No Additions shall be made u/s 68 of Income Tax Act on Unsecured Loans if Assessee furnishes Proper Evidences: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that no additions shall be made under Section 68 of the Income Tax Act, 1961 on unsecured loans if the assessee furnishes proper evidence.

The assessee is an individual and Proprietor of S. Mangaldas Finance Corporation engaged in Shroff Business. The assessee filed its Return of Income declaring a total income of Rs. 14,61,410/-. The return was processed under section 143(1) of the Income Tax Act.

Thereafter the assessment was reopened by issuing a notice under Section 148 of the Income Tax Act on the ground that the unsecured loan of Rs. 10,00,00,000/- was received by the assessee from Smt. Hansaben Manilal Patel as not genuine.

The assessee failed to prove the identity, genuineness, and creditworthiness of the unsecured loan of Rs. 10,00,00,000/- and also it is proved that Smt. Hansaben M. Patel has given accommodation entry to the Assessee in the guise of an unsecured loan, the unsecured loan of Rs. 10,00,00,000/- is added to the total income of the Assessee under Section 68 of the Income Tax Act, as unexplained cash credits and demanded taxes thereon.

The Departmental Representative supported the orders passed by the Assessing Officer and pleaded that the loan creditor namely Smt. Hansaben M. Patel who has filed her Return of Income showing an income of Rs. 8,65,250 for the Assessment Year 2009- 10 and not paid Short Term Capital Gain on sale of land worth Rs. 149 crores.

The counsel for the assessee submitted the copies of Ledger Account, Confirmation from Smt. Hansaben M Patel, Bank account of the assessee reflecting the loan transaction, Return of Income filed by the assessee, and that of Smt. Hansaben M Patel, details of land sold by Smt. Hansaben M. Patel and Bank statements of Smt. Hansaben M. Patel reflecting the loan transactions.

The Two-member bench comprising of Waseem Ahmed (Accountant member) and T.R. Senthil Kumar (Judicial member) held that the unsecured loan availed was repaid in the next financial year to the creditor namely Smt. Hansaben M. Patel through cheque payments and the bank statement also filed before the Lower Authorities.

Therefore, the provisions of Section 68 of the Income Tax Act do not attract in the above transaction and thereby the order passed by the Ld. CIT(A) was upheld by deleting the addition made under Section 68 of the Income Tax Act with respect to the unsecured loans availed from Smt. Hansaben M. Patel.

Thus, the appeal made by the Revenue was dismissed.

To Read the full text of the Order CLICK HERE

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