Possessing Ration Card of low Economic Strata is not sufficient to prove Financial Status: ITAT [Read Order]

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the fact that the assessee possesses a ration card of low economic strata cannot be a sole basis to show the financial status.

Earlier, the Assessing Officer, while completing the assessment against the assessee, observed that she has received an amount of Rs. 3 lakhs from Smt. B. Nirmala as loan. Since the assessee agreed to offer it as income the Ld. AO made the addition of Rs. 3 lakhs by treating it as a bogus loan.

On appeal, the first appellate authority held that the assessee had furnished a confirmation statement from Smt. B. Nirmala before the Ld.AO. It was also revealed that the loan was obtained through cheque. However, the assessee did not produce the entire bank account of Smt. B. Nirmala in order to rule out the possibility of the cash being deposited by the assessee in the bank account of B.Nirmala to facilitate cheque payment to the assessee, therefore the Ld.CIT(A) doubted the genuineness of the transaction. Smt. B. Nirmala also possessed a ration card belonging to the lowest economic strata and was engaged in the activity of running a small shop and was never assessed to tax. Further, it was observed from the bank statement that the repayment of the loan by way cheque to Smt. B. Nirmala was instantly withdrawn from the bank account. Based on the above facts, the CIT(A) held in favor of the Revenue.

After analyzing the facts deeply, the Tribunal observed that it is apparent that Smt. B. Nirmala is engaged in the activity of running a small shop.

“Therefore, she has some source of income. Further, possessing a ration card of low economic strata does not categorically prove that the assessee does not have any resources to earn reasonable income or financially unsound. Moreover, apparently the entire transactions are made through the banking channel. Accumulating an amount of Rs. 3 lakhs by an individual engaged in small business activity is not an unrealistic factor. Keeping in view of the facts and circumstances of the case I am of the considered view that the loan transaction cannot be treated as bogus,” the Tribunal said.