TaxTMI 
TaxTMI 
2019 (12) TMI 988
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.... the circumstances of the case, the Appellate Tribunal is right in law in holding that the sum of Rs. 4,10,000/- being loan from its Managing Director, is 'unexplained cash credit' assessable to tax as income of the appellate company under Section 68 of the Income Tax Act 1961? 2.Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in not accepting the evidence by way of confirmatory letters and sworn affidavits of its Managing Director and his creditors and treating the sum of Rs. 4,10,000/- as unexplained and as the appellant company's income? 3.The learned counsel for the Assessee, Mr.Kumar submitted that unsecured loan given by the Managing Director of the Assessee Company Mr. Balasubramanian has been disallowed under Section 68 of the Act. The said Mr.Balasubramanian had taken cash loan from two persons his friend and relative viz., Mr.M.Rajagopalan a sum of Rs. 3,00,000/- and Ms.Dhanam wife of Sridhar a sum of Rs. 1,00,000/-. Both these persons were relative and close family friend who advanced a sum of Rs. 4,00,000/- and the Managing Director of the Company himself, who was drawing annual salary of Rs. 6....
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....t to the Assessment year 2005- 06. During the course of assessment proceedings it was stated that the MD Of the company has obtained loan from Mr. M. Rajagopalan (Rs. 3,00,000) and Mr. S. Dhanam (Rs. 1,00,000) and same was given to the company. To this affect the MD of the Company has given an affidavit dated 05.09.2007 and in that affidavit he stated that he has Introduced Rs. 4 lakhs as unsecured loan in his personal capacity but not as a loan from the above two people, in order to avoid a legal consequences u/s 58 A of the Companies Act. In other words, if the above two loans are taken in to the books of the company directly, those loans tent amounts to same acceptance of deposits under said section. 7.2: If the loan taken by the MD from the above parties was true, to that effect he must have shown in his return of income as a loan given to company. But on perusal of the return of Income filed by the MD of the Company it was found that there is no mention about the loans taken from the above two parties. In reply to my pre-assessment notice the assessee has stated that it is true that the Managing Directors not given a note in his return of income because he did not mai....
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....e loan given by the Managing Director to the company and prove his credit worthiness. No evidence is produced to prove that the loan of Rs. 4,10,000 of has been routed through the banking channel. If it is genuine transaction the Managing Director must have produced the evidence of bank account from which the amount have been paid. Even the relevant entry in the bank statements of the company has not been produced. It clearly indicates that the genuineness of the transaction is not established. 7.7: Now let us see the creditworthiness of the Managing Director. As it already indicated the only source of income for him is salary of Rs. 60000 received from the assessee company. During the course of hearing, the assessee was asked to explain the creditworthiness of the creditor. I was informed that the Managing Director of the company has in turn obtained loan from the following persons and same was introduced in the company as unsecured loan. Sl No Name and address of the Person Amount Remarks 1 N. Rajagopalan, S/o. Narayana lyer New no 5(old No 7), IV cross st, Indira Nagar, Adayar, Chennal-20 3,00,000 He is brother of the father of the M.D 2 S.....
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....explained by the assessee, it is open to the revenue to hold that it is the Income of the assessee and no further burden lies on the revenue to show that the Income is from any particular source - Roshan Di Hatti Vs CITkj (1977) 107 ITR 93B (SC) 7.10: Under these circumstances, I charge Rs. 4,10,000 as Income of the assessee for the assessment year 2005-06. " 8.From the Order dated 22.07.2008 of CIT (Appeals) "5. Disallowance of un-explained cash credit amounting to Rs. 4.10 lakh u/s 68 of the Income Tax, 1961:- Briefly, the case of the Assessing Officer is that Shri N. Balasubramanian, Managing Director of the Company has given a loan of Rs. 4.10 lakh in cash to the Appellant Company. Shri N. Balsubramanian is assessed to tax with Income-tax Officer, Range III, Chennai and had declared income from salary at Rs. 60,000/- in assessment year 2005-06. Therefore, he did not have adequate capacity to give loan of Rs. 4.10 lakh to the Appellant Company in cash. Consequently, the Appellant Company had failed to prove the genuineness of this loan. During the course of the assessment, Assessing Officer verified whether this transaction is genuine. It w....
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....ny in the disguise of loan alleged to have been given by the Managing Director of the Company. The Assessing Officer has built a fool proof against the Company because the alleged loan accepted by the Appellant Company from Shri M. Balasubramanian, Managing Director of the Company was found to be not reflected in the income tax return of Shri M. Balasubramanian who also did not have the capacity to advance such large sum to the Company. Therefore, I confirm the addition of Rs. 4.10 lakh as made by the Assessing Officer u/s 68 of the Income tax Act, 1961. No relief is called for on this issue." 9. From the Order dated 27.07.2007 of the Income Tax Appellate Tribunal "10. After considering the rival contentions and the materials on record, we find that it is an undisputed fact that the loan transaction recorded by the assessee is not through the banking channel but only in cash. It is also an undisputed fact that the Managing Director of the assessee was not having the capacity of giving the loan amount of Rs. 4,10,000/- because he himself has admitted only salary income of Rs. 60,000/-. The only explanation in this respect was that the said Managing Director of t....
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.... Assessing authority himself. Further the Managing Director was present with the Chartered Accountant during the course of Assessment proceedings. But, from the record of the Assessing authority, we do not find any kind of examination of these Affidavits or cross examination by the Assessing authority of these persons. The Affidavit of Mr.N.Rajagopalan, inter alia states that he is a retired employee of the Southern Railways and out of his retirement benefits received, he advanced a sum of Rs. 3,00,000/- (Rupees three lakhs only) to his brother's son who is the Managing Director of the Assessee Company. The other Affidavit of Ms.Dhanam shows that she has advanced a sum of Rs. 1,00,000/- (Rupees one lakh only) as loan to the Managing Director of the Assessee Company, from the amount received out of the business carried out by her husband and agreed to take interest at the time of final settlement. 11. In the absence of any cross examination or rebuttal or controverting of these Affidavits, the learned Assessing Authority could not have concluded that the Assessee has failed to adduce the evidence to prove the identity of the creditor, genuineness of the transaction and credit....