2003 (5) TMI 466 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the assessment year 1990-91 and pertains to cross appeals by the assessee and revenue against the order passed by the CIT(A)-II, Agra.

Assessee's Appeal (Appeal No. 5205/Delhi/1995):
The issue revolves around the addition of Rs. 71,000 on account of loan creditors and disallowance of interest of Rs. 5,135. The Assessing Officer found discrepancies in the credits on the balance sheet, leading to scrutiny of the loans raised from friends and relatives for business purposes. The CIT(A) concluded that certain amounts advanced by cheque were genuine, directing the deletion of Rs. 55,000 while confirming the balance of Rs. 71,000 and interest.

The assessee argued that the loans were necessary for starting a new business and were obtained from close relatives and friends due to a lack of funds from previous ventures. Various legal precedents were cited to support the genuineness of the transactions. The Department contended that the funds were channeled through bank accounts suspiciously, indicating undisclosed income. However, the Tribunal found the creditors' identities established, transactions confirmed, and the small loan amounts justified, ultimately allowing the assessee's appeal.

Departmental Appeal (Appeal No. 5332/Delhi/1995):
The only ground of appeal was against the relief granted by the CIT(A) regarding unexplained cash creditors. Following the reasoning in the assessee's appeal, the departmental appeal was dismissed.

In conclusion, the Tribunal allowed the assessee's appeal, reversing the CIT(A)'s order on the addition of loan creditors and interest. The departmental appeal was dismissed based on similar considerations.