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2015 (7) TMI 1381 - AT - Income TaxAdditions u/s 68 on account of unsecured loan - HELD THAT - In the case of loan from Champa Lal Baid, the assessee has filed a copy of the acknowledgment of return, copy of the bank statement of assessee as well as affidavit. The TDS on interest has also been deducted. This person has issued a cheque from the bank account. The immediate source of cheque is receipt of cheques stated to be receipt of loan from another party - Thus this sum cannot be added to the income of the assessee because the depositor is a regular Income-tax assessee. The money was deposited in cheques in his bank and the Revenue cannot investigate the source of source. The second loan was taken from Shri Parkash Joshi onus to prove the creditworthiness of depositor was on the assessee which has not been properly discharged. In this background, in our opinion, the loan from Shri Parkash Joshi cannot be accepted. Similarly in respect of loan from Shri Chandra Kanta Joshi, if the loan of ₹ 5 lakhs from Shri Champa Lal Baid should have been accepted and other two loans are required to be added to the income of the assessee. We uphold the order of Ld. CIT(A) in respect of Parkash Joshi and Shri Chandra Kanta Joshi and confirm the addition on account of loan for ₹ 2,50,000/- each. However, we set aside the order of Ld. CIT(A) partly by deleing the addition in the case of Champa Lal Baid. Assessee appeal is partly allowed.
Issues Involved:
1. Addition of Rs. 5,00,000/- under Section 68 on account of an unsecured loan from Sh. Champa Lal Baid. 2. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Sh. Parkash Joshi. 3. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Smt. Chandra Kanta Joshi. Detailed Analysis: 1. Addition of Rs. 5,00,000/- under Section 68 on account of an unsecured loan from Sh. Champa Lal Baid: During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had taken unsecured loans from various parties, including Rs. 5,00,000/- from Sh. Champa Lal Baid. The AO did not accept the explanation justifying the loans, stating that the assessee failed to prove the genuineness of the transaction and the creditworthiness of the creditor. The AO observed that the person advancing the loan had a salary of merely Rs. 48,000/- per annum, and the loan was advanced after receiving a declaration under Section 197A, indicating the person did not have taxable income. Before the CIT(A), the assessee contended that the identity, genuineness, and creditworthiness of the creditors were proved by submitting copies of returns, bank statements, and affidavits. However, the CIT(A) upheld the AO's decision, stating that merely proving the identity and payment by cheque does not establish the creditworthiness of the creditor. Upon appeal, the Tribunal considered the rival submissions and noted that the depositor, Sh. Champa Lal Baid, was a regular income-tax assessee, and the loan was returned through an account payee cheque. The Tribunal referred to the decision of the Hon'ble Punjab & Haryana High Court in CIT v Laul Transport Corporation, which held that once the initial source is proved, the Revenue cannot investigate the source of the source. Consequently, the Tribunal concluded that the sum of Rs. 5,00,000/- could not be added to the income of the assessee, as the depositor was a regular income-tax assessee and the money was deposited through cheques. 2. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Sh. Parkash Joshi: The AO also added Rs. 2,50,000/- taken as an unsecured loan from Sh. Parkash Joshi, citing similar reasons as in the case of Sh. Champa Lal Baid. The assessee argued that the loan was taken from a regular income-tax assessee, and the necessary documents were submitted. However, the Tribunal noted that the relevant portion of the bank statement was not filed, and the first entry showed a debit entry in respect of cheques issued to the assessee after depositing cash. The Tribunal referred to the decision in ACIT Vs. Ekta Construction Co., which emphasized that the onus to prove the creditworthiness of the depositor lies with the assessee. Since the cheque was issued after depositing cash, the Tribunal concluded that the loan from Sh. Parkash Joshi could not be accepted, and the addition was upheld. 3. Addition of Rs. 2,50,000/- under Section 68 on account of an unsecured loan from Smt. Chandra Kanta Joshi: Similarly, the AO added Rs. 2,50,000/- taken as an unsecured loan from Smt. Chandra Kanta Joshi. The assessee contended that the loan was genuine and submitted the necessary documents. The Tribunal observed that a sum of Rs. 40,000/- was deposited in cash immediately before giving the loan, and another entry of Rs. 2,40,000/- was unexplained. Referring to the principles established in previous cases, the Tribunal concluded that the creditworthiness of Smt. Chandra Kanta Joshi was not proved, and the addition was upheld. Conclusion: The Tribunal partly allowed the appeal, deleting the addition of Rs. 5,00,000/- in the case of Sh. Champa Lal Baid, while upholding the additions of Rs. 2,50,000/- each in the cases of Sh. Parkash Joshi and Smt. Chandra Kanta Joshi. The final order was pronounced in the open court on 03/07/2015.
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