TMI Blog2010 (10) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... g the interest claimed by the assessee on unsecured loans. 3. In the first Ground the dispute relates to an addition of ₹ 14,75,000/- made by the Assessing Officer by invoking the provisions of section 68 of the Income-Tax Act, 1961 (in short the Act ) by treating unsecured loans raised from the following four person as unexplained: i) Smt.Veena Rani ₹ 3,00,000/ ii) Smt.Saroj Rani ₹ 3,00,000/- iii) Smt. Salochana Rani ₹ 6,45,000 iv) Smt.Anguri Rani ₹ 2,30,000/- 4. According to the Assessing Officer, he was not satisfied with the creditworthiness and the genuineness of the aforesaid creditors and, therefore, he treated the aforesaid sum of ₹ 14,75,000/- as unexplained cash credits within the meaning of section 68 of the Act. The Commissioner of Income-tax (Appeals) has since deleted the addition, against which the Revenue is in appeal before us. 5. Before us, learned DR appearing for the Revenue has primarily reiterated the points made out by the Assessing Officer in the assessment order. According to the learned DR the creditors in question could not prove their creditworthiness in the course of the verification exercise carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise in order to examine the nature and source of such credits. All the four creditors appeared before the Assessing Officer and their statements were recorded by the Assessing Officer. It also emerges from record that the creditors confirmed having advanced loans to the assessee. It is also seen that all the creditors stated that they were income-tax payees and requisite material in this regard was also furnished. The Assessing Officer has not doubted the identity of the creditors. As per the Assessing Officer, the creditors did not have the requisite creditworthiness to advance the stated loans to the assessee. Further, the Assessing Officer was also not satisfied with the genuineness of the transaction since in some cases he found that the assessee was claiming interest expenditure but the same was not actually paid to the respective creditors and was outstanding for payment. For the aforesaid two reasons, the stated credits have been treated as unexplained within the meaning of section 68 of the Act. 9. We have carefully examined the points raised by the Assessing Officer on the basis of his examination of the creditors. As noted earlier, the creditors who are income-tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir respective bank accounts before issuing cheques to the appellant for the impugned loans, as rightly pointed out by the Ld. Counsel all the four creditors were duly produced before the AO. They have confirmed having advanced the said amounts to the appellant. Though the AO was not satisfied with the explanation given with regard to the sources of cash deposited in the respective bank accounts of the creditors, I am afraid addition of these amounts cannot be made in the hands of the appellant. As these creditors could not, as per the AO, explain the sources of cash satisfactorily the AO came to hold that these amounts represented appellant s own undisclosed income brought in the books of accounts in the names of these creditors. However there is no evidence brought on record to confirm this position. Though, to some extent, the observation of the AO with regard to proper explainability of the sources of cash cannot be said to be without force yet I do not think if from these observations valid conclusion could be drawn that this money represented unaccounted income of the appellant. As rightly pointed out by the Ld. Counsel if we go through the detailed discussion made in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ingredients of section 68 of the Act are satisfied qua the stated credits. The Commissioner of Income tax (Appeals), in our view, made no mistake in deleting the impugned addition. Accordingly, the order of the Commissioner of Income-tax (Appeals) is hereby affirmed and the Revenue fails on this Ground. 11. The second Ground relates to interest expenditure of ₹ 3,68,567/- claimed by the assessee. The said expenditure is in respect of the brought forward loans and also loans raised by the assessee during the year under consideration. As far as the interest on the four unsecured loans mentioned above is concerned, the amount was disallowed because the Assessing Officer had treated the loans as unexplained. For the brought forward loans, the Assessing Officer required the assessee to produce the depositors for verification. Though all the creditors were existing income-tax payees, but they were not produced before the Assessing Officer and, therefore, the corresponding interest expenditure was also disallowed. 12. In appeal, before the Commissioner of Income-tax (Appeals), assessee explained that the requisite confirmation and copies of the accounts of all the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insofaras the disallowance of interest on loans raised during the year is concerned, the same is not tenable once such loans are considered as explained. In Ground No.1 above, such loans have been considered as satisfactorily explained, and, therefore, there is no basis for the Assessing Officer to disallow the corresponding interest expenditure. The Commissioner of Income-tax (Appeals), in our view, made no mistake in deleting such addition. Even with regard to the brought forward loans it is evident that the action of the Assessing Officer is unjustified having regard to the material and evidence brought on record by the assessee. The assessee produced the respective confirmations and other material to show that the creditors are income-tax payees and they have duly shown interest income earned from the assessee in their returns of income. The Commissioner of Income-tax (Appeals), in our view, made no mistake in deleting the entire addition having regard to the factual position of the case in this regard. Thus, on Ground No. 2 Revenue fails. 16. In the result, appeal of the Revenue is dismissed. 17. Now we may consider the Cross Objection raised by the assessee which relat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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