2009 (11) TMI 337 - HC - Income Tax

Undisclosed Income-Loan- The assessee engaged in the business of investment in securities, filed return for the assessment year 2001-02 declaring loss of Rs. 26,50,670. Assessing officer treated this as income of the assessee from undisclosed sources and made additions under section 68 of the Act. The Commissioner (Appeals) upheld the order passed by Assessing officer. Tribunal held that since the genuineness of transaction was not proved by the assessee the amount found credited in the name of the director and his daughter in the books of the assessee in the year under appeal was to be charged to tax as the income of the assessee for that year. Held that- the Tribunal rightly arrived at a finding of fact on the analysis of all the relevant material on record that genuineness of the transaction had not been established and the assessee had failed to independently proves the same. Dismiss the appeal.

Summary

Issues Involved:
Assessment of unsecured loans under section 68 of the Income-tax Act, 1961 for the assessment year 2001-02.

Detailed Analysis:

1. Assessment of Unsecured Loans:
The appellant company declared a loss in the return for the assessment year 2001-02 and showed unsecured loans from its director and another individual. The Assessing Officer treated these loans as income from undisclosed sources and made additions under section 68 of the Income-tax Act. The Commissioner of Income-tax (Appeals) recorded statements from the director and others involved. The remand report highlighted that the loans were advanced by a different entity, not the individuals claimed by the appellant. The Commissioner upheld the assessment order based on discrepancies in statements and lack of evidence supporting the appellant's claims.

2. Appeals and Tribunal Decision:
The appellant appealed to the Income-tax Appellate Tribunal (ITAT), which dismissed the appeal, stating the genuineness of the transaction was not established. The Tribunal found that the loans did not belong to the individuals claimed by the appellant, leading to doubts about the authenticity of the transaction. The Tribunal emphasized the need for the appellant to independently prove the genuineness of the transaction, considering the entire context and circumstances surrounding the loans.

3. Final Decision and Conclusion:
The High Court upheld the Tribunal's decision, stating that the appellant failed to establish the genuineness of the transaction. The Court analyzed the surrounding circumstances, including the lack of written agreements, the improbability of interest-free loans of such magnitude, and the absence of benefit to the alleged creditors. The Court concluded that the appellant did not meet the test of human probabilities in proving the transaction's authenticity. Consequently, the additions under section 68 of the Income-tax Act were upheld, and the appeal was dismissed as no question of law arose.