Income tax

This query is : Resolved

manoj mahimkar (Querist)
Follow

05 November 2009 An assessee is a partnership firm. It has taken loan of Rs. 150000/-from one of his friend in the financial year 1999-00. The above mentioned assessee received notice u/s 143(2) for the assessment year 2007-08. So far no confirmation was taken from the friend who had given the loan of Rs. 150000/-. It was found that the said friend had squared off the amount by showing the same as cash paid in his books of account without any supporting. There was no such entry in the books of account of assessee. Now the assessee is not in a position to provide confirmation to ITO. It is to be noted that the amount is received in the year 1999-00 which is more than six years. Hence the ITO has no right to reopen the case for the assessment for the period beyond six years. We made aware the said fact to ITO. The ITO now insist that since the liability no more exist, it is an income liable to tax. Our contention is that the amount received is shown as capital receipt and hence if at all the laibiliy in respect of loan does exist the same is not to be considered as revene receipt. Pls provide me remedy

Anjani Pratap Tiwari

Anjani Pratap Tiwari (Expert)
Follow

06 November 2009 Liablity shown in the books can't be a capital reeipt. as your liablity does not exist on that date , ITO is right in his intention , but as you have not trated it as income he can not consider it as income. You to refer the case law which is recently dicided by the ITAT .

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now