Decided on September 30,1994



R. Acharya, Accountant Member - (1.) THIS appeal is instituted by the revenue against the order of the CIT (Appeals) for the assessment year 1979-80 on the following grounds: (1) That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in deleting the addition of Rs. 2,20,000 made as income from undisclosed sources under Section 69 of the Income-tax Act, 1961. (2) That on the facts and in the circumstances of the case, the learned CIT (Appeals) erred in holding that loans should be treated as genuine since the assessee has filed loan confirmation certificates showing names and Income-tax file nos. of the loan creditors and in that view in directing the Assessing Officer to allow interest paid Rs. 20,703.
(2.) Briefly stated, the facts of this case are that the original assessment in this case for the assessment year 1979-80 was completed under Section 143(3) on 16-3-1982 and the total income was determined at Rs. 802 against the loss of Rs. 1780 declared by the assessee in the return filed on 3-12-1979. Subsequently the assessment was reopened by issue of notice under Section 148 dated 10-3-1986 and in response to that notice the assessee filed a return on 25-4-1986 declaring total income of Rs. 4,670. The re assessment was completed on 26-3-1990 under Section 143(3)/ 147 determining the total income at Rs. 2,52,261 including income of Rs. 2,20,000 from undisclosed sources. This re-assessment is under appeal. The addition of Rs. 2,20,000 as income from undisclosed sources was made on account of unexplained loans obtained from the following parties : JUDGEMENT_6828_TLIT0_19940.htm The Assessing Officer (in short 'AO') found that the assessee has received a loan of Rs. 1,20,000 from Sri P.O. Agarwal of Tinsukia, Assam on an interest rate of 12% and has deposited the same in the firm M/s. Sudershan Plywood Industries. The opening balance of outstanding loan due to the creditor Sri P.O. Agarwal brought forward to this year was shown at Rs. 85,324 and the balance together with the current year's loan stood at Rs. 2,05,325. On this loan interest amounting to Rs. 20,703 (@ 15% P.A. up to 31-3-1978 and @ 12% P.A. thereafter) was credited to the account of the loan creditor and the assessee has claimed the same as deduction from the total income.
(3.) AS regards the loan of Rs. 1,00,000 from M/s. Dibang Valley Timber Trade (P.) Ltd., Tinsukia, ASsam, the assessee claimed to have invested this loan in making fixed deppsit of Rs. 1,00,000 with Indian Bank, Tinsukia on which interest of Rs. 2,250 was received. In order to verify the loans, the AO issued summonses under Section 131 of the Act dated 14-3-1990 to both the creditors for appearing before him on 23-3-1990 with relevant books of account and other documents. He also requested the assessee vide his letter dated 14-3-1990 to produce the loan creditors. The assessee filed a letter dated 23-3-1990 asking for time which was refused by the AO as according to him this is a time-barring case. Since neither the creditors appeared nor the assessee could produce them before the AO, the AO came to the conclusion that the loans remained unverifiable. Accordingly he added Rs. 2,20,000 to the total income of the ASsessee as income from undisclosed sources. He also disallowed interest payable to Sri P.O. Agarwal.;

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