The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that the loan amount obtained by the assessee from his friends out of their labour work income cannot be dismissed by the income tax department as “unbelievable” as per the provisions of the Income Tax Act, 1961.
During the assessment proceedings against the assessee, Shri Arun Kumar Thakur prasad Oza, the AO found that the assessee made certain transactions in cash relating to sharing trading transactions, the source of which, he stated was loaned from his friends and family. However, the loans amounting to Rs.1,00,500/- were added to his income as a source of the same was not explained to the satisfaction of the Revenue authorities.
A bench of Smt. Annapurna Gupta (Accountant Member) and Shri Mahavir Prasad (Judicial Member) observed that “the assessee had given complete list of his friends from whom loans were taken, and it is evident from the same that he had taken very small amount of loan ranging from Rs.3,000/- to Rs.15,000/- and all the details regarding his friends from whom loan had been taken by the assessee was given to the AO who had issued summons to them and in respect of which, two persons had confirmed having given loan to the assessee. Considering that loans were taken for the purpose of carrying out share trading transactions, which is an accepted fact and were of very small amounts and two persons have confirmed giving loan, we see no reason to treat the loans as unexplained.”
Concluding the favour in favour of the assessee, the bench has held that the explanation of the source of these very small loans as given by friends of the assessee to help him in his share trading transactions, and which has been confirmed by two parties to be given out of their labour work income ,cannot be dismissed as unbelievable.
Shri Deepak R. Shah represented the assessee.
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