Satty and Associates Vs ACIT (ITAT Hyderabad)
Conclusion: Addition made under Section 69A for an alleged unexplained cash loan was not justified as assessee provided evidence of receiving the loan through banking channels and not through cash.
Held: Assessee was a partnership firm. Search and seizure operation u/s 132 was conducted in the case of Sri Satty Ramkumar Reddy and assessee-firm. Consequent to search, notice u/s 153A was issued and duly served on assessee. In response to the notice u/s 153A, assessee filed return of income, admitting total income of Rs.52,010/-. During scrutiny, AO noticed that during the course of search and seizure, certain material was found from the premises of the assessee, which contained rough balance sheet of the assessee firm. AO further noticed that as per the rough balance sheet found during the course of search, unsecured loan was shown at Rs. 11,59,460/-, whereas in final balance sheet, the same was shown at Rs.4,07,602/-. AO called upon assessee to file reconciliation statement of two balance sheets. In response, assessee filed reconciliation statement and explained the difference between the unsecured loans shown in the two balance sheets and claimed that the unsecured loans taken from Smt.K.Subbaratnamma had been repaid and due to this, in the final balance sheet, the unsecured loan liability had come down from Rs.11,59,460/- to Rs.4,07,602/-. Similarly, AO further noticed that there was a difference in profit as per rough balance sheet and income admitted by assessee amounting to Rs.1,01,190/-. Since assessee had not explained the difference between unsecured loans with relevant evidences and also the difference in profit declared in rough balance sheet and return of income filed for the relevant assessment year, AO made addition of Rs.8,53,048 (Rs.7,51,858/- + Rs.1,01,190/-) as unexplained money u/s 69A. It was held from the details filed by assessee, it appeared that the loans had been received in cheque and repaid in cash. Therefore, the allegation of AO that assessee had received the loan in cash was incorrect. Further, assessee had also filed relevant evidences including confirmation letter along with ITR copies of Smt.K.Subbaratnamma. Also, loan given to assessee had been disclosed in the financial statement of the creditor. Therefore, assessee had filed relevant evidences to prove the amount of loan received from the creditor. Further, the reason for difference in the rough balance sheet and the final balance sheet was explained and as per the rough balance sheet, assessee had recorded loan received from Smt.K.Subbaratnamma, whereas, after considering the details of repayment of loan, the account was squared up in the final balance sheet. It was undisputedly clear that assessee had explained the difference in unsecured loan from two balance sheets by filing reconciliation. AO and CIT(A) without appreciating relevant facts, simply sustained the additions made by AO. Thus, the order of CIT(A) was set aside and AO was directed to delete the addition of Rs.7,51,858/- made towards unsecured loan received u/s 69A of the Act.
