DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, LUDHIANA vs. GAUTAM MALHOTRA, FARIDKOT

The assessee declared income of Rs.109.07 Lacs. During assessment proceedings, it transpired that the assessee received unsecured loans from various persons during the year and accordingly, he was required to demonstrate the fulfillment of conditions of Sec.68. After considering assessee’ submissions, loan creditors were accepted except for loan of Rs.145 Lacs as received from Shri Arun Malhotra and another loan of Rs.160 Lacs as obtained from Smt. Neelam Malhotra. The assessee had obtained aggregate loan of Rs.515 Lacs from these two persons out of which the addition was made u/s 68 for Rs.305 Lacs as under: - No. Name Amount of Loan Addition made 1. Shri Arun Malhotra Rs.145 Lacs Rs.145 Lacs 2. Smt. Neelam Malhotra Rs.370 Lacs Rs.160 Lacs Total Rs.515 Lacs Rs.305 Lacs The addition has been made on the ground that the respective Income Tax Returns (ITRs) of the two lenders showed less income and there was huge debits and credit in the account of the lender which were not commensurate with the income tax return.

The assessee’s submissions during first appeal were subjected to remand proceedings wherein the assessee furnished additional evidences which were in the shape of documentary evidences pertaining to those persons who had lent money to these two lenders. However, Ld. AO still doubted the source of source and pointed out deficiencies in the documentary evidences. The adjudication of Ld. CIT(A) is contained in para 5.2.3 onwards. It was noted that in terms of requirements of Sec.68, the assessee was required to establish the identity of the creditor, the creditworthiness of the lender and the genuineness of the transactions. 4. The Ld. CIT(A) observed that the documentary evidences of the two lenders were duly furnished by the assessee during assessment proceedings. During appellate proceedings, the assessee further furnished the detailed source of entities from where the said credits were received by the two lenders. The assessee furnished, PAN, confirmation of accounts, copies of Income Tax Returns and Bank statements. The assessee also provided documents relating to source of source to explain the genuineness and creditworthiness of the loan givers. The Ld. CIT(A) concurred that the assessee furnished complete details of the transactions to the extent of source of source. Therefore, the onus of Sec.68 was duly discharged by the assessee. The Ld. AO made addition merely on the observation that returned income of lenders was low. However, there was no adverse material on record which would prove that unsecured loan money belonged to the assessee. Finally, considering ratio of various judicial decisions, the impugned addition was deleted against which the revenue is in further appeal before us.