Friday, May 26, 2017

Mere loan confirmation letters from lenders couldn’t prove sanctity of loan transaction: ITAT


a) Assessee was owner of a proprietorship concern and claimed to have received unsecured loans of Rs 10 lakhs each from Natasha Enterprises (NE) and Mohit International (MI).

b) Assessment was initially completed but subsequently the Assessing Officer (AO) came to know that NE and MI were shell entities. He accordingly reopened assessment.

c) During reassessment proceedings, assessee filed the loan confirmations, copies of ledger account and other supporting evidences to justify the transactions but same were rejected by the AO. Accordingly, loan amount was added to income as unexplained cash credit u/s 68.

d) CIT(A) confirmed the additions, Aggrieved-assessee filed the instant appeal before the Tribunal.

The Tribunal held in favour of revenue as under:

1) Merely because loan transactions were though cheques, which were duly evidenced from the bank statements of the lenders, copies of loan confirmations and statements of accounts could not prove that the initial onus of demonstrating the bonafides of loan transactions was duly discharged by the assesse.

2) It was pointed out that the lenders were shell entities and this fact was duly brought to the notice of the assessee but the assessee did not have anything to say on this point. He was neither able to produce any of the lenders nor gave sufficient information about the nature of relationship with them.

3) In order to demonstrate valid transaction, it was not the completion of paper work but genuineness of transactions which was crucial. Thus, onus had not been discharged by the assessee. Accordingly, loan transaction was rightly treated as unexplained credit as per section 68. - [2017] 81 308 (Ahmedabad - Trib.)

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