During the F.Y The Assessee has accepted Unsecured Loans from Friends and are shown as Unsecured Loans in the Balance Sheet. These loans are excepted without any interest and Learned AO has added these loans as income from other sources by invocking the provisions of section 56(2)(v) and impose penality for furnishing inaccurate particulars of income. The Statement of Unsecured lender was also recorded and they have confirmed that we have given unsecured loans without interest and received back next year and this fact has also mentioned is assesment order. Please give your openion along with case laws if any
Sandeep (CA)
Guest
Guest
(Expert)
10 November 2008
AO is not correct in adding the unsecured loan as andisclosed income, although he can add the innterest assuming the highest prvelling market intt. rate at that time. one can file the appeal against this unlawfull addition.
11 November 2008
It is the intention of the parties to such transaction whereby a transaction may be classified as a gift or a loan. In the given case the intention of the parties is that of an Unsecured Loan. Further, the amount has been booked as a liability for an Unsecured Loan which is confirmed by the lender and is duly supported by the future course of action,i.e., repayment thereof. An appeal should be preferred by the assessee.
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