The Income Tax Appellate Tribunal (ITAT), Kolkata Bench ruled that the loan amount cannot be taxed as it is a liability and not income.
During the course of assessment proceedings, it was observed by the AO that the assessee, Sati Nath Chatterjee maintained a personal loan account with Vijaya Bank. From the bank statement, it was found by the AO that the assessee had paid interest to the tune of Rs. 48,831 during the Financial Year 2011-12 and the closing balance stood at Rs. 2,33,950.
According to the AO, the assessee had not shown the liability in his accounts i.e. either in M/s United Industries or in his personal account. According to AO, he asked the assessee to explain why the amount of Rs. 2,33,950/- should not be added to the total income of the assessee, since the corresponding asset had not been reflected in the Balance sheet. According to AO, the assessee could not offer any satisfactory explanation on this issue.
Hence, the amount of Rs. 2,33,950/- was added by the AO to the total income of the assessee as undisclosed investment u/s 69B of the Income Tax Act, 1961.
Aggrieved the assessee preferred an appeal before the CIT(A) against the addition of Rs. 2,33,950 and the CIT(A) confirmed the same as well as directed the AO to examine whether the assessee has shown the interest expenditure of Rs.48,831 incurred by the assessee on this loan of Rs.2,33,950 which had been recorded by the assessee in the books of account and if not recorded by the assessee, then this interest expenditure to be brought to tax under section 69C of the Act.
The assessee raised the issue of whether CIT(A) is justified to add bank loan liability of Rs. 2,33,950 with the income of the appellant under section 69A as unexplained money.
The coram of A. T. Varkey held that the addition made by the authorities below on the facts and circumstances of the case is erroneous and, therefore, even though for whatever reason/over-sight the assessee had not disclosed the loan as a liability in the balance sheet and since the incurring of interest on it has been disallowed being personal in nature and the source of loan is from Vijaya Bank as noted by the AO, the loan amount of Rs.2,33,950/- cannot be taxed as it is a liability and not income, so, the ITAT directed the deletion of Rs. 2,33,950/-.
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