Documented Loan Repayment Cannot Be Taxed Merely Due to Clerical Mistake: ITAT

A partner in an Enterprise challenged an addition of Rs. 40 lakh made under Section 68. The addition stemmed from a loan transaction in which MA Enterprises had advanced funds to another company, which mistakenly repaid the amount to the assessee’s personal account rather than to the partnership firm. The Assessing Officer treated this as unexplained income in her hands and made an addition.

The assessee submitted documentary evidence showing the fund flow and the genuineness of the transaction. However, the CIT(A) mechanically upheld the AO’s order without offering any independent reasoning, simply reproducing the assessment order.

Main Issue: Whether a mistaken repayment to a partner, duly explained and supported by evidence, can be treated as unexplained income under Section 68.

Tribunal Held: The ITAT found merit in the assessee’s appeal and noted that the repayment had occurred due to a clerical mistake by the borrower. The entire transaction, including the source and movement of funds, was properly documented.

The Tribunal criticized the CIT(A) for failing to apply an independent mind and remanded the matter back for fresh adjudication with proper reasoning. It emphasized that genuine transactions, supported by evidence, cannot be taxed merely due to procedural errors.