INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Unsecured loan - Non-providing of opportunity of cross-examination

Assessee was running educational institution and had taken unsecured loan. The said loans were appearing in the name of twenty-one parties and in spite of sufficient opportunity afforded by AO, the assessee could not furnish the complete postal address of many of the said parties. Notices under section 133(6) were issued by AO to some of the said parties/creditors at the address furnished by the assessee. The said notices, however, returned back unserved by the postal authority with remarks 'not known'. AO proceeded to add the entire unsecured loan to the total income of the assessee by treating the same as unexplained. CIT(A) held that unsecured loan only to that extent could be treated as unsubstantiated/bogus and not the entire amount, thus, restricted additions made by AO. Held: Assessee submitted that no proper and sufficient opportunity was afforded by AO to assessee to explain the relevant loan amounts in as much as final show cause notice stated to be issued by AO was never received by assessee. In such circumstances, it was just and proper to send back to AO for giving one more opportunity to the assessee to prove genuineness of relevant loans. As rightly submitted by assessee in this regard, the total loan amount represented opening balance to the extent and the same, therefore, cannot be added to the total income of the assessee as unexplained cash credit under section 68. As regards the balance loan amount, AO was directed to give one more opportunity to the assessee to explain the same by establishing the identity and capacity of the concerned loan creditors as well as the genuineness of the relevant loan transactions by adducing the necessary supporting evidence.

REFERRED :

FAVOUR : Partly in assessee's favour (by way of remand).

A.Y. : 2013-14

INCOME TAX ACT, 1961

Section 37(1)

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