M/S GOVIND LAL DIGGA,KOLKATA vs. I.T.O.,WARD-45(2), KOLKATA

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ITA 2591/KOL/2019Status: DisposedITAT Kolkata26 February 2020AY 2006-072 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the AO for fresh adjudication. It held that an addition under Section 68 cannot be made solely because loan creditors could not be located after several years, especially if they are assessed to tax.

What were the facts?

The assessee appealed an addition of ₹5,72,000 as undisclosed income, representing loans. The CIT(A) upheld the addition, citing the inability to verify the loan creditors' sources and creditworthiness. The AO noted that one creditor could not be located and others filed returns belatedly or not at all.

What were the issues?

Whether an addition under Section 68 is justified when loan creditors are identified and assessed to tax, but their creditworthiness and sources of funds could not be fully verified by the AO.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA

Before: Shri J. Sudhakar Reddy]

order

: February 26th, 2020 ORDER

Per J. Sudhakar Reddy, AM:

1.

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-21, Kolkata [‘CIT(A)’ for short] dated 24.10.2019 u/s 250 of the Income Tax Act, 1961 (‘the Act’ for short) for AY 2006-07.

2.

There is only one addition in dispute in this appeal and it pertains to an amount of ₹5,72,000/- added as undisclosed income. The ld. CIT(A) at para 15 stated as follows: “I have perused the assessment order and Grounds raised

by the Ld. A/R of the appellant. The Ld. A/R contended that the loan given by both the creditors are evidenced and creditors are assessed to tax. But, neither during the assessment proceedings nor during the remand proceedings, the appellant could satisfy the AO for verification of sources of these loans. One of the loan creditors M/s B. M. Creation could not be located by the department person. Moreover, in the remand report dated 16-03-2010, the AO has commented that both the loan creditors had filed their return of income belatedly and one of creditors Mr. Gopal Das Diga has not filed his return of income for the relevant A.Y. 2006-07. The AO could not verify sources of these funds in the hands of the loan creditors and therefore, genuinity & creditworthiness of the loan creditors could not be established. Hence, addition made by the AO for Rs. 5,72,000/- on account of money from undisclosed sources in disguise of loan and INR 2,114/- on account of consequential disallowance of interest on such loan is hereby upheld and grounds of the appellant in this behalf are dismissed.”

3. The ld. Counsel for the assessee strongly disputed these findings and submitted that when both the loan creditors are assessed to tax and are identified, no addition should be made u/s 68 of the Act.

Assessment Years: 2006-07 M/s. Govind Lal Digga.

4.

The ld. DR submitted that the creditworthiness of the loan creditors was not proved.

5.

Both the parties agreed that the issue may be restored to the file of the AO for fresh adjudication in accordance with law. Simply because, the loan creditors could not be located on the address given in the loan confirmation data, after a number of years an addition u/s 68 of the Act cannot be made. In view of the submissions of both the parties I restore the matter to the file of the AO for fresh adjudication in accordance with law.

6.

In the result, the appeal of the assessee is allowed for statistical purposes. Kolkata, the 26th February, 2020.

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