2021 (1) TMI 665 - AT - Income Tax

Addition of unsecured loan as a gift - gift from unrelated persons treated as assessee s income u/s.56(vi) - CIT (A) has deleted the said addition - HELD THAT - AO has made addition in respect of unsecured loan as a gift purely on the basis of surmises and presumption, because her husband, Shri P.K. Jain, has also given unsecured loan which has been subsequently treated as gift by the assessee. Inferring the same yardstick, Assessing Officer has treated the loan taken from unrelated person as gift and has taxed u/s.56(vi). We concur with the finding and the observation of the ld. CIT(A) that, simply because husband has treated his loan as a gift to his wife, cannot be the reason for drawing a similar conclusion for unrelated parties that the other persons will also convert their loan to gift, especially when in the books of account amount has been reflected as loan. Assessee has brought on record that, these loans has been repaid back in the subsequent year, and therefore, amount which has been treated as loan in the books of account and has also been repaid back as a loan, same cannot be treated as a gift. We do not find any reason to interfere in the order of the ld. CIT (A), and therefore, the appeal of the Revenue is dismissed.

Summary

Issues:
- Appeal against the order of Ld. Commissioner of Income Tax (Appeals)-IX for the quantum of assessment passed u/s.153C read with Section 153A for the Assessment Year 2008-09.
- Treatment of unsecured loans as gifts by the Assessing Officer and subsequent deletion of the addition by Ld. CIT (A).

Analysis:

Issue 1: Appeal against the order of Ld. Commissioner of Income Tax (Appeals)-IX
The Revenue filed an appeal against the order dated 23.02.2017 by the Ld. Commissioner of Income Tax (Appeals)-IX for the assessment year 2008-09. The grounds of appeal raised concerns about the genuineness of loans taken by the assessee and the repayment timeline of the loans.

Issue 2: Treatment of unsecured loans as gifts
The Assessing Officer treated unsecured loans taken by the assessee as gifts from unrelated parties, totaling to ?1,67,40,000, and taxed it under section 56(vi). However, the Ld. CIT (A) deleted this addition, emphasizing that assessment cannot be based on presumption alone. The Ld. CIT (A) highlighted that loans cannot be equated to gifts under Section 56(vii) of the Income Tax Act, as loans involve an obligation to repay. The Ld. CIT (A) referred to various case laws to support this position. The Tribunal concurred with the Ld. CIT (A)'s findings, noting that the addition was made on surmises and presumption. The Tribunal agreed that just because the husband treated his loan as a gift does not imply a similar treatment for loans from unrelated parties. The Tribunal further noted that since the loans were repaid in the subsequent year, they cannot be considered as gifts. Consequently, the Tribunal dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the decision of the Ld. CIT (A) and dismissed the Revenue's appeal regarding the treatment of unsecured loans as gifts, emphasizing the importance of factual evidence and legal principles in tax assessments.