2018 (2) TMI 1872 - AT - Income Tax

ITAT Partially Allows Appeal Deleting Additions under Section 68

The ITAT allowed the appeal in part by deleting all additions made under section 68 for loans and gifts received by the assessee. It directed the AO to ... Unexplained credits - receipt of loans and gifts from closed relatives and friends - copy of the return of income filed by them, the computation of taxable profit, the balance sheet as well as loans confirmation and declaration gift letters filed - HELD THAT:- I find that all the loans taken by the assessee from these persons have wrongly been added u/s 68 of the Act. It cannot be said that there is no capacity of the creditors to lend such small amounts of ₹ 13,000/- or ₹ 15,000/- or ₹ 16,000/- when they are all income tax assessee’s. Even the gifts herein have been received from close relatives. The additions have been made on surmises of probabilities. No evidence is brought on record by the A.O. to contradict the evidence filed by the assessee. Such addition cannot be sustained. The assessee has proved the identity, creditworthiness as well as the genuineness of the transactions. Thus all these additions made u/s 68 are deleted Levy of interest u/s 234A and 234B - return income or assessed income - following the propositions of law laid down by the jurisdictional High Court in the case of AJAY PRAKASH VERMA VERSUS INCOME TAX OFFICER, [2013 (1) TMI 140 - JHARKHAND HIGH COURT] , I direct the A.O. to levy interest u/s 234A and 234B only on the income returned by the assessee and not on the income assessed by the A.O. Issues:1. Addition made under section 68 of the Act for loans and gifts received by the assessee.2. Levy of interest under sections 234A and 234B on the income disclosed by the assessee in the return of income or on the total income determined by the Assessing Officer (AO).Analysis:Issue 1: Addition under section 68 of the Act for loans and gifts received by the assessee:The appeal was against the order of CIT (Appeals) for the assessment year 2009-10 regarding additions made under section 68 of the Act for loans and gifts received by the assessee. The assessee provided details of amounts received, including loans and gifts, along with supporting documents. The ITAT referred to a previous case where it was established that once the identity of the creditor, capacity to lend, and genuineness of the transaction are proven, the burden shifts to the department. In this case, the donors were income tax assesses who provided necessary documents. The ITAT concluded that the additions made under section 68 could not be sustained as the assessee had proven the identity, creditworthiness, and genuineness of the transactions. Therefore, all additions made under section 68 were deleted.Issue 2: Levy of interest under sections 234A and 234B:The next issue was regarding the levy of interest under sections 234A and 234B. The question was whether interest should be imposed on the total income disclosed by the assessee in the return of income or on the total income determined by the AO. Referring to judgments by the Hon'ble Jharkhand High Court, the ITAT held that interest under sections 234A and 234B should only be levied on the income declared by the assessee in the return of income, not on the income assessed by the AO. Following the precedents set by the High Court, the ITAT directed the AO to levy interest only on the income returned by the assessee.In conclusion, the ITAT allowed the appeal in part, deleting all additions made under section 68 and directing the AO to levy interest under sections 234A and 234B only on the income declared by the assessee.