2018 (9) TMI 701 - AT - Income Tax

Disallowance on a repayment of loan to Assessee s namesake in, Bangalore - Held that - Repayment done by the assessee was from its overdraft account and there was no use of any funds from its partner for such repayment. The addition was made on a wrong presumption by AO. The said addition in our opinion was rightly deleted by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue

Summary

Issues:
- Disallowance of loan repayment
- Source of funds for loan repayment

Analysis:
1. Disallowance of loan repayment: The appeal was filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) deleting a disallowance of ?3,61,07,920 made by the Assessing Officer on a repayment of loan to Assessee's namesake in Bangalore. The Revenue contended that the assessee, a trader in steel, had repaid a loan to another concern named M/s. Jindal Steels, Bangalore. The Departmental Representative argued that the assessee failed to explain the source of funds used for the repayment, specifically the amount claimed to have been received from one of its partners, Shri. Mohanlal Jindal. The Revenue claimed that the assessee could not substantiate the source of ?3,61,07,920 out of the total loan repayment of ?7,65,76,906.

2. Source of funds for loan repayment: The Authorized Representative supported the order of the Commissioner of Income Tax (Appeals) by stating that the assessee had an overdraft account with State Bank of India, with a drawing power of ?13,00,00,000. It was argued that the payment to M/s. Jindal Steels, Bangalore was made through RTGS transfer from this overdraft account, indicating that the assessee had sufficient sources for the repayment even without considering the credit from Shri. Mohanlal Jindal. The Authorized Representative presented the statement of the account to support this claim.

3. The Tribunal considered the contentions of both parties and reviewed the orders of the authorities below. The Assessing Officer had made an addition of ?3,61,07,920, part of the repayment of the loan to M/s. Jindal Steels, Bangalore, due to the alleged lack of sufficient source for this amount. However, it was noted that the assessee had an overdraft limit of ?13,00,00,000 and had transferred ?3,61,07,920 from this account to M/s. Jindal Steels, Bangalore even before receiving the sum of ?3,00,00,000 from its partner, Shri. Mohanlal Jindal. The Tribunal found that the repayment was made from the overdraft account without utilizing funds from the partner, indicating that the addition made by the Assessing Officer was based on a wrong presumption. Consequently, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the disallowance.

4. Conclusion: The Tribunal dismissed the appeal of the Revenue, affirming the deletion of the disallowance of the loan repayment by the Commissioner of Income Tax (Appeals). The order was pronounced on August 7, 2018, at Chennai.