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Undisclosed Income- Repayment made out of loan
October, 26th 2007
DCIT vs G.S. Entertainment
Citation 110 TTJ 140

Block-period: 1 April 1990 to 26 September 2000. During search a computer CD was found which showed a loan or a finance transaction of Rs. 15 lakhs received in cash by the assessee. The assessee was in the business of shooting films. The repayment of the said amount was shown. The repayment made had come out of loan received. The repayment could not be said to have been made out of undisclosed income.

ITAT, Mumbai

DCIT vs G.S. Entertainment

IT(SS)A No. 215/Mum/2004; Block period 1st April, 1990 to 26th Sept. 2000

R.K. Gupta, J.M and A.K. Garodia, A.M

6 June 2007

U.K. Shukla for the Appellant
Prakash Jotwani for the Respondent

ORDERR.K. Gupta, J.M :

This is an appeal by the Department against the order of the learned CIT(A) relating to block period from 1st April, 1990 to 26th Sept., 2000.

2. The Department is objecting in deleting the addition of Rs. 15 lakhs made by the AO on account of undisclosed income.

2.1 The briefly stated facts of the case are that during the course of search computer CD marked Annex. 'O' was seized from the office of the assessees firm on 27th Sept., 2000 as per Panchnama dt. 27th Sept., 2000. On perusal of the contents of the CDs through computer, it was seen that a page marked GSE/GW/SK/00217/99 reflected a loan or finance transaction of Rs. 15 lakhs. The said amount was received in cash by the assessee firm from one Shri Gautam Gupta. Contents of the cash receipt as appearing in the CD are reproduced in the order of the AO at p. 8. The assessee was asked to explain the above transaction. In reply it was submitted that since money was required to avoid temporary block and discontinuance in shooting schedule, Sohail Khan tried to arrange finances from Shri Gautam Gupta and for this purpose this cash receipt was prepared. The assessee was asked to submit the evidence, in support of his contention, in the form of affidavit of confirmation from Gautam Gupta that no disbursement had actually taken place for the said cash loan. The assessee had failed to come up with any plausible explanation and any form of evidence. Therefore, the AO treated by observing that the assessee has taken this loan in cash and utilized the same for his business. However, repayment is reflected in bank statements. Even otherwise there is no entry with respect to cheque No. 759590 of Vijaya Bank vide which repayment was promised or secured. This establishes that the assessee had repaid the same loan of Gautam Gupta in the form of cash from its undisclosed income which is not reflected in the books of account. Therefore a sum of Rs. 15 lakhs is added as the undisclosed income of the firm for the financial year 1998-99 by the AO.

3. The CIT(A) after examining the details and explanation found that there is no basis to make the addition in the hands of the assessee on account of undisclosed income. It was submitted that the film shooting was not matured therefore, the amount was available with the assessee and the same amount should be taken that the same has been returned to Shri Gautam Gupta. Accordingly, the CIT(A) deleted the addition made by the AO. Now the Department is in appeal here before the Tribunal.

4. The learned Departmental Representative strongly placed reliance on the order of the AO. Part of the order of the AO was read by the learned Departmental Representative. It was further submitted that the CIT(A) was not justified in deleting the additions as there was no evidence that the amount so returned was available with the assessee. It was also stated that the amount taken as loan was utilized for the purpose of business and same cannot be said that it was available with the assessee for returning the same to Mr. Gautam Gupta. It was further submitted that the findings of the learned CIT(A) are on the basis of presumption and are not in accordance with the provisions of law. On the other hand the learned counsel of the assessee strongly placed reliance on the order of the CIT(A). It was further submitted that the very amount was available with the assessee for returning the same. If the amount is not returned then the loan should be treated as payable, therefore, for this reason also no addition can be made on account of undisclosed income because there was no evidence at all that the assessee has paid the amount of Rs. 15 lakhs out of his undisclosed income.

5. After considering the orders of the AO and CIT(A) and the submissions, we find no infirmity in the findings of the learned CIT(A). The learned CIT(A), in para 24 of his order has recorded that even if the AO's contention was to be accepted that Shri Gautam Gupta had given the loan in cash then the assessee could not have been faulted for receiving the same in cash. Similarly, it would also have to be accepted that the repayment, if at all made in cash, had come out of the same cash that had been taken as a loan. It was not open to the AO to draw the conclusion that the repayment had come from undisclosed sources.

6. From these observations it is clearly seen that if the amount of Rs. 15 lakhs was taken from Shri Gautam Gupta then it has to be presumed that the same was available for repayment also. Though it was submitted that an advance receipt was prepared but in fact no money was taken, therefore, no addition can be made on account of undisclosed income and if it is presumed that the amount is taken as loan then it has to be presumed that the same was available with the assessee for making repayment of the amount. Therefore, in view of these facts and circumstances and in view of the reasoning given by the CIT(A), we confirm his order in this regard.

7. In the result, the appeal of the Department is dismissed.

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