INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of unsecured loan - AO doubted credit worthiness of lender on account of declaration of meagre income in the return

Assessee claimed to have received loan from M/s. 'E'. AO treated loan amount as unexplained credit under section 68 on the ground that M/S 'E' had declared very low income in the return and further, assesee could not prove source of numerous deposits in bank accounts of M/s. E. Held: Declaration of low income could not by itself be a ground to doubt creditworthiness of M/s. E., i.e., the lender. Assessee had furnished before AO a copy of the audited balance sheet of M/s. Further, AO, in order to verify creditworthiness of M/s. E. Further, AO, in order to verify creditworthiness of M/s. E and genuineness of loan transactions himself called for documents from AO of said concern. AO after verifcation of said documents including audited balance sheet, etc., could not find any fault in the same. Further, assessee had been stating that source of said deposits in the accounts of M/s. E was out of its business receipts in normal course. In remand proceedings neither AO required assessee to furnish further evidences in respect of the source of deposit into the accounts of M/s. E, nor AO himself called M/s. E to prove source of deposits. Accordingly, AO was not justified in making addition under section 68.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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