INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Claim of receipt by way of loan from the son-in-law of assessee -

Assessee was MD of M/s. E and had invested a sum in the said company. AO asked for explanations with regard to the above said investment. Assessee explained that the said company had engaged a person Mr. A for arranging loan from foreign sources. In that connection, M/s E paid a sum to Mr. A and further a sum was paid by Mr. R, who was son in law of assessee. It was claimed that Mr. R had advanced the amount to Mr. A on behalf of the company. Mr. A failed to arrange foreign funds and hence, the M/s E demanded back the amount paid to him. Criminal proceedings were also initiated against the Mr. A and finally the dispute was settled out of Court. Assessee could not furnish any evidence in support of receipt of loan from his son in law. Hence, AO accepted the credit to the extent of part amount i.e. the amount paid by the above said company and accordingly assessed the balance amount as income of the assessee under section 68. CIT(A) granted relief of part amount from the addition made by AO, being the assessee's share of reimbursement of expenses and confirmed the balance addition. Held: ITAT stated that the litigation expenditure of an amount being reimbursement claimed to be given to Mr. R was connected with the loan given by Mr. R to the person appointed by assessee. Assessee had not produced the criminal complaint to prove that a sum was given by way of loan by the son-in-law of the assessee nor had the assessee proved the amount of sum was given to Mr. A. Since the ITAT's order in [[ITA No.71(Coch)/2016, dt. 18-4-2016]] had clearly stated that the sum received from son-in-law was to be sustained if the documents relating to criminal proceedings did not contain anything about the claim of receipt of the amount by way of loan from the son-in-law of the assessee, addition was sustained because assessee failed to furnish the documents relating to the criminal proceedings.