Dhanaraja Babu Ganesh Vs ITO (ITAT Bangalore)
In the case of Dhanaraja Babu Ganesh vs ITO, the ITAT Bangalore addressed the issue of taxing a cash loan advanced by the assessee in earlier assessment years. The assessee had given a cash loan of Rs. 4.75 crore to one Sri Madhukar during the financial years 2015-2017. However, the Assessing Officer (AO) added this amount as unexplained cash credit under Section 68 of the Income Tax Act for the assessment year 2018-19, despite the fact that the loan transaction had taken place in the earlier years. This was done following a reassessment order under Section 148, which ignored both the Verification Unit’s report and a Civil Court decree that confirmed the loan was advanced in previous years.
The assessee challenged the AO’s decision, arguing that the cash loan should not be taxed in the year under consideration as the transaction occurred in the earlier assessment years. The ITAT observed that Section 68 applies to the current year’s credits, not to amounts advanced in previous years. The tribunal noted that the AO had mistakenly taxed the loan amount in the wrong year, overlooking the established position of law. It was held that if the loan was given in earlier years, the department should use the appropriate remedies to tax it in those years, rather than imposing the tax in the current year.
