2018 (4) TMI 1372 - HC - Income Tax

Addition u/s 68 on account of unsecured loans - Held that - The matter pertains to some six years back and it has been explained by the Assessee that the loan in question is outstanding due to the financial crunch being faced by the appellant firm. We find substance in the contentions of the learned counsel for the Assessee/appellant before us as the material/ reply placed by the Assessee before the Assessing Officer has not been considered and no opportunity has been given to him to explain his position, therefore, the view taken by the Tribunal is perverse, accordingly, this question is answered in favour of the Assessee/ appellant before us. Addition of unexplained expenditure - Held that - Such addition was already made in the assessment year 2006-07 and not the year in question. Simply by saying that this was a bogus liability for assessment year 2006-07 which is cleared in assessment year 2007-08, it must be repaid out of unrecorded sources is only a presumption without any evidence brought on record to that effect. In the upshot, this addition made by the Assessing Officer is held to be bad and needs to be deleted as, in terms of well settled law, the same amount cannot be taxed for two separate years. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?15,00,000/- as unexplained unsecured loan under Section 68 of the Income Tax Act.
2. Addition of ?18,30,000/- as unexplained expenditure under Section 69C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition of ?15,00,000/- as Unexplained Unsecured Loan:
The Assessee, a partnership firm, had declared an unsecured loan of ?1,50,00,000/- from M/s Himachal Futuristic Co. Ltd. raised in the financial year 2001-02. The Assessing Officer (AO) added ?15,00,000/- to the Assessee's income for the assessment year 2007-08 under Section 68 of the Income Tax Act, citing the lack of repayment details and documentary evidence. The Commissioner of Income Tax (Appeals) deleted this addition, stating that the loan had been consistently carried forward since 2001-02 and could not be considered as income for 2007-08. The Tribunal reversed this decision, arguing that the Assessee failed to establish the genuineness of the loan and its relationship with the creditor. The High Court, however, found that the loan was indeed carried forward and not a fresh credit, thus not applicable under Section 68 for the year 2007-08. The Court upheld the deletion of the addition by the Commissioner of Income Tax (Appeals).

2. Addition of ?18,30,000/- as Unexplained Expenditure:
The AO added ?18,30,000/- to the Assessee's income as unexplained expenditure under Section 69C, citing the failure to establish the identity of the creditor, Ghulam Nabi, and the mode of repayment. The Commissioner of Income Tax (Appeals) deleted this addition, noting that the amount was already added in the assessment year 2006-07 and could not be taxed again. The Tribunal reversed this decision, stating that the Assessee failed to provide documentary evidence of repayment. The High Court found that the addition was indeed made in the previous assessment year and taxing the same amount again would result in double taxation. The Court upheld the deletion of the addition by the Commissioner of Income Tax (Appeals).

Conclusion:
The High Court concluded that the Tribunal erred in sustaining the additions of ?15,00,000/- and ?18,30,000/-. The Court upheld the findings of the Commissioner of Income Tax (Appeals) and set aside the Tribunal's order, deleting the additions from the Assessee's income for the assessment year 2007-08. The appeal was allowed in favor of the Assessee.