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Income Tax Appellate Tribunal, DELHI BENCH “SMC-3” NEW DELHI
Before: SHRI S.V. MEHROTRA :Shri Darshan Lal,
This is assessee’s appeal against the CIT(A), Rohtak’s order dated 29.10.2015 in appeal no. 543/2014-15, relating to A.Y. 2011-12.
Brief facts of the case are that the assessee, in the relevant assessment year, filed his return of income declaring income of Rs. 2,39,420/-. During the course of assessment proceedings the AO noticed from the list of unsecured loans as on 31.3.2010, that the assessee had shown unsecured loan in the name of Shri Piyush Kumar amounting to Rs. 5,62,000/-. But from the list of unsecured loans attached along with the audit report for AY 2011-12, it had been found that no amount on account of unsecured loan in respect of Shri Piyush Kumar had been shown by the assessee. From the copy of account of Shri Piyush Kumar, furnished in course of assessment proceedings, AO noticed that assessee did not make repayment to Shri Piyush Kumar either in cash or through cheque but the liability had been shown as ceased without making payment. Verification from bank account also revealed that no such payment had been made. The assessee’s reply vide letter dated 24.12.2012 was as under:
“Amount of Rs. 5,71,116/- transferred to M/s Shree Gobind Trading Company from the account of Piyush Sir, a sum of exceeding Rs. 5 lakh were due from M/s Shree Gobind Trading company a prop. Concern of Sh. Bharat Bushan who is father of Sh. Piyush. To recover the amount from Bharat Bushan we transferred the amount from account of Poyush and intimation was sent to Mr. Bharat Bushan and Piyush on telephone. Copy of account of Gobind Trading Co., attached herewith.” 2.1. The AO did not accept the assessee’s contention and observed that unsecured loan raised from Shri Piyush Kumar through account payee cheque should have been returned through a/c payee cheque only. He further pointed out that as per principle of accountancy liability of unsecured loan cannot be transferred to other party. He, accordingly, made addition of Rs. 5,71,446/-.
Ld. CIT(A) confirmed the addition, inter alia, observing that the explanation of the assessee regarding the fact that transfer made to a proprietary concern of the Piyush’s father and was done with the consent of the Piyush and his father, was not borne out by any evidence.
Aggrieved, the assessee is in appeal before the Tribunal and has taken following grounds of appeal:
“1 That the learned Commissioner of Income Tax (Appeals) Rohtak has erred both in law and on facts in upholding the addition ofRs. 5,71,446/- made by invoking the provisions contained in section 41(1)(a) of the Act.
1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the amount raised was an unsecured loans and as such in absence of any deduction claimed, application of section 41 (1)( a) of the Act is highly misplaced. 1.2 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that there was no valid basis or material to assume that the liability of the appellant in respect of the sum of Rs. 5,71,446/-had ceased to exist and, therefore the provisions of section 41 (1) were inapplicable and, could not have been made on the basis to uphold the impugned addition.
I have considered the submissions of both the parties and have perused the material available on record. The explanation of assessee has been rejected solely on the ground that the same was not backed by any evidence. It is not disputed that M/s Govind Trading Co. was the proprietary concern of Piyush’s (creditor’s) assessee’s father and in the books of account the sum was recoverable from Bharat Bhushan, who was father of Shri Piyush Kumar. Therefore, in order to recover the amount from Bharat Bhushan, the assessee transferred the amount due to Piyush Kumar to the account of Shri Bharat Bhushan. It was further pointed out by assessee that intimation was given to both the parties on telephone. No dispute has been raised by either party. Under such circumstances, it cannot be said that the transfer entry passed by assessee from Piyush Kumar’s account to M/s Govind Trading Co.’s account was not as per prevailing commercial customs. Amount had been transferred to the father of creditor and the entries made in the books of a/c. This constitute sufficient evidence in this regard as per section 34 of the Evidence Act. Accordingly, addition of Rs. 5,71,446/- is deleted.
In the result, assessee’s appeal is allowed. Order pronounced in open court on 22-08-2016.