INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Unexplained unsecured loans -

Assessee received unsecured laons from certain parties and filed return of income disclosing the same. Further, assessee had proved identity, creditworthiness and genuineness before AO, however, on the ground that the depositor had filed return 4S and hence, it cannot be ascertained as to whether he had advanced loan or not whether amount deposited prior to issue of loan cheque was loan taken by him or out of his earlier deposit to some other person. Assessee challenged the order of the CIT(A) confirming the actions of the AO in making additions on account of unexplained Unsecured Loans and on account of interest paid on such loans. Held: In all the cases, assessee had already submitted before the AO, PAN cards of all the depositors and even notarized copy of proof of identities have been submitted. Assessee had also submitted acknowledgement of Return of Income of all the depositors and bank passbook which reflects the credit worthiness of the depositors. Since all the confirmations from the depositors have been submitted, so there was no conclusion of any after-thought or make believe transactions. All the transactions were duly recorded in the regular books of accounts. Therefore, genuineness of those cannot be doubted. Even otherwise, Jurisdictional Gujarat High Court in the case of Dy. CIT v. Rohini Builders along with PAN and confirmation, then in that eventuality no additions were sustainable. Even in the case of CIT v. Ranchhold Jivabhai Nakhava it has categorically been held Jurisdictional Gujarat High Court that when once the initial onus had already been discharged by the assessee, then in that eventuality it was the duty of the AO to ascertain from the AO's of those lendors, whether in the respective returns they have shown existence of such amount of money or not. The AO in the present case had not carried out any such exercise the additions made by the AO in the case of assessee were against priciples laid down under section 68. No addition could have been made by the AO as in the present case the assessee had already discharged his initial onus the unsecured loan received by the assessee cannot therefore, be termed as unexplained. thus, no addition on that account was sustainable. Since addition on account of unexplained unsecured loans had been deleted, therefore, as a consequence, also the additions made on account of interest paid on the above loan was also deleted.

Followed:Dy. CIT v. Rohini Builders [SLP CC 9155 of 2001] (SC), Dy. CIT v. Rohini Builders [(2002) 256 ITR 360 (Guj) : 2002 TaxPub(DT) 305 (Guj-HC)] and CIT v. Ranchhod Jivabhai Nakhava (2012) 21 Taxmann.com 159 (Guj) : 2012 TaxPub(DT) 2351 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 143(3) Section 371(1)

SUBSCRIBE FOR FULL CONTENT