Assessee not Required to Prove Source of Source when Loan Repaid via Bank: ITAT Deletes Unsecured Loan Addition [Read Order]
ITAT held that Repayment of Loan Through Banking Channel Corroborates Genuineness
The Income Tax Appellate Tribunal ( ITAT ),Ahmedabad Bench, held that the assessee, Kalptaru Cotton Industries, cannot be required to prove the source of source once the identity and genuineness of the transaction are established and the loan is repaid through banking channels.
The Tribunal directed deletion of the ₹60,00,000 addition sustained by the Commissioner of Income Tax (Appeal) (CIT(A)).
The Appellant, Kalptaru Cotton Industries, is a partnership firm engaged in manufacturing cotton, ginning and pressing. During the relevant assessment year, the appellant declared a loss of ₹7,81,324.
The appellant received the unsecured loan of ₹60,00,000 from Billeshwar Auto Agency on 28.10.2013 through banking channels and the entire loan amount was repaid on 25.03.2015 through banking channels
During assessment, the Assessing Officer (AO) made an addition of ₹60,00,000 under section 68 of the Income Tax Act, 1961 on account of the unsecured loan received from Billeshwar Auto Agency. Other additions were also made by the AO on account of VAT interest and low gross profit.
On appeal, the CIT(A) deleted the additions relating to VAT interest and low gross profit but sustained the addition of ₹60,00,000 made under Section 68 of the Income Tax Act. Aggrieved by the order of CIT(A), the appellant filed an appeal before the ITAT.
Kamal Deep Singh, representing the Revenue Department, contended that the appellant failed to prove the creditworthiness of the lender and therefore the addition made under section 68 was rightly sustained.
Siddhartha Nautiyal, Judicial Member and B.R.R. Kumar, Vice President, noted that the loan amount repaid in the subsequent financial year through banking channels is a strong corroborative circumstance supporting the genuineness of the transaction as well as the existence and capacity of the creditor.
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The tribunal observed that in the case of Shree Samruddhi Overseas Trading Co. vs. DCIT (2018), the Coordinate bench of the tribunal held that repayment of loan through banking channels transcends all considerations and sufficiently discharges the onus cast under sections 68 of the Act.
Accordingly, the tribunal directed CITA to delete the addition of ₹60,00,000.
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