Addition for loan received after deposit of Cash in Bank Account of loaner

CA Sandeep Kanoi

In the case of Ghisulal S. Jain(HUF) Vs. CIT,  ITAT Mumbai has confirmed the addition in respect of loan received by the Assessee in the cases in which Loaner has given the loan to Assessee after depositing the cash in his bank account and on failure to establish creditworthiness of the Loaner. It further held that merely because the transactions have taken place through banking channels, is not sufficient to establish that the loans taken by the assessee are genuine. The onus is on the assessee to prove the nature and source of the amount found credited in the books of the assessee. The Hon’ble Kerala High Court in the case of ITO vs. Diza Holding (P) Ltd. (supra) has held that furnishing of particulars is not enough and the payment by way of account payee cheque is also not conclusive.

Further in respect of Loan received by the Assessee from Loaner out of loan received by the Loaner it was held that assessee cannot be asked to prove the source of source or the origin or origin. ITAT has relied on the judgments of  Hon’ble Allahabad High Court has also held in the case of Zafa Ahmad Khan & Co. vs. CIT  [2013 30 taxmann.com 267].

Relevant Extract of the Case are as follows :-

Please become a Premium member. If you are already a Premium member, login here to access the full content.