Unsecured loan/ Gifts to be added in Income if paying capacity of giver is not proved: HC

M.R. Shah, J. – Feeling aggrieved and dissatisfied with the impugned judgment and order dated 02.02.2018 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Ahmedabad in ITA Appeal No.861/Ahd./2015 for the Assessment Year : 2006-2007, by which the learned Tribunal dismissed the Appeal preferred by the assessee and confirmed the addition made by the Assessing Officer and further confirmed by the learned CIT (Appeals) of Rs.18,26,730/- as unexplained cash credit, the assessee has preferred the present appeal with the following proposed question of law :

“(i)  Whether on the facts and in the circumstances of the case as well as on law the Tribunal was right in law in not allowing relief in reference to addition made towards unsecured loans / gifts amounting to Rs.18,48,730/-?

(ii) Whether on the facts and in the circumstances of the case the Tribunal has erred in law and on facts in not considering the arguments and paper books filed by the Appellant and therefore, it is prayed that the matter should go back to the final fact finding body i.e. Income Tax Appellate Tribunal?”

2. The facts leading to filing of the present Appeal, in a nutshell, are as under :—

(a) That the assessee filed a return of income for the Assessment Year 2006-2007. Through annual information return, information was received by the Department that the assessee has made deposits of Rs.19,92,730/- in his bank account. The case was therefore, re-opened based on the above information. Notice under Section 148 of the Act was issued to the assessee. Thereafter, notice under Section 143(2) and 142(1) of the Act dated 03.07.2013 alongwith questionnaire, calling for certain details was issued by the assessing officer and served upon the assessee. No submissions were made nor any one attended. Thereafter, further letters were issued and served upon the assessee for furnishing the details as called for. Still nobody appeared. Thereafter, a show-cause notice was issued which was served personally on the assessee. In the show-cause notice, the assessee was called upon to show-cause why the addition / disallowance on additional cash deposits as well as other credits in the bank account and the addition of interest received from the Bank be not disallowed and why the penalty under Section 271(f) of the Act should not be levied? Despite the same, the said letter remained uncomplied with. Therefore, the assessing officer proceeded further ex-parte and considering the material on record, made an addition of Rs.18,49,305/- into the total income as unexplained cash credit.

(b) Before the CIT (Appeals), the assessee was unsuccessful. In the Appeal before the learned Tribunal, the learned Tribunal by the impugned order has also dismissed the said Appeal and hence, the assessee is before this Court.

3. We have heard learned Counsel Mr. Ketan H. Shah appearing on behalf of the assessee. It is vehemently submitted by learned Counsel Mr. Ketan H. Shah that the learned Tribunal has materially erred in dismissing the Appeal without considering the material produced along with the Paper Book which was produced before the learned CIT (Appeals). It is submitted that the learned Tribunal has not properly appreciated the fact that those persons who made the gift have specific confirmations and therefore, the learned Tribunal ought to have allowed the Appeal and disallow the addition made by the Assessing Officer.

4. Having heard learned Advocate appearing on behalf of the appellant – assessee, and considering the material on record, and even considering the impugned orders, it appears that the assessee has shown receipt of Rs.19,92,730/- by way of unsecured loan and/or gift from various persons. However, on appreciation of evidence, and by giving cogent reasons, the learned CIT (Appeals) as well as the learned Tribunal has doubted the capacity of the concerned persons, who are alleged to have given the unsecured loan / gift. As per the assessee, he received a total sum of Rs.19,92,730/- by way of unsecured loan and/or gift as under :—