2016 (5) TMI 766 - AT - Income Tax

Addition of unsecured loan received from his minor daughter and son u/s. 68 - Held that - The assessee has enclosed the complete bank statement from where it is clear that minor daughter Annica Phillips has advanced a sum of ₹ 1,35,000/- out of RBI Bond maturity and RBI Bond interest and also other deposits made. The assessee has also enclosed copies of RBI certificate issuing RBI bonds in the name of Rohan, minor son and Annica Phillips, minor daughter with repayment of 6.5% Saving Bonds 2003 and repayment of 7% Saving Bank Schemes 2002. These documents clearly establish the source of loan transaction, i.e., advancing of money by minor Annica Phillips and Rohan Phillips amounting to ₹ 13.50 lacs and ₹ 1.350 lacs respectively. On query from the Bench, the ld. Sr. DR stated that these documents were not filed before the A.O. but we find that the assessee has given certificate in its paper book that these were filed before the A.O. as well as CIT(A). The CIT(A) has particularly noted this fact in his order which is reproduced above. Further, these bank details were available before the A.O. from where these loans were given and maturity proceeds of RBI Bonds were deposited. In entirety of the facts and circumstances of the case, we are of the view that in the case of the above unsecured loan, the assessee is able to prove the creditworthiness and genuineness of the transaction, i.e., the immediate source of the transaction. In such circumstances, we feel that unsecured loan advanced by these two, minor son and minor daughter, to the assessee is explained and cannot be added as unexplained cash credit u/s. 68 - Decided1 in favour of assessee

Summary

Issues:
Appeals arising from CIT(A) orders confirming addition of unsecured loans received from minor children u/s. 68 of the Income Tax Act.

Analysis:
1. Common Issues in Appeals: The appeals by two separate assessees involved the confirmation of additions of unsecured loans received from their minor children under section 68 of the Income Tax Act. Both appellants contested the CIT(A)'s decision, citing the provision of loan confirmations, bank statements, and source of deposits as evidence. They argued that the loans were genuine and fully explained, emphasizing the lack of creditworthiness proof as the basis for the additions.

2. Assessment by AO and CIT(A): The Assessing Officer (AO) framed separate assessments for each appellant, making identical additions for unsecured loans from their minor children. The AO's rationale was the inability of the assessees to provide sufficient details to establish creditworthiness and genuineness of the transactions. The CIT(A) upheld the AO's decision, noting deficiencies in the loan confirmations and the lack of substantiated explanations from the appellants.

3. Appellants' Submissions: The appellants submitted additional evidence during the appeal process, including RBI Bonds, VDIS Certificates, and bank statements to support the initial sources of the loans. They argued that the minor children's loans were sourced from RBI Bonds maturity proceeds and other deposits, which were adequately documented. The appellants contended that the creditworthiness and genuineness of the transactions were proven through these submissions.

4. Appellate Tribunal's Decision: After considering the submissions and evidence, the Appellate Tribunal reversed the decisions of the lower authorities. The Tribunal found that the appellants had successfully demonstrated the creditworthiness and genuineness of the transactions involving unsecured loans from their minor children. The documentary evidence provided, including RBI Bonds, bank statements, and certificates, supported the immediate sources of the loans, leading to the allowance of the appeals.

5. Final Verdict: Consequently, the Appellate Tribunal allowed both appellants' appeals, overturning the additions made by the AO under section 68 of the Income Tax Act. The Tribunal's decision was based on the established creditworthiness and genuineness of the transactions, supported by the documentary evidence presented by the appellants.

This detailed analysis encapsulates the legal judgment involving the confirmation of additions of unsecured loans received from minor children under section 68 of the Income Tax Act, highlighting the arguments, assessments, submissions, and final decision rendered by the Appellate Tribunal.