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Facts
The assessee, an individual and director of two companies, declared salary income and filed a return. During scrutiny, the AO made an addition of Rs. 24,20,000/- under Section 69A as unexplained money, related to a loan received from a friend, Mr. Sevugon. The CIT(A) upheld this addition.
Held
The Tribunal held that the assessee had provided sufficient details to prove the genuineness of the transaction, the identity of the lender, and the lender's creditworthiness, including PAN details, bank statements, and GST return certificate. Therefore, the addition made by the AO and confirmed by the CIT(A) was deemed devoid of merit.
Key Issues
Whether the addition under Section 69A for unexplained money is sustainable when the assessee has provided evidence of the loan's genuineness, lender's identity, and creditworthiness.
Sections Cited
69A, 143(1), 143(3), 144B
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K, HON’BLE & SHRI S. R. RAGHUNATHA, HON’BLE
आदेश/ O R D E R
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)/ NFAC, Delhi, for the assessment year 2021-22, vide order dated 22.07.2024.
The assessee has raised the following grounds of appeal:
1. The order of the CIT(A) relating to upholding the addition of Rs.24,20,000/u/s.69A of the Act is erroneous as the same is contrary to the facts of the case and provisions of law.
2. The CIT(A) erred in failing to delete the addition of Rs.24,20,000/- as the same has been made without considering the submissions and documents filed by the appellant.
:-2-: ITA. No: 2425/Chny/2024
3.The appellant having furnished the explanation and proved the source and genuineness of the loan received, the CIT(A) grossly erred in upholding the addition made by the AO. 4. The addition being unsustainable u/s.69A of the Act, the CIT(A) ought to have deleted the same. 5. The loan borrowed having been accounted in the appellant's books of accounts, the addition made u/s.69A of the Act is wholly illegal and the CIT(A) erred in failing to delete the same.
Brief facts of the case are that the assessee is an individual and Director of two companies has earned salary income of Rs.6 lakhs and filed return of income on 23.10.2021 declaring taxable income of Rs.5 lakhs. The return was processed and intimation u/s.143(1) was issued computing returned income. Later, the case was selected for scrutiny and issued statutory notice to the assessee by calling for details by the AO. During the assessment proceedings, the assessee furnished details from time to time and also furnished PAN of the lender one Mr.Sevugon, who is the proprietor of M/s.Excellent Products of India, who had lent Rs.44.20 Lakhs loan to the assessee. However, the AO was not convinced with the statements furnished by the assessee, made an addition of Rs.24,20,000/- u/s.69A of the Act as unexplained money along with additions of Rs.10,70,421/- and Rs.37,967/- by passing an order u/s.143(3) r.w.s 144B of the Act dated 22.12.2022.
Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The assessee submitted that Rs.24,20,000/- has been received from his friend Mr.Sevugon in the form of personal
:-3-: ITA. No: 2425/Chny/2024 loan. The assessee also stated that confirmation letter from the lender had been submitted before the AO along with the PAN details. Further, the assessee stated that he had furnished proof for receipt of the loan before the AO and hence, stated that there is no logic or reason to such loan as addition u/s. 69A of the Act, and hence, prayed for deleting the additions. However, the CIT(A) was not convinced with the explanation provided by the assessee and confirmed addition of Rs.24,40,000/- by holding as under:-
“5.2.3 : The appellant submitted that he obtained personal loan Rs. 24,20,000/- from his friend Mr Sevugon. Mr Sevugon is the proprietor of M/s. Excellent Products of India and the fund has been transferred from the proprietary entity to the account of the appellant. The appellant failed to produce even the ledger extract in the books of M/s Excellent Products of India before the AO. At the appellate stage, the appellant produced only the date, PAN number and amount obtained as hand loan from M/s Excellent Products of India through banking channel (page 159 of paper book).
1. Identity of the lender is proved by the appellant Mode of payment of loan amount of Rs.24,20,000 is through banking channel. The said payments were received through banking channel. There is catena of judicial precedents to hold that entries in the bank statement alone cannot be taken to be genuine to prove that the appellant has taken loan from the said entity. Hence the mode of payment through banking channel alone could not be considered as a benchmark to treat the transaction as a genuine transaction. Nature and sources of acquisition of such section 69A of the Act. The appellant failed to produce details of transaction like the ledger account of the proprietary entity supported with the nature of business and bank statement of that entity to prove the :-4-: ITA. No: 2425/Chny/2024
nature and sources of that entity to support the advancement of personal loan transaction with the appellant. Though the money is recorded in the books of the appellant, he failed to offer explanation as to the nature and sources of such money within the meaning of section 69A of the Act. In view of the above, the grounds raised by the appellant on this issue are" Dismissed”. Aggrieved by the order of the CIT(A), the assessee preferred am appeal before us.
The Ld.AR for the assessee assailed action of the CIT(A) stating that both the lower authorities have erred in making addition of Rs.,24,20,000/- u/s.69A of the Act, even though the assessee has filed entire details of loan received along with bank statement , PAN of lender and also confirmation letter from lender.
Before us, the Ld.AR submitted a paper book consisting of 69 pages having details of notices issued by the AO, bank statement of the assessee for financial year 2020-21 in respect of Indian Overseas Bank two accounts and Federal bank, submissions made by the assessee before the AO, written submissions filed by the assessee before the CIT(A), GST return of Mr.Sevugon as well as invoices raised by M/s.Excellent Products of India and certain other ledger extracts of M/s.Excellent Products of India. The Ld.AR further referred to notices issued by the AO placed at page 20 & 25 of the paper book, wherein the AO has asked the assessee to file either extracts or confirmation
:-5-: ITA. No: 2425/Chny/2024 letter from Mr. Sevugon. Accordingly, the assessee had filed confirmation obtained from Mr.Sevugon along with bank statement to show that these amounts have been transferred through bank account.
Further, the assessee had obtained confirmation letter dated 14.12.2022 from Indian Overseas Bank (placed at page 42 of the paper book) in respect of the amounts transferred to the assessee from Mr.Sevugon and his proprietorship firm M/s.Excellent Products of India during the assessment yea 2021-22 and the same was certified by Mr.Sevugon by quoting his PAN and the same has been furnished during assessment proceedings. In spite of furnishing the above documents, the AO not satisfied with the same, has made addition u/s.69A of the Act as unexplained money, which is against the conditions laid down by the provisions of the Act. Therefore, the orders of the AO as well as CIT(A) need to be reversed and prayed for deletion of addition made u/s.69A of the Act.
Per contra, the Ld.DR supported orders of the lower authorities.
We have heard rival contentions, perused material available on record and gone through orders of the authorities below. Admittedly, the assessee is a salaried employee and filed his return of income for the AY 2021-22 by declaring his salary income. During the course of assessment proceedings, the assessee was asked to furnish details of :-6-: ITA. No: 2425/Chny/2024 credits to the tune of Rs.34,50,000/- by the AO. The assessee explained that said sum was received from his friend Mr. Sevugon, proprietor of M/s.Excellent Products of India to the tune of Rs.24,20,000/-, Rs.9,50,000/- has been transferred from his bank account held at Federal Bank and Rs.80,000/- was cash deposited. Further, it is noted that the assessee had filed confirmation letter to the tune of Rs.24,20,000/- from Mr. Sevugon quoting his PAN along with bank transfer details . However, the AO has made addition u/s.69A of the Act as unexplained money to the tune of Rs.24,20,000/- in the assessment order. The CIT(A) also confirmed the same. On perusal of records submitted by the assessee during the course of assessment and appellate proceedings, we note that the assessee had provided details of lender in the form of proving lender’s identity, genuiness of transaction and creditworthiness of the lender i.e., PAN details, bank statement and GST return certificate. Since, the assessee has provided all the necessary details of the lender, we are of the view that the AO and that of the CIT(A) have erred in confirming the addition of Rs.24,20,000/- as unexplained money u/s.69A of the Act, is devoid of merit. Therefore, in the present facts and circumstances of the case, we are of the opinion that the assessee has proved genuineness of transaction along with identity and creditworthiness of the lender by furnishing necessary details and documents and hence, we are inclined to delete the addition
:-7-: ITA. No: 2425/Chny/2024 made by the AO and confirmed by the CIT(A) amounting to Rs.24,20,000/- u/s.69A of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the court on 24th February, 2025.