LEKHRAJ JAIN vs. ITO,

ITA 1050/BANG/2013Status: DisposedITAT Bangalore03 June 2016AY 2006-075 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition was not justified as the revenue had not proven that the sale proceeds were invested elsewhere. The explanation of the HUF's source of funds was not disbelieved solely on the basis of the time gap.

What were the facts?

The assessee, a money lender, received a loan of Rs. 3,60,000/- from his HUF. The HUF claimed the source of funds was from the sale of agricultural land in 1999. The Assessing Officer made an addition for this cash credit, which was confirmed by the CIT(A) due to the 7-year gap between the land sale and the loan.

What were the issues?

Whether the addition of cash credit is sustainable when the source of funds for the loan is from sale proceeds of agricultural land received 7 years prior, and the HUF has provided a confirmation letter.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, BANGALORE

Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAOShri Lekhraj Jain,

For Appellant: Shri Naginchand Khincha, CA

For Respondent: Shri S.R.Karupuswamy, JCIT(DR)

Hearing: 30/05/2016Pronounced: 03/06/2016

Date of hearing : 30/05/2016 Date of pronouncement : 03/06/2016 O R D E R Per INTURI RAMA RAO, AM :

This is an appeal filed by the assessee directed against the order of the CIT(A)-I, Bangalore, dated 13/05/2013 for the assessment year 2006-07.

The assessee raised the following grounds of appeal:

The learned assessing officer had erred in adding a sum of Rs. 3,60,000/- on the ground that the creditor did not have any PAN and has not filed any return of income and the learned Commissioner of Income tax (Appeals) had erred in confirming the Page 2 of 5 same. The creditor is identifiable and had source to give the amount. The creditor had also filed confirmation letter for the loan. The transaction being genuine is to be accepted. The addition being bad in law and on fact is to be deleted.

2. The assessing officer has also erred in levying interest U/s. 234B of I.T. Act, 1961. The appellant denies liability to pay interest. The interest levied U/s. 234B of I.T. Act, 1961 being wrong is to be deleted.

3. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that order passed be quashed or at least the addition made to income be deleted and interest levied be deleted.

Briefly facts of the case are that the assessee is an individual engaged in the business of money lending. Return of income for the assessment year 2006-07 was filed on 24/7/2016 disclosing a total income of Rs.1,03,409/-. Against the said return of income, assessment was completed u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] at a total income of Rs.7,13,409/-. While framing the assessment order, the Assessing Officer (AO) made an addition of Rs.2 lakhs on account of unexplained gift and addition of Rs.3,60,000/- as unexplained cash credit.

Being aggrieved, an appeal was preferred before the CIT(A) who vide impugned order deleted the addition on account of unexplained cash gift. However, confirmed the addition on account of cash credit of Rs.3,60,000/- by holding as under:

“4.5 I have carefully considered the appellant’s submissions and also perused the assessment order, remand report, etc. It is the contention of the appellant that he had received Rs.3,60,000/- from HUF. It may be seen from the report that the HUF was having agricultural lands and the same were sold in 1999 and the monies were given out of the said sale proceeds. The AO is not able to believe that the sale proceeds received in 1999 were given to the appellant in the year 2006. In the absence of any credible evidence, the AO’s rejection of the appellant ‘s claim that he had received a loan from the HUF is justifiable. Therefore, the findings of the AO are accepted and the addition on account of this loan o Rs.3,60,000/- is confirmed.”

Being aggrieved by this part of the CIT(A)’s order, assessee is before us in the present appeal.

5.1 Learned AR of the assessee submitted that an amount of Rs.3,60,000/- was received by the assessee from his HUF and said amount was lent by HUF out of sale proceeds of agricultural land in the year 1999. This version of the assessee was merely disbelieved and addition was made.

5.2 On the other hand, learned Departmental Representative had placed reliance on the orders of the lower authorities.

We heard rival submissions and perused material on record. The issue to be adjudicated in the present appeal is whether explanation tendered by the assessee in support of receipt of loan from his HUF is tenable in the eye of law. The Page 4 of 5 assessee has stated that the said loan was received from his HUF. It was explained that the source for HUF was out of sale proceeds of agricultural land in the year 1999. In support of this, confirmation letter was filed in the capacity of kartha of his HUF. The addition was made by the AO disbelieving this explanation. The AO has not doubted the veracity of the confirmation letter. The addition was made merely disbelieving the explanation given by the assessee. The AO has also not doubted the transaction of sale of agricultural land in the year 1999. The only issue which raised the eye brows is the gap of 7 years between the date of sale of agricultural land and giving of loan to the assessee. Unless and otherwise revenue proves that the sale proceeds were invested somewhere else, the explanation cannot be disbelieved. No addition can be made on surmises and conjectures. In the circumstances, we hold that the addition made is not called for.

In the result the appeal filed by the assessee is allowed.

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