2017 (3) TMI 75 - AT - Income Tax

Addition u/s 68 - Held that - The assessee has raised loan of ₹ 2 lacs from Sh. Sachin Aggarwal and ₹ 3 lacs from Smt. Lata Aggarwal and during the examination by the Ld. CIT(A) Sh. Sachin Aggarwal has admitted to have given a sum of ₹ 2 lacs to the assessee during the AY 2011-12. I further find that Sh. Sachin Aggarwal and Smt. Lata Aggarwal even though have declared the same in their balance sheet, books of accounts and they are assessed to tax, which itself proves the identity, creditworthiness and genuineness of the transactions and hence, the addition in dispute is not sustainable in the eyes of law, therefore, the same is deleted. - Decided in favour of assessee.

Summary

Issues:
1. Addition of &8377; 200,000 in the name of Mr. Sachin Aggarwal under section 68.
2. Addition of &8377; 300,000 in the name of Mrs. Lata Aggarwal under section 68.

Analysis:
1. The assessee appealed against the order confirming the additions made by the AO under section 68. The AO observed that the assessee took interest-free loans from Mr. Sachin Aggarwal and Mrs. Lata Aggarwal, but failed to prove the identity, creditworthiness, and genuineness of the transactions. Consequently, the AO added &8377; 200,000 and &8377; 300,000 to the total income of the assessee. The CIT(A) partly allowed the appeal but sustained the additions, stating that the assessee did not satisfactorily explain the loans, thus invoking section 68 of the Income Tax Act.

2. The assessee contended that both Mr. Sachin Aggarwal and Mrs. Lata Aggarwal had declared the loans in their balance sheets, books of accounts, and were assessed to tax, proving the identity, creditworthiness, and genuineness of the transactions. The counsel presented a Paper Book with relevant documents supporting the transactions. During the examination, Mr. Sachin Aggarwal admitted to providing the loan to the assessee. The counsel requested the deletion of the disputed additions.

3. The Senior DR supported the orders of the lower authorities, stating that the CIT(A) had provided a well-reasoned order that did not require interference. After hearing both parties and examining the documents, the Tribunal noted that the loans were declared in the lenders' financial records and they were assessed to tax, establishing the genuineness of the transactions. The Tribunal referred to the precedent set in the case of Nemi Chand Kothari vs. CIT & Anr., emphasizing that the source of funds for the loans was not the concern of the assessee as long as the lenders declared the amounts in their accounts.

4. Based on the evidence presented and the legal precedent cited, the Tribunal concluded that the additions made by the AO were not sustainable in the eyes of the law. Therefore, the Tribunal deleted the disputed additions of &8377; 200,000 and &8377; 300,000. Consequently, the appeal of the assessee was allowed, and the order was pronounced in the open court on 10/02/2017.