The Income Tax Appellate Tribunal (ITAT) Kolkata Bench deleted the addition made under Section 69 of Income Tax Act, 1961 on account of gold loan obtained from partner which was recorded under books of account.
Assessee, H.K. Dutta & Co is a partnership firm engaged in the business of manufacturing and sale of gold jewellery through showrooms located at Bowbazar and Garia. The assessee filed the return of income electronically for the assessment year. Thereafter, the assessee’s case was selected for scrutiny.
During the proceedings, the AO found that one of the partners of the assessee firm Mr. Pradip Kumar Gupta, gave gold loan weighing 4132.20 grams during the period 1997-98 and the said gold was declared by Mr. Pradip Kumar Gupta under the VDIS scheme.
The AO also ascertained the value of the difference of the loan amount as per the prevailing rate of gold and observed that Mr. Pradip Kumar Gupta, has not reflected the said increase of gold loan in his income tax return nor any wealth tax return has been filed him.
Further, the AO observed that the gold belongs to the assessee firm and it is using it as a stock in trade since inception.
Thus, the assessee firm is the owner of the stock in trade and difference in the valuation in VDIS declaration and the present value of gold i.e. Rs.1,05,57,773/- deserves to be added as income under Section 69 of the Income Tax Act.
Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax Appeals (CIT(A)), who upheld the action of AO. Thus, the assessee filed the appeal before the tribunal.
During the appeal proceedings, the tribunal observed that the assessee has given detailed explanation about the nature and source of the said gold loan. Also, assessee is maintaining the books of account on Historical Cost Concept Method (HCCM)
Thus, the bench observed that the gold loan which is duly accounted for in the books and the nature and source thereto has been duly explained to the assessing officer.
Further, the impact envisaged by the revenue authorities which might arise to the assessee firm at the time of repayment of loan cannot be converted into an addition in the hands of the assessee.
After reviewing the facts and submission the two-member bench of the tribunal comprising Dr. Manish Borad (Accountant Member) and Sonjoy Sarma, (Judicial Member) allowed the appeal filed by the assessee and deleted the addition made by the lower authorities.
Manish Tiwari, appeared for assessee and Ranu Biswas, appeared for revenue.
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