Absence of Formal Loan Agreement or Repayment Schedule Does Not Justify Treating Unsecured Loan as Unexplained Cash Credit u/s 68 of Income Tax Act: ITAT
Shri Niteshkumar Maganbhai (ITA No. 1763/Ahd/2019)
- The AO found that the assessee
during the year under consideration received an unsecured loan of Rs.
2,38,76,229/- from Sri Salim Hamid Menon, a resident of Dubai.
- He received interest free unsecured loan to fund ongoing project with a condition that amount will be refunded once revenue is generated from the project.
- The assessee in support of his argument furnished copy of confirmation letter but no agreement.
- However, the AO found that the assessee has not furnished proper details of the lender such as the address9 as well as return of income of the lender.
- Hence the AO, treated the credit of loan amount as unexplained cash credit under section 68.
ITAT held as below:
- The allegation of the revenue that there is no formal agreement, repayment schedule cannot be the basis for treating the credit of loan as deemed income of the assessee.
- When the identity and credit worthiness of creditor is established, genuineness of transaction is also not in doubt as the party has confirmed and the transaction was carried out through banking channel by way foreign direct remittance. Then, such amount cannot be deemed as unexplained.
- In view of the above, we hold that the assessee has discharged the onus cast under section 68 of the Act. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him.
The copy of the ITAT order is as under: