No addition since Assessee furnished Identity of Creditors and Entire Loan transaction was done through Regular Banking Channel: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) recently held that addition under section 69A of the Income Tax Act, 1961 cannot be made since the identity of the creditors have been established and Entire loan transaction was done through regular banking channel.

The bench comprising Saktijit Dey, Judicial member, and Rajesh Kumar, Accountant member was considering the case between Dy. Commissioner of Income Tax and M/s. Karthik Construction Company.

In Present case, the Assessing Officer raised suspicion on the loan repayment by doubting the genuineness of the unsecured loan availed by the assessee against which such loan repayment was made. Accordingly, AO made addition under section 69 of the Act and held that the repayment of the loan to parties whose creditworthiness is doubtful cannot be held to be genuine.

The assessee challenged the same before first appellate authority and they admitted that in the earlier years wherein such unsecured loans were availed by the assessee no doubts were raised by the Assessing Officer and the unsecured loans have been accepted.

The first appellate authority held that when the identity of the creditors has been established and the entire loan transaction was done through regular banking channel, addition under section 69A of the Act in the impugned assessment year cannot be made.

The Revenue appealed before tribunal challenging the decision of CIT (A) and relied upon the decision of the Supreme Court in CIT v/s K. Chinnathamban and contended that source and repayment of the aforesaid loan are doubtful accordingly AO rightly invoked the section 69A of the Act.

The bench made a clear statement regarding the section 69 of the Act that the addition can only be made when the assessee is found to be in possession of money bullion jewellery, etc., not recorded in his books of account. The bench also noted this is not the case of loan repayment is not recorded in the books of accounts or fund utilized in repaying the loan is doubtful.

Accordingly, the bench held that the decision of Commissioner (Appeal) has to be sustained since the case in dealing was not with regard to the recording of repayment of the loan or with respect to the source of such fund.