DHAVAL VINOD GADA,PUNE vs. DCIT CIRCLE-5, PUNE

Facts

The assessee purchased land for Rs.1.62 crore using an interest-free loan from Shri Manilal M. Gada. The AO discovered that Manilal Gada received the funds from his wife, who in turn received them from the land vendors, leading the AO to treat the loan as unexplained cash credit under Section 68, which the CIT(A) upheld.

Held

The Tribunal, citing a Delhi High Court ruling on Section 68 prior to the Finance Act, 2022 amendment, determined that the assessee was not required to explain the source of the source for unsecured loans. Since the assessee proved the identity and creditworthiness of the lender and the genuineness of the transaction, and noting an identical loan to the assessee's brother for the same land purchase was accepted, the addition made under Section 68 was not justified.

Key Issues

Whether the assessee is obligated to explain the source of the source of an unsecured loan under Section 68 of the Income Tax Act, prior to the Finance Act, 2022 amendment, to discharge the onus of proving genuineness and creditworthiness.