Sum accepted as a loan, which is found correct in principle, could not be treated as an amount received since there is a pre-condition of its return to be made to the creditor party. The fact that the creditor company’s name is subsequently struck off is contrary to the factual position in the impugned year

FACTS
During the previous year relevant to the assessment year under consideration, the assessee received a sum of Rs. 2,84,00,000 from Synchron Infotech Pvt. Ltd. The amount so received was paid to Legend Infra Homes Pvt. Ltd. The purpose of the transactions was to purchase property from Legend Infra Homes Pvt. Ltd. by Synchron Infotech Pvt. Ltd.

This position was confirmed by bank transactions and copies of ledger account in the books of Synchron Infotech Pvt. Ltd., Legend Infra Homes Pvt. Ltd. and the assessee. The entry in the case of the assessee is that the relevant sum was given to Legend Infra “towards advance for purchase of property on behalf of Synchron”. The ledger account of Legend Infra Homes Ltd. reflected the relevant sums as advances towards the purchase of property on behalf of Synchron and not in the name of the assessee.

The Assessing Officer held this sum of Rs. 2,84,00,000 to be taxable u/s 56(2)(vi) of the Act and added it to the assessee’s total income. He also observed that the name of Synchron Infotech Pvt. Ltd. had been struck off.

Aggrieved, the assessee preferred an appeal to CIT(A), who allowed the appeal filed by the assessee and held that the sum of Rs. 2,84,00,000 received by the assessee is not without consideration, and consequently, section 56(2)(vi) of the Act does not apply.

Aggrieved, revenue preferred an appeal to the Tribunal.

HELD
The Tribunal observed that the AO had not invoked section 68 of the Act in order to treat the impugned sums as unexplained cash credit on account of the assessee’s failure to prove the identity, genuineness and creditworthiness of all the parties therein. The Tribunal held that a loan sum accepted as correct in principle could not be treated as an amount received since there is a pre-condition of its return to be made to the creditor party. The Tribunal rejected the arguments on behalf of the revenue and confirmed the action of CIT(A).