Amit Mittal was unjustified. The counsel highlighted that the transactions with the director were conducted through banking channels as part of a running account for business purposes, with total transactions amounting to Rs. 4,33,75,000 during the year

. The counsel contended that, as a director, Shri Amit Mittal’s identity and creditworthiness did not require further proof, and the genuineness of the business transaction was evident from the running account. Read More: ITAT Orders Re-Examination of Rs.83 Lakh Dispute for Shipping Firm, Cites Contingent Liability Error [Read Order] The two-member bench comprising S. Rifaur Rahman (Accountant Member) and Anubhav Sharma (Judicial Member) observed that the assessee had submitted relevant information, including confirmation letters before the CIT(A) without following the procedure under Rule 46A of the Income Tax Rules. The tribunal observed that the assessee maintained a running account with the director for business purposes, involving transactions totaling Rs. 4,38,65,000. The outstanding balance of Rs. 4,90,000 was added by the AO as an unsecured loan. The tribunal held that, as Shri Amit Mittal was a director, there was no requirement to prove his identity or creditworthiness. The tribunal held that the assessee had sufficiently proved the vital ingredients under Section 68 of the Act for the director’s loan. The tribunal deleted the addition of Rs. 4,90,000, along with the addition related to Kamdhenu Buildcon Pvt. Ltd., The appeal of the assessee was allowed.