The Commissioner of Income Tax-I vs Saranapal Singh, HUF

Adarsh Kumar Goel, J.—This appeal has been preferred u/s 260A of Income Tax Act, 1961 (hereinafter referred to as ''the Act'')

proposing following substantial question of law arising out of order dated 9.9.2009 of the Income Tax Appellate Tribunal, Chandigarh Bench ''B'',

Chandigarh (hereinafter referred to as ""the Tribunal"") passed in ITA No. 892/Chandi/2009 in respect of assessment year 2006-07:

Whether, on the facts and in the circumstances of the case, the Hon''ble ITAT has erred in affirming the order of the CIT (A) Chandigarh in view

of the decision of Hon''ble ITAT, Mumbai Bench in the case of Chander Kant H. Shah 19 DTR 241 (Mum) by holding that the intention of

Section 56(2)(v) is to tax cases of bogus gifts-whereas actually no word like gift has been used in the said section of the Income Tax Act, to

suggest that these provisions pertain to gifts only?

The Assessing Officer made addition to the returned income on account of amount received as loan which was treated to be receipt within the

meaning of Section 56(2)(v) of the Act. On appeal, the CIT(A) set aside such addition which was upheld by the Tribunal. The Tribunal observed

in para 9 as under:

Apart from the aforesaid, in so far as the present case is concerned, there is no dispute regarding the nature and source of the impugned unsecured

loans. The nature of the amounts having been received as unsecured loans and the sources thereof, is not in doubt. The Assessee had also

explained that such unsecured loans have been repaid within a short period and the purpose of raising the loans was also explained before the

Assessing Officer. The Assessing Officer has not doubted any of the aforesaid features of the transaction but has merely observed that since the

unsecured loans were raised free of interest, it constituted receipt of money ''without consideration'' and therefore he proceeded to invoke Section

56(2)(v) of the Act. In our considered opinion, the factum of the assesee being liable to repay the impugned unsecured loans, imbibes the same

with characteristics of a liability. Merely because the amount of loan has been raised without involving payment of interest, cannot be seen to have

vested the impugned amount with characteristics of an income, within the meaning of Section 56(2)(v) of the Act. The existence of the expression

without consideration"" in Section 56(2)(v) cannot distract from the fact that in the impugned case, the sum of money received in question carried a

liability of its repayment and the same was not received by the Assessee with an absolute unfettered right of possession. Therefore, in the totality of

circumstances of the prsent case, we find no justification to uphold the stand of the Assessing Officer and the CIT (Appeals) was justified in

deleting the impugned addition. Accordingly, the conclusion of the CIT (Appeals) is affirmed.

We have heard learned Counsel for the parties.

Learned Counsel for the Appellant submits that scope of Section 56(2)(v) is very wide which included any amount received by the Assessee

unless the same was covered by the proviso.

We are unable to accept the submission.

The amount contemplated u/s 56(2(v) of the Act cannot include loan which is shown to have been repaid. In the facts and circumstances of the

present case, a concurrent finding of fact has been recorded that the amount received was a short term loan which was duly repaid. The said

amount cannot be treated as income of the Assessee u/s 56(2)(v) of the Act. Thus, no substantial question of law arises.

The appeal is consequently dismissed.