2012 (9) TMI 431 - AT - Income Tax

Loan from creditor deemed as income u/s 68 Weather assessee is under the obligation to prove source of sum deposited in the creditor s bank account Loan made by creditor through cheque - Credit entry shown in the bank statement of the assessee AO contended that the source of the loan was sale of property - Assessee also submit PAN card, bank statement, copy of ITR for said year and proof of residential address and source of loan Creditor receive an advance from another person to finance the loan to assessee Held that - It was not necessary that the amount advanced by the creditor had to be out of the current years income only, as the returned income of creditor shown off lesser income as compare to loan given to assessee. Bank statement of creditor clearly shows the deposit of said sum from another person. AO has neither conducted any inquiry, nor had any material been brought on record to doubt the source of the deposit entries in the creditor s account. Assessee had duly discharged his onus of establishing the identity and credit worthiness of the creditor, as well as the genuineness of the transaction. The findings of fact recorded therein remained irrational. Decision against revenue.

Issues:
- Discharge of onus under Section 68 of the IT Act regarding unsecured loan received by the assessee.
- Addition of Rs. 10 lacs as deemed income under Section 68 of the IT Act.
- Appeal against the order of the CIT (A) deleting the addition made by the Assessing Officer.

Discharge of Onus under Section 68 of the IT Act:
The case involved an appeal by the department for Assessment Year 2008-09 against the order of the CIT (A) regarding the source of an unsecured loan received by the assessee. The Assessing Officer treated the unexplained cash credit of Rs. 10 lacs as deemed income of the assessee under Section 68 of the IT Act. The CIT (A) deleted this addition, stating that the assessee had discharged the onus of proving the identity and credit worthiness of the creditor, as well as the genuineness of the transaction. The CIT (A) considered various documents provided by the assessee, including the creditor's PAN card, income tax return, bank statement, and proof of residential address. The CIT (A) also noted that the cheque issued by the creditor was debited to the assessee's account, indicating the genuineness of the transaction.

Addition of Rs. 10 Lacs as Deemed Income:
The Assessing Officer had raised concerns about the credit worthiness of the creditor, as her reported income did not seem sufficient to support the loan amount given to the assessee. However, the CIT (A) disagreed with this assessment, stating that the creditor's income for the relevant year did not necessarily have to match the loan amount advanced. The CIT (A) highlighted that there were deposits in the creditor's account prior to the loan transaction, and the source of these deposits was not adequately questioned or investigated by the Assessing Officer. Additionally, the CIT (A) considered a cheque deposit from another individual to the creditor, further supporting the genuineness of the transaction.

Appeal Against CIT (A) Order:
The department appealed the CIT (A) order, arguing that the CIT (A) erred in accepting the source of the loan as the sale of property without sufficient documentary evidence. The department also contended that the CIT (A) should have remanded the matter to the Assessing Officer for further inquiries. However, the ITAT upheld the CIT (A) order, emphasizing that the CIT (A) had provided a detailed and well-reasoned decision. The ITAT found no grounds to interfere with the CIT (A) order, confirming the deletion of the Rs. 10 lacs addition as deemed income. Consequently, the appeal filed by the department was dismissed.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the final decision reached by the ITAT regarding the disputed unsecured loan and deemed income addition.

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