2011 (9) TMI 1209 - AT - Income Tax

Summary

Issues Involved: Appeal against addition of loan received under Section 143(3) of the Income-tax Act, 1961.

Summary:
The Assessee appealed against the addition of Rs. 1 lakh on account of a loan received from Shri Manish Jain. The Assessing Officer (AO) added the amount under Section 68 of the Act due to the Assessee's failure to provide Shri Manish Jain's bank account copy. The CIT(A) upheld the addition, stating that Shri Manish Jain's bank statement showed cash deposits before issuing the cheque. The Assessee contended that the responsibility is discharged once the investment source is established, citing relevant court decisions. The Assessee provided loan confirmation and bank statements, demonstrating the genuineness of the transaction and creditworthiness of the creditor. The Tribunal found that the Assessee fulfilled the primary onus of proving identity, genuineness, and creditworthiness, hence no addition was warranted. The appeal was allowed.

This judgment emphasizes the importance of establishing the identity, genuineness, and creditworthiness of loan transactions under Section 68 of the Income-tax Act, 1961. It highlights that once the Assessee proves the source of investment, their responsibility is fulfilled. The Tribunal stressed the need for proper enquiry by the AO before making additions under Section 68 and the Assessee's obligation to provide relevant documents to support their case. The decision underscores that the source of the source cannot be inquired into and that the burden of proof shifts once the Assessee demonstrates the legitimacy of the transaction.