Income from undisclosed sources: trust-fund payments for nursing college construction were not cash loans under section 69; Rs. 2 lakh bank credit under section 69A was sustained

5-Second Takeaway

The Tribunal deleted the section 69 additions, holding that payments recorded in the ledger and tally data reflected trust funds handled by the assessee and his wife for the nursing college, not unexplained cash loans advanced by them to the trust. It sustained the separate section 69A addition of Rs. 2 lakh in the assessee’s bank account because the explanation of a loan from JG was found improbable and unsatisfactory.

The assessee and his wife, who was a trustee, were found to have handled receipts and payments relating to a nursing college run by the trust. The dispute was whether amounts appearing in their ledger accounts represented cash loans advanced to the trust from unexplained sources, or expenditure incurred on the trust’s behalf from trust funds already in their custody.

On the ledgers, tally data and the cashier’s statement, the Tribunal found that fees collected from students were handed over to the assessee and his wife, who in turn made payments for construction material, contractors, labour and other college expenses. It noted that the accounts also showed drawings and later reconciliation with the trust’s regular books.

The Tribunal therefore held that the entries did not show unexplained loans from the assessees to the trust, and no material suggested that the trust had incurred a liability to repay them. The additions under section 69 were deleted.

A separate addition of Rs. 2 lakh in the assessee’s bank account was upheld under section 69A. The explanation that the lender periodically withdrew cash by debit card only to redeposit it was rejected as contrary to human probability.