The Tax Publishers2021 TaxPub(DT) 0529 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68

AO himself observed that unsecured loan was from director of company and all the transactions were through banking channel. Therefore, identity and creditworthiness was already proved considering the fact that these transactions were carried out throughout the year and it was accepted fact that Mr. Vivek was director of assessee-company. Coming to genuineness of the transaction, there is no bar in the IT Act that assessee cannot deal or take unsecured loan from Director. Addition under section 68 was far-fetched and loan transaction with director could not be termed as non-genuine. Therefore, AO was not justified in making addition under section 68.

Income from undisclosed sources - Addition under section 68 - Receipt of loan from director -

Assessee-company had taken unsecured loan from its director Mr. Vivek. AO required assessee to submit documents to prove genuineness of the transactions. Assessee submitted bank statement and income-tax return. Assessee had not submitted balance sheet and confirmation of loan from director. AO could not verify nature of transaction, whether it was out of accumulated capital. Since assessee had not submitted balance sheet and confirmation, AO treated this transaction as unexplained credit since assessee failed to substantiate the identity, creditworthiness and genuineness of the transaction. Held: AO himself observed that unsecured loan was from director of company and all the transactions were through banking channel. Therefore, identity and creditworthiness was already proved considering the fact that these transactions were carried out throughout the year and it was accepted fact that Mr. Vivek was director of assessee company. Coming to genuineness of the transaction, there is no bar in the IT Act that assessee cannot deal or take unsecured loan from director. Addition under section 68 was far fetched and loan transaction with director could not be termed as non-genuine. Therefore, AO was not justified in making addition under section 68.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15


INCOME TAX ACT, 1961

Section 69C

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