The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that no addition under section 68 of the Income Tax Act cannot be invoked only on the basis of mere suspicion.
The assessee, the son of Shri Madhukar Rathi, filed his income tax return for the relevant assessment year. However, the Assessing Officer rejected the return by invoking Section 68 of the Income Tax Act, 1961 and held that the assessee has Running Account in matters of taking and repayment of loans from his father Shri Madhukar Rathi. Further, it is also discussed that Shri Madhukar Rathi (father) in turn takes and repays loans from Birla family. The AO also observed that despite the filers income tax return by concerned loan creditors, banking transactions, the loan transactions are not genuine.
The assessee failed to secure relief from the first appellate authority, approached the Tribunal.
While holding in favour of the assessee, the Tribunal noted that the assessee has Running Account in matters of taking loans from Shri Madhukar Rathi (father) and Shri Madhukar Rathi in turn-taking loans from Rahul Anil Birla and Nand Sales Corporation.
It was also observed that the said transactions are undisputedly through banking channels and the assessee repaid to the tune of Rs.1,25,50,000/- to Shri Madhukar Rathi during the relevant year.
“So, it is the case of taking loans and repayment of loans through a Running Account. Regarding the balance of the loan in the Running Account, it is also an undisputed fact that, in past too, no addition of these loans amounts were added by AO despite the similar loan transactions with Shri Madhukar Rathi and, in turn, Shri Madhukar Rathi with Rahul Anil Birla, Rakesh N. Birla and Nand Sales Corporation. In our view, therefore, it is the case of mere suspicion of the AO that led to invoking of the provisions of section 68 of the Act. Otherwise, there is no evidence with Revenue to demonstrate that it is the case of money laundering, non-discharge of onus by the assessee. With the loans taken from Birlas & others, Shri Madhukar Rathi is capable of providing a loan of Rs.79 lakhs to the assessee. AO has not disturbed the loans in the cases of Birlas & others. In our view, there is no case of addition u/s 68 of the Act. The additions made by the AO are not sustainable,” the Tribunal said.
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