Unsecured loans from directors and shareholders — The AO was not justified in making the addition under s 68 merely because creditors have not appeared before the AO and when the assessee-company has proven the creditworthiness of creditors and genuineness of transaction, as all transactions were routed through bank accounts and monies were paid by the assessee through cross-cheques, as held by DelHC in Mod Creations Pvt Ltd v ITO — In favour of: The assessee.
Section 68 of the ITA only sets up a presumption against the assessee whenever unexplained credits are found in the books of accounts of the assessee, but this presumption is rebuttable.
Decided on: 29 August 2011.
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