Case Law Details
ACIT Vs Mihir Subodhbhai Shah (ITAT Ahmedabad)
Mere agreement to not to charge/pay interest on loan will not vitiate genuineness of such loan transaction
Admittedly, during the year the bank account of the assessee was credited by Rs. 8 Lakh which was treated as unexplained investment by the AO in the absence of necessary detail. The assessee during the appellate proceeding before the learned CIT-A submitted that same represent receipt of unsecured loan from Paresh N Patel and Paresh N Patel HUF. To this effect the assessee also furnished copy confirmation letter from the parties and copy of their PAN as well as ITR acknowledgment. The learned CIT(A) after considering the submission of the assessee and remand report from the AO, was pleased to delete the addition made by the AO. From the perusal of remand report and ground of appeal we note that the only issue of the revenue is that the transaction of credit of unsecured loan as discussed above was not genuine because the assessee has not paid interest on the loan. As such the assessee during the remand proceeding to establish the identity & creditworthiness of creditor and genuineness of transaction, furnished copy of pan, ITR and confirmation letter of the creditor. The AO in the remand did not find any infirmity in the primary evidence furnished by the assessee. The law is fairly settled in case of credit in the books of account the assessee is required to furnished primary document to establish identity & creditworthiness of creditor and genuineness of transaction, once the primary documentary evidence furnished, the onus shifts on the revenue to point infirmity in the document furnished by the assessee after conducting necessary inquiry. In the case on hand, the AO has not carried out any independent inquiry and not found any infirmity in the primary documents filed by the assessee but merely doubted the genuineness of transaction since interest was not paid on impugned loan. In our considered view, the prerogative to pay/charge interest on loan is between the parties who accepted/provided the loan and the same also depends upon various factors. Merely the parties agreed to not to charge/pay interest on loan will not vitiate the genuineness of such loan transaction unless and until the revenue brought some cogent material on record to prove that such transaction of loan is not genuine.
No assessment can be made in the hand of the assessee on basis of certain noting/jotting/rough estimates on the loose sheets/note pad/diary etc. unless and until same is corroborated with independent cogent material giving rise to undisclosed income
A non-speaking document without any corroborative material, evidence on record and finding that such document has materialized into transactions giving rise to income of the assessee which had not been disclosed in regular books of account by such assessee, must disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such non-speaking seized documents are to be referred to as “Dumb Documents”. Therefore, in our considered opinion any loose sheets/diary/note pad containing certain noting or jotting found but on perusal of the same it not discernible that whether any transaction taxable in nature materialized which has not been recorded in the regular books of account or not corroborating with some other cogent material shall not be used for making assessment despite being presumption provide under section 132(4A) and under section 292C of the Act.
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