Draft of friendly loan

This query is : Resolved

Inamullah Shaikh (Querist)
Follow

03 April 2015 i used to give/take loan(interest free) to/from friends always in cash but only for the amount less than Rs:20.000/-. for the evidence purpose we uses to write in a normal paper and we both sign on it, is it acceptable? we write 1. name and address of both the parties 2. Amount in figure and in words 3. repayment period 4. signature on the back side of paper we also write about the money received serially with date and signatures on each installments. so is it enough for the purpose of cash explanation for Income Tax purpose?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

04 April 2015 By tax authorities, Cash transactions are generally seen with a suspicion.
.
However, production of such evidences as you have mentioned here in above may be helpful in providing explanation for the transactions which are otherwise unexplained. If you can present the parties, in case asked by the AO and the parties respond properly, then the AO has to accept your explanation.
.
Still it is advisable not to indulge in such type of transactions as the replies given by us may create an unending series of questions which can difficult to be
answered.
.