The Income Tax Appeal Tribunal (ITAT), Ahmedabad Bench removed the addition of rupees one crore as the loan received represents unexplained cash loan credit account books.
The only issue raised by the assessee, Manibhadra Securities Services P.Ltd is that the CIT-A erred in upholding the AO order by adding Rs. 1,05,05,000/- u/ s 68 of the Income Tax Act as an unexplained cash credit.
The assessee is a limited liability company and is engaged in stock and securities trading business. The assessee in the reporting year received the loan in the amount of Rs. 4,08,01,000/- from M/s Ken Securities Limited. The assessee repaid the loan amounting to Rs.3,02,96,000/- and in the books of account showed outstanding loans amounting to Rs. 1,05,05,000/- under unsecured loans .
However, the AO observed that the assessee did not provide the details required to substantiate the loan amount such as identity, creditworthiness, ITR, lender confirmation. The AO also noted that notice u/s 133(6) of the law issued to M/s Ken Securities Limited was returned with the remark “left”. The AO therefore, in the absence of relevant details and documents, added the closing balance of Rs. 1,05,05,000/- u/s 68 of the law to the total income of the assessee.
The injured party preferred to appeal to the CIT-A. Upon reading the aforementioned documents, Ld. CIT-A observed that M/s Ken Securities Limited had demonstrated the loss of income yield, therefore the solvency of M/s Ken Securities Limited is not proven. The CIT-A has thus confirmed the addition of Rs. 1,05,05,000/- made by AO u/s 68 of the Act. Injured, the assessed person is appealed to the Tribunal.
Counsel for the assessee argued that the paper book from pages 1-12 and argued that the assessee in support of the disputed loan provided all method documents. As such, the person being assessed has discharged the burden imposed under section 68 of the Act. In addition, part of the transaction with the party has already been accepted by revenue as genuine and therefore the remaining transaction reflected at the end of the financial year in the balance sheet cannot be treated as false. On the other hand, the DR supported the order of the lower authorities. Accordingly, no addition of anything is warranted in the given facts and circumstances.
The bench consisting of Suchitra Kamble, Judicial Member and Waseem Ahmed, Accounting Member, observed that “After reviewing all of the facts, we believe that the loan amount received by the assessee represents the unexplained cash credit on his books. Accordingly, we rescind the finding of the CTI-A and ask the AA to remove the addition he made.Therefore, the assessee’s ground of appeal is granted.
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