INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of unsecured loan - AO doubted source of loan amount in the hands of lender--Assessee proved identity, creditworthiness and genuineness

Assessee noticed that assessee had given loan of Rs. 7,50,000 to M/s. R.G. Consultants Pvt. Ltd. by cheque drawn on Bank Account maintained with Slandered Charted Bank. Prior to issuance of cheque of Rs. 7,50,000, there was credit of Rs. 3,50,000 and Rs. 4,00,000 in Bank Account of assessee. Assessee filed cash flow statement showing opening balance of Rs. 5,55,000. AO required assessee to explain source of above deposits in Bank Account. Assessee filed documentary evidences on record in support of contention. AO, however, noticed that assessee had received Rs. 4,00,000 from Federal Bank on 7-10-2008, source of which, was not explained. Accordingly AO made addition of amount considering it to be unexplained receipt in Bank Account of assessee. Assessee furnished copy of pass port of Shri Babu Jethani copy of residency visa in UAE of Shri Babu Jethani, copy of resident identity card and confirmation of unsecured laon. It was submitted that copy of passport duly stated that Shri Babu Jethani was a citizen of India having his residence in Ajmer, Rajasthan he was residing in Dubai, UAE and was a partner in Sheeba General Trading LLC and was able to give loan to assessee out of his source of income which was earned through general trading in Dubai. He has transferred the amount through Federal Exchange transaction by cheque. Held: Creditworthiness of lender even if not proved, it would not automatically give license to AO to make additions in the hands of recipient under section 68, unless that was proved that it was unexplained and unaccounted money of assessee which has been introduced in its books of account in the name of bogus/non-existent entities. In the instant case, the AO had not made any dent on these lines. On the other hand assessee had filed all the details and supporting documentary evidence to prove identity, genuineness and creditworthiness of loan party. Amount had been received through proper banking channels and for establishing the aforesaid fact, assessee had also submitted copy of bank statements. By submitting evidences and explanations, assessee had discharged initial onus for disclosing identity of loan provider by submitting copy of passport, confirmations, copy of resident identity card of Shri Babu Jethani. As evidences furnished by assessee remained uncontroverted, addition under section 68 could not be sustained.

Applied:Smt. Meena Nayyar v. ITO 2020 TAxPub(DT) 1815 (Dedl-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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