2022 (11) TMI 13 - AT - Income Tax

Addition u/s. 68 - unsecured loan received by the assessee - HELD THAT - The entire loan has been repaid by the assessee in A.Y.2011-12. The search in the case of Pravin Jain happened in Oct. 2013 wherein it transpired that he was engaged in providing accommodation entries through various entities and one such entity was M/s. Kunal Gems. The transaction of receipt of loan and repayment of loan had happened prior to the search action in the case of Pravin Jain. Once the loan transactions are settled, the assessee obviously will not have the latest address of the lender that to after a gap of few years. It is not the case of the revenue that the assessee is having regular transactions with M/s. Kunal Gems. Merely because the notice issued u/s.133(6) to M/s. Kunal Gems by the ld.AO had returned unserved, the genuine loan transaction like this carried out by the assessee cannot be doubted and disbelieved. Hold that assessee had duly proved all the three ingredients of section 68 of the Act Viz. Identity of lender, credit worthiness of the lender and genuineness of transaction. The interest claimed by the assessee in the sum of Rs. 15,016/- on the said loan has been allowed as deduction by the revenue in A.Y.2007-08. Hence, have no hesitation to direct the ld.AO the delete the addition made u/s. 68 - Appeal of the assessee is allowed.

Summary

Issues involved:
Challenge to the validity of reassessment, addition made under section 68 of the Income Tax Act regarding unsecured loan received, delay in filing appeal.

Challenge to the validity of reassessment:
The appeal addressed a delay in filing by one day, which was condoned after reviewing the reasons provided. The first ground raised by the assessee challenging the validity of reassessment was not pressed by the representative during the hearing and was dismissed accordingly.

Addition under section 68 - Unsecured loan received:
The main issue revolved around challenging the addition made under section 68 of the Income Tax Act concerning an unsecured loan received by the assessee from a specific entity. The assessee provided various documents to prove the genuineness of the transaction, including confirmations, bank statements, and ledger accounts. Despite the lender not being produced for examination, the loan was treated as unexplained cash credit. However, the tribunal found that the assessee had borrowed the loan through regular banking channels and had repaid it with account payee cheques. The tribunal concluded that the assessee had proven the identity of the lender, creditworthiness, and genuineness of the transaction, directing the deletion of the addition made under section 68.

Delay in filing appeal:
The delay in filing the appeal was condoned after reviewing the reasons provided in the condonation petition, and the appeal was admitted for adjudication.

In conclusion, the tribunal allowed the appeal of the assessee, directing the deletion of the addition made under section 68 of the Income Tax Act regarding the unsecured loan received. The decision was based on the assessee's ability to prove the genuineness of the transaction through various documents and evidence, despite the lender not being available for examination. The delay in filing the appeal was condoned, and the case was decided in favor of the assessee.