2001 (4) TMI 736 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 50,000 on account of a loan taken by the assessee.

Analysis:
The Assessing Officer raised concerns regarding the loan of Rs. 50,000 taken by the assessee from his sister-in-law, Smt. Balbir Kaur. The creditor admitted the loan during her deposition under section 131, stating her income from stitching work and teaching. The Assessing Officer doubted the creditor's creditworthiness due to lack of evidence supporting her income and questioned the source of the cash deposit in her bank account. Consequently, the Assessing Officer treated the amount as undisclosed income of the assessee.

In the first appeal, the ld. Commissioner (Appeals) supported the Assessing Officer's decision, emphasizing the need to prove the creditworthiness of the creditor for a genuine loan. The appellant contended that the loan was paid through an Account payee cheque and cited relevant judgments to support the genuineness of the transaction.

The Department challenged the creditworthiness of the creditor, highlighting the increasing cash in hand displayed in her Balance-sheets over the years, casting doubt on the sudden deposit into her bank account and subsequent loan to the assessee.

The Tribunal noted that the Department did not dispute the identity of the creditor or the genuineness of the loan transaction. The creditor's income had been accepted in previous assessments under section 143(1), and no cancellations were recorded. The Tribunal emphasized that the assessee had fulfilled the onus of proving the creditor's creditworthiness by providing relevant documents, shifting the burden to the Department to challenge the source of the source.

The Tribunal observed the timeline of events, indicating that the money was available with the assessee before the loan transaction, and the source of the cash credit in the books was explained as brought forward from the earlier year. Consequently, the Tribunal reversed the lower authorities' orders and deleted the addition, allowing the appeal filed by the assessee.