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Facts
The Assessing Officer made an addition of Rs. 3.25 Crores under Section 68 as unexplained cash credit for unsecured loans, as the assessee failed to prove the genuineness and creditworthiness of two lenders. The assessee appealed to the CIT(A) and submitted additional evidence, including ITRs, confirmations, and bank statements, which were specifically requested by the CIT(A) during the appellate proceedings.
Held
The Tribunal upheld the CIT(A)'s decision to delete the addition, affirming that the CIT(A) has the power to admit additional evidence under Rule 46A(4) and Section 250 of the Act, especially when such evidence is called for by the CIT(A). It concluded that the identity, creditworthiness, and genuineness of the loan transactions were established based on the documents examined by the CIT(A).
Key Issues
Whether the CIT(A) erred in admitting additional evidence under Rule 46A and Section 250 without directing verification by the AO, and whether the addition under Section 68 for unexplained cash credit was justified.
Sections Cited
250, 133(6), 68, 46A, 251(1), 271
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SMT. RENU JAUHRI
O R D E R
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Revenue against the order dated 14.03.2025, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2020-21.
In the instant case, the assessee had taken/received unsecured loan to the tune of Rs. 3,28,42,847/- in total from the lenders, as detailed below: - Anjuman E Mohammadi – 1,50,00,000/- Reshma Jai Ram Shetty – 1,75,00,000/- Digestive Health Institute by Dr. Muffi Pvt. Ltd. – 3,42,847/-
Muffazal Lakdawala 3. The Assessing Officer therefore, in order to examine the genuineness of the aforesaid unsecure loans, issued notices under Section 133 (6) of the Act to the lenders, however, only the Digestive Health Institute by Dr. Muffi Pvt. Ltd. responded to and therefore, the AO concluded that the assessee has failed to prove the genuineness and credit worthiness of Anjuman E Mohammadi Trust and Reshma Jairam Shetty and consequently held the amount of Rs. 3,25,00,000/- in total (Rs.1,50,00,000/- + 1,75,00,000/-) as unexplained cash credit, under Section 68 of the Act and brought to tax. However, the transaction held with Digestive Health Institute accepted as proved.
The assessee being aggrieved challenged the said additions by filing 1st appeal before the Ld. Commissioner and during the appellate proceedings filed ITRs of both the creditors mentioned above, for the AY 2020-21 thereby proving the identity and credit worthiness of the credit holders. The assessee also provided confirmations from the aforesaid two parties as well as also filed copy of cheque issued by Anjuman E-Mohammadi for Rs.1,50,00,000/- dated 04.10.2019. and the bank statement of the assessee with Axis Bank, wherein the amount of Rs. 1,50,00,000/- has been credited on 07.10.2019. The assessee further filed his bank statement of account maintained with HDFC Bank, which also shows credit of Rs. 1,75,00,000/- dated 30.04.2019, as against the confirmation given by Reshma Jairam Shetty, about the payment of Rs. 1,75,00,000/- made on 25.04.2019.
Muffazal Lakdawala 5. Thus, the Ld. Commissioner by considering the aforesaid peculiar facts and circumstances and the documents submitted by the assessee, ultimately held that the identity and credit worthiness of the creditors and genuineness of the transaction is established and consequently, the addition under Section 68 may be deleted.
The Revenue Department being aggrieved has preferred instant appeal. The Ld. DR mainly emphasized that the Ld. Commissioner allowed the claim of the assessee, without proper verification and affording an opportunity to the AO and without satisfying the legal requirements for establishing credit worthiness and genuineness of the loan transactions under Section 68 of the Act. Further, the Ld. Commissioner committed an error and violation of Rule 46 (9) of the Rule of the Income Tax Rules,1962 by admitting and relying on fresh evidences. Further, the Ld. Commissioner cannot substitute his own findings, over those of the AO, without directing independent verification.
On the contrary, the Ld. Counsel for the assessee submitted that the assessee has duly submitted the relevant documents before the Ld. Commissioner, may be first time, however, it is a fact that the Ld. Commissioner by issuing a notice dated 10.04.2024 under Section 250 of the Act has specially asked for the following details vide Annexure mentioned below: - In connection with the appeal proceedings, you are requested to file the following on or before 25/04/2024:
Muffazal Lakdawala 1. Balance Sheet and P&L account 2. Income computation statement 3. Bank account statement for the entire year. 4. Confirmation of the lenders: Anjuman E-Mohammedi Trust and Reshma Jairam Shetty 5. ITR, Balance sheet and P&L, ledger copies, bank statements of the lenders. 6. Written submission with documentary evidences to substantiate your grounds.
The assessee, thus in response to said notice dated 10.04.2024 submitted the relevant documents, not at his own desire but in fact on asking by the Ld. Commissioner specifically and therefore, according to Rule 46 (A) of the Income-tax Rules, 1962 {in short ‘Rules’}, the Ld. Commissioner is not precluded from entertaining the additional evidence and/or documents for adjudication of the issue/case involved in its right perceptive and proper manner. Further the said documents, somehow were not available at the time of assessment proceedings and therefore, on being asked by the Ld. Commissioner, the assessee submitted the same.
We have heard the parties and perused the material available on record. No doubt in Rule 46 (A) of the Rules, there are certain conditions for admission of additional evidence. However, sub-section 4 of Rule 46 (A) enumerated an exception that Ld. Commissioner is having powers to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause, including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-
Further, according to the provisions of Section 251(1) of the Act, the Commissioner (Appeal) is also having powers to take into consideration all the material and other information produced by the assessee before, or the results of the inquiry held or evidence recorded by, the Settlement Commission, in the course of the proceeding before it and such other material as may be brought on his record, confirm, reduce, enhance or annul the assessment
We observe from the order of the Hon’ble Jurisdictional High Court in the case of CIT – II Nagpur Vs. Suretech Hospital and Research Center Limited 293 ITR 53/164 taxmann 168 (Bombay) wherein the Hon’ble High Court has held that the appellate authority can permit production of document, which enable him to dispose of the appeal. In the facts of the case, the finding given by the Tribunal that the documents produced were necessary for disposal of the appeal on merits and therefore no question of law arise from said finding of the fact recorded by the Tribunal.
Coming to the instant case, no doubt the power of the Ld. CIT (A) is co-terminus that of the AO and it is a fact that in the instant case, in the impugned order the Ld. Commissioner failed to mention that the documents filed by the assessee are essential for adjudication of the issue, however, it is a fact that the Ld. Commissioner specifically asked the assessee to file
Muffazal Lakdawala the relevant documents by issuing notice dated 10.04.2024 under Section 250 of the Act, while exercising powers under Rule 46-A(4) of the Rules and therefore, in pursuance to the said direction, the assessee filed the relevant documents, which were examined by the Ld. Commissioner , in its right perspective and proper manner. Even otherwise, the documents referred to above as examined by the Ld. Commissioner, as per our considered view, were essential for proper and just decision of the case and thus having been rightly considered by the Ld. Commissioner and therefore, in our considered opinion, the deletion of additions by the Ld. Commissioner, is based on the relevant material and relevant documents sought for and examined by the Ld. Commissioner and thus, appeal filed by the impugned order is liable to be affirmed by dismissing the appeal filed by the Revenue Department.
Thus, in result, the Revenue’s appeal is dismissed. Order pronounced in the open court on 29.12.2025.