2009 (1) TMI 61 - HC - Income Tax

Unexplained credit - assessee had moved an application u/s 131, requiring the AO to summon the loanees (creditors) - since the Assessing Officer had taken no action, the assessee had not been afforded an adequate opportunity of discharging the onus placed on his shoulder u/s 68 - it was imperative for the AO to summon the loanees, and to record their statements u/s 131 Tribunal is justified in remanding the matter and requiring the AO to issue notices to loanees u/s 131

Summary

The High Court of Punjab and Haryana, in the 2009 judgment, delivered by J.S. KHEHAR and, J.S. KHEHAR and NAWAB SINGH JJ., considered an appeal by a respondent-assessee who was assessed to tax with unexplained credit of Rs.29 lacs treated as income under section 68 of the Income Tax Act, 1961. The Assessing Officer also disallowed a deduction of Rs.3,25,735 claimed as interest on loans. The respondent provided confirmation letters and loan details to the officer, revealing the source of the loans. The loans were extended through normal banking channels, with similar transactions in previous years. The Revenue contended that the respondent failed to prove the creditworthiness of the loanees, leading to the loans being treated as income. The Income Tax Appellate Tribunal's order remanded the case to the Assessing Officer, requiring him to summon the loanees and record their statements under section 131 of the Act to verify the loan details. The court upheld the Tribunal's decision, stating that the Assessing Officer needed to verify the loan sources before determining the veracity of the submission. The appeal was dismissed, pending the outcome of the loan verification process.