The Income Tax Appellate Tribunal (ITAT), Surat bench, held that an addition shall not be made under section 68 of the Income Tax Act, 1961 when the creditworthiness of the loan provider through the banking channel is satisfactorily explained.
The assessee, Hasmukhbhai Ravjibhai Ahir, after filing the return of income, had his case selected for scrutiny proceedings. During the proceedings, the Assessing Officer (AO) observed that the assessee had claimed to have accepted an unsecured loan of Rs. 1,00,00,000/- from Mr. Ishwarbhai D. Patel of Magob, Surat, which was conducted through banking channels. However, the AO noted that the loan provider had passed away, and no one could appear before the assessing officer except to file a written submission.
Accordingly, the AO made an addition under section 68 of the Income Tax Act due to the non-satisfactory explanation of the genuineness and creditworthiness of the person who had given the loan.
Aggrieved by the order, the assessee filed an appeal before the CIT(A) to delete the addition. Thus, the revenue filed a second appeal before the tribunal.
During the proceedings, Vinod Kumar, Counsel for the assessee, argued that the assessee had submitted documents related to the confirmation of the death of the loan provider’s son, along with all other documents to substantiate the claim.
Ankur Shah, Counsel for Revenue, argued that the assessee had taken an unsecured loan from Mr. Ishwarbhai D. Patel of Magob, Surat, but failed to prove the identity, creditworthiness, and genuineness of the said loan provider.
The Tribunal, while considering the appeal, observed that the assessee had produced confirmation before the AO, signed by the son of the assessee, and the bank statement evidencing the debit in the account of the giver of the loan, Mr. Ishwarbhai D. Patel. Therefore, the creditworthiness of the loan giver, Late Ishwarbhai D. Patel, was established by the assessee.
After reviewing the facts and records, the two-member bench of Dr. A. L. Saini (Accountant Member) and Pawan Singh (Judicial Member) held that an addition shall not be made under section 68 of the Income Tax Act, 1961 when the creditworthiness of the loan provider through the banking channel is satisfactorily explained.
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