INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of unsecured loan - Use of Information collected at back of assessee

AO treated loan amount received by assessee as unexplained credit under section 68 on the ground that addressees of creditor companies were same and transactions could be said to have been managed by assessee. Also, letters sent to two parties were returned unserved by postal authorities with the remarks 'Not Known” and in response to Summons/Commission under section 131, concerned AOs at Kolkata reported against assessee company that the transaction was not genuine. Held: Whatever material was collected by AO in view of report of the Inspector and concerned AOs of those parties at Kolkata, on the basis of summons issued to them under section 131, was never supplied to assessee and assessee was not allowed to cross-examine the Inspector or material collected at his back at any stage. Therefore, such material collected at the back of the assessee cannot be read in evidence against assessee especially when assessee filed copy of the ITR of creditors along with their assessment orders under section 143(3), their audited balance-sheet, confirmations to the receipt of loan, bank statement and confirmation of subsequent year to show repayment of loans, etc. Assessee paid interest on these loans and deducted TDS and interest payment had been allowed as deduction. Therefore, AO in the absence of further enquiry conducted by him, was not justified in making addition of loan amount under section 68.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

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