JAY KUNDAN BHATT,VIRAR vs. DCIT, CENTRAL CIRCLE 1(1), MUMBAI, MUMBAI

The Assessee challenged the above additions/disallowances in appeal before the CIT(A). Vide Order, dated 05/06/2025, the Learned CIT(A) disposed off the appeal as partly allowed. The Learned CIT(A) allowed Assessment Year 2020-2021 Assessee’s claim for deduction of INR.1,50,000/- under Chapter VI-A of the Act. However, the disallowance of INR.22,45,300/- (INR.6,45,300/- + INR.16,00,000/-) was confirmed by Learned CIT(A).

Not being satisfied by the relief granted by the Learned CIT(A), the Assessee has preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above.

The Assessing Officer had made an addition of INR.6,45,300/- on account of difference in the closing balance of unsecured loan taken by the Assessee from his father (i.e. Shri Kundan Bhatt) as reflected in the books of accounts of the Assessee and as recorded in the books of accounts of his father. As per the books of accounts of the Assessee the Closing Balance of the loan account stood at INR.2,20,88,000/-, whereas the said loan, as reflected in the books of accounts of father of the Assessee was INR.2,14,42,700/-. The Assessing Officer/CIT(A) held the differential sum of INR.6,45,300/- was unexplained cash credit taxable in the hands of the Assessee under Section 68 of the Act.

During the course of hearing the Learned Authorised Representative for the Assessee submitted that the differential amount could not have been taxed during the relevant previous year as the same had been carried forward from the preceding assessment years.

On perusal of the Ledger Accounts of both parties for the relevant 3 Assessment Year 2020-2021 previous year (placed Page No. 74 & 75 of the Paper-Book), we find that the same support the above submissions advanced on behalf of the Assessee. There was no discrepancy/difference with respect to the transactions for the Assessment Year 2020-2021. The Learned Authorised Representative for the Assessee had placed on record the Assessment Orders for the Assessment Years 2017-2018 (at Page 67 to 73), 2018-2019 (at Page 60 to 66) and 2019-2020 (at Page 53 to 59). On perusal of the same we find that Assessing Officer had made identical addition of INR.6,45,300/- in each of the said assessment years. We note that in appeal for the said assessment years, the first appellate authority had deleted the additions on the ground that same were not arising out of any incriminating evidence found in the course of search action under Section 132 of the Act.

Thus, from the above it is clear that the credit of INR. 6,45,300/- did not pertain to the Assessment Year 2020-2021 and therefore, the addition of INR.6,45,300/- made by the Assessing Officer under Section 68 of the Act cannot be sustained. Accordingly, the addition of INR.6,45,300/- is deleted and Ground No.1 raised by the Assessee is allowed.

Our view draws support from the following decisions cited on behalf of the Assessee during the course of hearing: - Ivan Singh vs. ACIT [2020] 116 taxmann.com 499 (Bombay) - CIT vs. Usha Stud Agricultural Farms Ltd.: 301 ITR 384

Ground No. 2 raised by the Assessee pertains to addition of INR.16,00,000/- made by the Assessing Officer under Section 68 of the Act.

During the relevant previous year, the Assessee had borrowed Assessment Year 2020-2021 INR.16,00,000/- as unsecured loans from 3 parties. During the course of proceedings before Assessing Officer/Learned CIT(A), the Assessee had placed on record the loan confirmations, ITR acknowledgement and the bank statement of the Lender. We find that the aforesaid material has also been placed before us as part of the paper-book filed by the Assessee. Name of the Party Amount in Loan ITR V Bank Statement INR. Confirmation enclosed at at page no. of enclosed at Page No. the paper book page no. of the of the paper book paper book Bhumika Gandhi 1,00,000/- 24 & 25 26 27 to 38 M/s. Krisha Enterprises 5,00,000/- 39 & 40 41 42 to 48 Yash Sharad Gandhi 10,00,000/- 49 50 51 & 52

On the strength of the aforesaid documents, it was contended on behalf of the Assessee that the Assessee had placed on record sufficient evidence/additional evidence to discharge the onus cast upon the Assessee by Section 68 of the Act. It was submitted that neither during the assessment nor during the remand proceedings had the Assessing Officer brought on record any evidence to dispute the genuineness of the aforesaid unsecured loan transactions. It was submitted that the Assessing Officer as well as the Learned CIT(A) had, without making any enquiries either with the lenders by way of notice under Sections 133(6) or by issue of summons under Sections 131 to examine the parties/documents placed on record, rejected the corroborative material furnished by the Assessee by merely stating that further documents should have been furnished by the Assessee. It was further submitted by the Learned Authorised Representative for the Assessee that the documents sought by the Assessing Officer during assessment proceedings were - "Proof of business carried out/source of income, proof of employees, books of accounts, complete ITR, GST return, Truck bills to prove the identity & creditworthiness of parties and genuineness of transactions..........”. However, such documents (like books of accounts, details of employees, 5 Assessment Year 2020-2021 GST return, complete ITR set, Truck bills, etc.) pertained to lenders/third parties and could not have been furnished by the Assessee. It was also submitted that the loans taken from of Bhumikaben Mehta and M/s. Krisha Enterprises were repaid by the Assessee. Thus, the Assessee had sufficiently discharged the onus under Section 68 of the Act. In support reliance was placed by the Learned Authorised Representative for the Assessee on the following decisions (a) CIT vs. Orissa Corporation (P) Ltd., 159 ITR 78 (SC) (1986), (b) PCIT vs. Ami Industries (India) Pvt. Ltd., 424 ITR 219 (Bom) (2020, and (c) DCIT vs. Rohini Builders, 256 ITR 360 (Guj) (2003).

Per Contra, the Learned Departmental Representative refuted the submission made on behalf of the Assessee and placed reliance upon the order passed by the Learned CIT(A). It was submitted that a search and seizure action under Section 132(1) of the Act was conducted on 19/02/2020 in case of M/s. R.B. Tradelinks LLP alongwith its other group concerns and partners/ directors i.e. Ms. R.B. Lifespaces LLP, M/s. R.B. Fluids Pvt. Ltd. Mr. Kundan Bhatt, Ms. Riddhi Kundan Bhatt, Mr. Jay Kundan Bhatt & Mrs. Jigna Kundan Bhatt. The Assessee was also covered under search and seizure action. Consequent to the search action, the case of the assessee was centralized in the charge of Central Circle-1(1). Mumbai and assessment under Section 143(3) was completed. During the assessment proceedings, the Assessing Officer noted that the Assessee had taken unsecured loans from 03 parties. The Assessee was given opportunities to submit corroborative documents to prove the identity & creditworthiness of the above parties and genuineness of the above transactions vide notices dated 22/02/2021, 30/07/2021, 11/08/2021 & 03/09/2021. In Its reply, the Assessee merely submitted the names of the above mentioned parties and nothing else in this regard. In view of the failure by the Assessee to submit any corroborative evidence to prove the Identity & 6 Assessment Year 2020-2021 creditworthiness of the parties and genuineness of the transactions, the Assessing Officer held the amount of unsecured loans amounting to INR.16,00,000/- received from the above three parties as Unexplained Cash Credit u/s 68 of the Act. The Assessee had failed to submit the requisitioned documents either before the Assessing Officer or the CIT(A).

We have considered the rival submission and have perused the material on record.

It is admitted position that the Assessee had filed additional evidence before the CIT(A) which was admitted after calling for a remand report from the Assessing Officer. We note that in paragraph of the remand report the Assessing Officer has recorded as under:

On perusal of the above it becomes clear that the Assessee had filed as additional evidence (a) Ledger Account – Loan Confirmation, (b) Income Tax Return Acknowledgement for the relevant assessment year, and (c) bank statement of the 3 parties from which unsecured loan was taken by the Assessee. Thus, in our view, the Assessee had discharged the primary onus cast upon the Assessee and Section 68 7 Assessment Year 2020-2021 of the Act to prove identity/creditworthiness of the lenders and the genuineness of the transactions. Perusal of the order passed by the Assessing Officer and CIT(A) as well as the remand report shows that neither any independent inquiry was done by the Assessing Officer nor was any discrepancy pointed out in the aforesaid documents furnished by the Assessee. We are of the view that the onus cast upon the Assessing Officer to bring on record material challenging the veracity of the corroborative documents furnished by the Assessee. On perusal of remand report, we find that the Assessing Officer has doubted the creditworthiness of the 3 lenders without bringing on record any material. We have no reason to doubt the veracity of the documentary evidence placed on record by the Assessee. Further, we note that the averment made of the Assessee that the unsecured loans taken from Bhumikaben Mehta and M/s. Krisha Enterprises were repaid by the Assessee has gone uncontroverted during the appellate proceedings. Thus, taking into totality of the facts and circumstances of the present case and the material on record, we hold that the Assessee was able to discharge the onus cast under Section 68 of the Act to prove identity/creditworthiness of the lenders and the genuineness of the loan transactions under consideration. Accordingly, we delete the addition of INR.16,00,000/- made under Section 68 of the Act. Ground No.2 raised by the Assessee, is therefore, allowed.

In result, the present appeal preferred by the Assessee is allowed.