Addition u/s 69 of Income Tax Act shall not be made,  if assessee proves identity and creditworthiness of lenders in respect of loan taken for purchase of property: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi bench held that Income Tax Addition under Section 69 of the Income Tax Act, 1961 should not be made if assessee prove identity and creditworthiness of lenders in respect of loan taken for purchase of property.

Assessee, Ekta Garg, After filing the return of income,  during the assessment proceedings AO noted that Assessee had taken loan from 4 parties for purchase property after seeking explanation regarding the transactions AO concluded the assessment and made addition of Rs. 14850000/- as unexplained cash credit under Section 69 of the Income tax Act under the head "Income from other sources".

Aggrieved by the order, the assessee filed an appeal  before the Commissioner of Income Tax-Appeals [CIT(A)], who dismissed the appeal and confirmed the addition. Thereafter the revenue filed another appeal before the tribunal.

Before the bench, Gaurav Bansa, counsel for the assessee submitted that the assessee had produced all statements and details of lenders before the assessing officer but the Assessing Officer rejected the same by wrongly observing that the amount given by the assessee to these parties during earlier financial year is required to be proved without making any enquiries either from the assessee or from said two lenders.

Further, the AO did not make any enquiry in respect of the lenders. Further assessee successfully demonstrated identity and creditworthiness of lenders and genuineness of transaction regarding all four lenders.

R. Mohan Reddy, Counsel for the revenue,  submitted that CIT(A) rightly confirmed the addition as the assessee failed to prove source of investment in the property purchased during the relevant financial period.

The tribunal during the proceedings verifying the documents in respect of the four lenders and observed that the assessee filed all documents from where the loan was taken  and who are the entities etc . The AO and CIT(A) did not consider the documents for making the addition.

Assessee has successfully demonstrated and established identity and creditworthiness of said lender company and of transaction routed through bank. 

After considering  the facts submitted by both parties, the two member bench of Pradip Kumar Kedia (Accountant Member) and Chandra Mohan Garg (Judicial Member) observed that the creditworthiness of all four lenders and genuineness of transactions is clearly established by the assessee and there is no iota of doubt in this regard.

Therefore the bench allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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