2019 (4) TMI 1961 - AT - Income Tax

Unexplained income of the assessee u/s 68 - undisclosed loan raised by the assessee - HELD THAT - Order of the CIT(A) reveals that the assessee had duly furnished not only the bank statement of Shri Sham Singh, creditor but also the bank statement of Sunil Kumar Goel, HUF from whom Shri Sham Singh had taken loan which was further advanced to the assessee. All the transact ions were routed through banking channel. The confirmations of the aforesaid transact ions were duly filed before the Assessing officer, whereby, not only Sunil Kumar Goel, HUF confirmed the loan transactions with Shri Sham Singh but also Shri Sham Singh further confirmed the loan transactions with the assessee. So far as the question that the CIT(A) raised that why a person would take loan on interest to pay it further interest free to the assessee, is concerned, we are of the view, that the aforesaid fact is not sufficient to hold that it was the own money of the assessee which was routed through Shri Sham Singh. Had it been so, in those circumstances, Shri Sham Singh would not have required to pay the interest to Shri Sunil Kumar HUF . Whether Shri Sham Singh had paid interest on the loan amount to Shri Sunil Kumar Goel HUF or not, in our view, is not relevant and cannot form the basis to hold that it was the own money of the assessee routed though Shri Sham Singh. So far as the view of the Ld. CIT(A) that it was not clear as to from where Shri Sham Singh returned the money to Sh. Sunil Kumar Goel HUF , in our view, that is a matter of subsequent transaction between Shri Sham Singh and Shri Sunil Kumar Goel HUF and the assessee is not supposed to explain about that subsequent transact ion. CIT(A) did not choose to summon and cross examine of Shri Sham Singh about any subsequent transaction as it was only Shri Sham Singh who could have explained the source of the returned money to Shri Sunil Kumar Goel HUF. The said transaction however, is not related to the appellant and thus he is not supposed to answer that quest ion. The assessee in this case has not only duly proved the transact ion but has also proved the source of the aforesaid loan amount in the hands of the creditor.- Decided in favour of assessee.

Summary

Issues:
1. Addition of undisclosed loan as unexplained income under section 68 of the Income-tax Act, 1961.

Analysis:
The judgment involves an appeal by the assessee against the Commissioner of Income Tax-2, Ludhiana's order confirming the addition of a loan as unexplained income under section 68 of the Income-tax Act, 1961. The Assessing Officer had added the loan amount to the assessee's income as unexplained due to lack of bank statement evidence. However, during the appeal, the assessee provided bank statements, confirmations from the creditor, and additional details regarding the loan transaction. The CIT(A) directed the assessee to produce further evidence, which was duly submitted, including accounts of the creditor and bank statements. The CIT(A) observed discrepancies in the transaction, such as interest payments, and concluded that the assessee failed to establish the creditworthiness of the creditor, hence confirming the addition.

Upon appeal to the Tribunal, it was noted that all transactions were routed through the banking channel, with confirmations provided by both the creditor and the assessee. The Tribunal disagreed with the CIT(A)'s reasoning that the loan amount was the assessee's own money routed through the creditor due to interest payments. The Tribunal held that the source of subsequent transactions was not the assessee's concern, and the assessee had sufficiently proven the transaction and the source of the loan amount. Consequently, the Tribunal found no justification for the addition made by the lower authorities and ordered its deletion, allowing the appeal of the assessee.

In conclusion, the Tribunal overturned the CIT(A)'s decision, emphasizing that the assessee had adequately proven the legitimacy of the loan transaction and the source of the loan amount, leading to the deletion of the addition of the undisclosed loan as unexplained income under section 68 of the Income-tax Act, 1961.