HARE KRISHNA VARMA,BHUBANESWAR vs. ITO, WARD-2(2), BHUBANESWAR

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ITA 450/CTK/2015Status: DisposedITAT Cuttack22 March 2017AY 2005-065 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 of Rs. 2,02,397/- on account of unsecured loans could not be sustained. It was found that the loan creditors' income might have been below the taxable limit, thus not requiring a PAN, and the revenue had not proven their lack of capacity to advance the loans.

What were the facts?

The assessee claimed to have received unsecured loans from friends and relatives. The Assessing Officer added a portion of these loans to the assessee's income, considering them unexplained credit. The CIT(A) confirmed a part of this addition.

What were the issues?

Whether unsecured loans from individuals without PAN can be treated as unexplained credit, and if the revenue has discharged its onus to prove lack of genuineness and capacity of the creditors.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK

Before: SHRI N.S SAINI

For Appellant: Shri P.R.Mohanty, AR
For Respondent: Shri D.K.Pradhan, DR
Pronounced: 22/03

This is an appeal filed by the assessee against the order of CIT(A)-1,

Bhubaneswar, dated 18.8.2015, for the assessment year 2005-06.

2.

The sole issue involved in this appeal is that the ld CIT(A) erred in

confirming the addition of Rs.2,02,397/- as unexplained credit u/s.68 of

the Act made by the Assessing Officer.

3.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. The Assessing Officer

observed that the assesse has claimed to have received unsecured loan

2 ITA No. 450/CT K/ 2015 Asse ssment Year :20 05- 06 from friends and relatives of Rs.8,00,000/- during the year under

consideration. The Assessing Officer required the assessee to prove the

genuineness of loans by filing details alongwith confirmation letters. The

Assessing Officer found that all the loans had been obtained in cash except

that from Dr. Vijaya Laxmi Visoi amounting to Rs.32,103/-, which was

received in cheque. He also observed that all the loans except a small

amount of Rs.7,397/- which was received from one Mahmud Khan, were of

Rs.19,500/- from each creditor uniformly. Considering these facts, he

concluded that the loans to the extent of Rs.7,67,897/- are not genuine

and added the same to the income of the assessee.

4.

On appeal, the CIT(A) called for a remand report, wherein, the

Assessing Officer stated that apart from the loan obtained from Dr. Visoi,

there were three more loan creditors as mentioned below, could be

accepted as genuine:

1) Sri Sarat Ch Bishoyi Rs.19,500/- 2) Smt Rekha Agrawal Rs.19,500/- 3) Sri Sanjay Kumar Agarwal Rs.19,500/-

5.

Ld CIT(A) after considering the submission of the assessee and

remand report concluded that the loans from the creditors who have PANs

and who have confirmed the transactions subsequently could be accepted

as genuine apart from the loans which have been treated as genuine by the

Assessing officer in the remand report. Accordingly, he held that the

following creditors had no PAN and in whose cases the three ingredients of

3 ITA No. 450/CT K/ 2015 Asse ssment Year :20 05- 06 proving a loan transaction have not been established are considered as not

genuine:

1) Sarat Chandra Vishoyi : Rs.19,500/- 2) Shasikanta Verma : Rs.19,500/- 3) Jaimati Devi Verma : Rs.19,500/- 4) Surya Prakash Gupta : Rs.19,500/- 5) Safika Khatun : Rs.19,500/- 6) Rashid NZIR : Rs.19,500/- 7) Ahmed Sayed : Rs.19,500/- 8) Usha Agarwala : Rs.19,500/- 9) S.K.Muna : Rs.19,500/- 10) Santosh Kumar Gupta : Rs.19,500/- 11) Mahamud Khan : Rs. 7,397/- Total : Rs.2,02,397/-

6.

Hence, he deleted the addition of Rs.5,65,500/- and confirmed the

addition of Rs.2,02,397/-.

7.

Being aggrieved, the assessee is in appeal before me.

8.

Ld Authorised Representative of the assessee argued and submitted

that the CIT(A) was not justified in confirming the addition of Rs.2,02,397/-

u/s.68 of the Act being unsecured loan received from 11 persons on the

ground that they did not have PAN. He argued that as the income of the

loan creditors is below taxable limit, they were not required to obtain PAN

and hence, PAN was not available. He submitted that the loan received

from those persons are of small amount of Rs.19,500/- each. He submitted

that no material has been brought on record by the revenue after making

enquiry from the loan creditors that they did not have the capacity to

advance Rs.19,500/- as loan to the assessee. In absence of the same,

considering the unsecured loan as not genuine because they did not have

PAN is not justified.

4 ITA No. 450/CT K/ 2015 Asse ssment Year :20 05- 06 9. Ld Departmental Representative supported the order of the CIT(A).

10.

I find that the addition of Rs.2,02,397/- on account of unsecured loan

was confirmed by the CIT(A) on the ground that the loan creditors did not

have PAN. I find force in the arguments of ld Authorised Representative of

the assessee that the income of the loan creditors was below the taxable

limit, therefore, they were not required to obtain PAN. I also find force in

the submissions of Authorised Representative of the assessee that small

amount of Rs.19,500/- was received from 11 persons as unsecured loan

and no material has been brought on record by the revenue after making

enquiry that the loan creditors did not have the capacity to advance

Rs.19,500/- as loan to the assessee. In the above facts and circumstances

of the case, I am of the considered opinion that the addition of

Rs.2,02,397/- u/s.68 cannot be sustained in law. I, therefore, set aside

the order of the CIT(A) and delete the addition of Rs.2,20,397/- and allow

the ground of appeal of the assessee.

10.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 22/03/2017 in the presence of parties.

Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 22/03/2017 B.K.Parida, SPS

5 ITA No. 450/CT K/ 2015 Asse ssment Year :20 05- 06 Copy of the Order forwarded to : 1. The Appellant : Hare Krishna Varma, A-39, Neelkantha Nagar, Nayapalli, Bhubaneswar 2. The Respondent. ITO, Ward 2(2), Bhubaneswar. 3. The CIT(A)-1 Bhubaneswar 4. Pr.CIT1, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy//

SR.PRIVATE SECRETARY ITAT, Cuttack

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