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Facts
The Revenue appealed the Ld. CIT(A)'s order deleting additions of Rs. 2,85,56,973/- (unsecured loans) and Rs. 34,56,000/- (cash deposits). The assessment proceedings were completed ex-parte under section 144 due to non-compliance by the assessee.
Held
The Tribunal held that the Ld. CIT(A) was justified in deleting both additions. The unsecured loan transactions were found to be genuine after considering additional evidence, and the cash deposits were explained as cash sales duly recorded in the books, preventing double taxation.
Key Issues
Whether Ld. CIT(A) was justified in deleting additions on account of unsecured loans and cash deposits without proper appreciation of facts and evidence, and whether the matter should have been remanded to the AO.
Sections Cited
144, 68, 251(1)(a), 46A, 143(2), 142(1)
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Income Tax Appellate Tribunal, MUMBAI “A” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
Assessment Year : 2012-13 Income Tax Officer, Akshay Automobiles 129, Aayakar Bhavan, Private Limited, Mumbai-400020. vs. 1, 2 William Compound, 33 Marve Road, Mith Chowke, Malad (East), Mumbai-400064. PAN : AAFCA3582P (Appellant) (Respondent) For Assessee : NONE For Revenue : Shri Surendra Mohan, Sr.DR Date of Hearing : 18-09-2025 Date of Pronouncement : 19-09-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 18-04-2025, pertaining to Assessment Year (AY) 2012-13, wherein the Revenue has taken the following grounds of appeal:
“1. Whether on the facts and circumstances of the case, Ld. CIT(A) is justified in deleting the addition of Rs. 2,85,56,973/- made by the assessing officer by disallowing the unsecured loan and addition of Rs. 34,56,000/- on account of cash deposits without appreciating the fact that the assessee company did not provide relevant supporting documents during the assessment proceedings and AO did not get the chance to examine the additional evidences filed by the assessee before Ld. CIT(A).
2. Whether on the facts and circumstances of the case, Ld. CIT(A) is justified in deleting the addition of Rs. 2,85,56,973/- made by the assessing officer by disallowing the unsecured loan and addition Rs. 34,56,000/- on account of cash deposits without considering the proviso to section 251(1)(a) of the IT. Act vide which the assessment could have been set aside to the file of the AO for deciding it afresh after giving opportunity to the assessee.
3. Whether on the facts and circumstances of the case, Ld. CIT(A) is justified in deleting the addition of Rs. 2,85,56,973/- disallowing the unsecured loan and Rs. 34,56,000/- disallowing the cash deposits without appreciating the fact that the assessee company has filed additional evidence during the appellant proceedings and Ld. CIT(A) should remand back to assessing officer for examine the same as per rule 46A of the income tax Act. 4. "The appellant craves leave to add, alter, amend or delete all or any of the aforesaid grounds of appeal.”
None appeared on behalf of the assessee nor was any adjournment application filed. Considering that the matter has been adjourned from time to time and notice has been duly served on the assessee and inspite of that, there is no representation on behalf of the assessee, it was decided that no useful purpose would be served in adjourning the matter any further and to decide the matter based on material available on record.
Briefly the facts of the case are that the assessee-company filed its return of income, declaring total income of Rs. 71,39,424/- which was selected for scrutiny and subsequently, notices u/s. 143(2) and 142(1) of the Income Tax Act, 1961 („the Act‟) were issued which remain non- complied with. Thereafter, the AO proceeded and passed the order u/s. 144 of the Act, dt. 30-03-2015, wherein addition of Rs. 2,85,56,973/- was made in respect of unsecured loans u/s. 68 of the Act and addition of Rs. 34,56,000/- were made on account of cash deposits as un-explained deposits u/s. 68 of the Act. Thereafter, the assessee carried the matter in appeal before the Ld.CIT(A), and also moved an application for submitting additional evidences under Rule 46A.
The Ld. CIT(A) called for a remand report from the AO vide letter dt. 03-01-2025 and thereafter, a reminder letter was issued on 17-01-2025. However, there was no compliance on the part of the AO to submit the remand report and thereafter, the Ld. CIT(A) proceeded and passed the impugned order.
Regarding the addition of Rs. 2,85,56,973/-, the relevant findings of the Ld.CIT(A) are contained at paras 5.1 to 5.9 of the impugned order, which read as under: “5.1 I have perused the assessment order and the submission of the appellant. It is noted that as the details and supporting pieces of evidence in respect of the unsecured loan were not submitted during the assessment proceeding, the AO, in Para 5 of the order, proceeded with the addition of the difference between the closing and the opening balance of the unsecured loan as unexplained cash credit u/s. 68 of the Act. 5.2 During the appellate proceedings, the appellant has submitted the following details to explain the issue related to the unsecured loans:
5.3 It is pertinent to note that the addition u/s. 68 of the Act can be resorted to if either no explanation with regard to the 'nature and source of the credits appearing in the Books has been offered or the AO is not satisfied with the explanation of the assessee with regard to the 'nature and source' of such credits. As far as the nature of the credits is concerned, it must be a genuine business transaction. For the source, the identity, creditworthiness, and genuineness of the transaction are required to be ascertained. 5.4 In the case of the appellant, it is noted that the AO has added a sum of Rs. 2,85,56,973/- as unexplained cash credit on account of the difference of unsecured loan amount standing in the Balance Sheet of the appellant as of 31.03.2011 and 31.03.2012. Therefore, firstly, it is imperative to have a closer examination of the Balance Sheet of the appellant for AY 2011-12 and 2012-13, specifically the detailed break-up of party-wise unsecured loans availed, to identify the lenders. Thereafter, we must test the lender on the touchstone of identity, creditworthiness, and genuineness. For the sake of clarity, the schedule of the Balance Sheet of the appellant is pasted hereunder for quick reference:
5.5 From the data pasted in the tables above, it could be noted that the major variation of 2.85 crore in unsecured loans is on account of loans taken from M/s, Manba Finance Ltd., an NBFC company, during the year under consideration i,e., FY 2011-12. Some upward mobility of around 18.30 Lakh is in respect of M/s. Prabhanjan Automobiles Pvt. Ltd. is noticed. It is also noted that some outstanding unsecured loans as of 31.03.2011 have also been repaid during the year ending 31.03.2012. The appellant has submitted the details in respect of M/s. Manba Finance Ltd., being an NBFC, along with the audited financials, loan confirmation, and its ITR filed. As far as the identity of M/s. Manba Finance Ltd., as a lender, is concerned, the appellant has provided the details regarding its registration with the RBI as an NBFC. The company master data of the RoC site also shows that it is a compliant company and is ACTIVE. The company has also filed its ROI, declaring a Total Income of Rs. 5,77,50.840/-. All this evidence points out to the fact that the identity of the lender stands established. The creditworthiness of the lender, M/s. Manba Finance Ltd gets established by its audited Balance Sheet for the period under consideration, placed on record. It is seen that it has 5.19 crore of its own capital, while Rs. 18.43 crore of Reserves and surplus. If we add up the current and non-current liabilities, its Sources of Fund stand at Rs. 58,88,48,844/-. From the P&L Account, it is noted that during the year under consideration, M/s. Manba Finance Ltd. has shown a total revenue of Rs. 12,65,39,643/- from its operations, which again points to the fact that they are into genuine financial business. The above facts establish the creditworthiness of the lender to advance a sum of Rs. 2.85 crore to the appellant during the year, beyond any doubt. The appellant has also provided the Bank Statement of the lender, where the immediate source of the funds being transferred to the appellant can be seen to be routed through clearing and not in any cash deposits. 5.6. The appellant has also submitted the details such as the loan confirmation ledger account in respect of all the other lenders, along with copies of their respective ITRs and audited financials. This evidence duly explains the nature and source of the unsecured loan availed by the appellant during the year under consideration and also the previous year, i.e., FY 2010-11. This transaction is a genuine unsecured loan, hence, the same cannot be brought to tax. 5.7 The appellant, during the current proceeding, has also submitted the reconciliation statement of the unsecured loan and an explanatory note thereto. The submission of the appellant is self-explanatory and hence plausible. For the sake of clarity, the reconciliation table is pasted hereunder:
5.8 identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. However, once the assessee has discharged this initial burden, the onus shifts to the Revenue to prove that the cash credits are not genuine. In the present case, the submission of the appellant is duly supported by the other documents, which are in my considered view, credible. 5.9 Given the facts and the evidence on record, I am of the view that the addition u/s. 68 of the Act in the case of the appellant is not justified. The AO is directed to delete the addition of Rs. 2,85,56,973/-, The ground of the appellant is allowed.”
Regarding addition of Rs. 34,56,000/-, the relevant findings of the Ld.CIT(A) are contained at paras 6.3 to 6.6 of the impugned order, which read as under: “6.3 I have perused the assessment order and the submission of the appellant along with the Annexures thereto. Annexure N-1 (Part-1) contains a tabulated list showing party-wise details of cash sales made by the appellant. For the sake of reference, details in respect of a few buyers listed at the top of the list and a few names listed at the bottom of the list are pasted hereunder to give a fair idea of the appellant's contention:
6.4 From the above, it could be noted that the appellant has shown cash sales of Rs. 38,13,669/- during the year, as against the addition on account of unexplained cash credit of Rs. 34,56,000/- made by the AO. This simply means that the cash sales duly accounted for by the appellant are in excess of the addition made by the AO on account of unexplained cash credits. It is also seen from the P&L Account of FY 2011-12 that the revenue from operations (sales) has been shown at Rs. 67,31,66,344/-. This also implies that the cash sales of Rs. 38.13 Lakh, when compared to total sales of Rs. 6731.66 Lakh, are very small and fit within the preponderance of probability of the appellant's business. Furthermore, the Annexures submitted on record (N-1 to N-10) contain copies of invoice no., date, customers name, invoice amount, insurance & RTO charges, total amount along with copy of invoices, cash receipts & customers' ledger etc., in respect of these buyers, to explain the issue of cash sales appropriately. The submission of the appellant duly explains the cash sales made by them and their due realization as revenue. 6.5 Here too, if the addition made by the AO is examined from the angle of the provisions of section 68 of the Act, the nature and source of such cash deposits need to be verified. The appellant has elucidated the nature of the transaction to be on account of sales made in cash to various customers, which are duly supported by the copies of invoice no., date, customers name, invoice amount, insurance & RTO charges, total amount along with copy of invoices, cash receipts & customers' ledger etc. The sources of such small sums of cash of about Rs. 50,000/- on average with individual customers intending to buy a two-wheeler seem reasonable. In my considered view, this is a plausible explanation. These cash sales are duly recorded in the appellant's revenue from sales, and they have been duly offered to tax under the head "profits & gains from business or profession". Therefore, adding the same sum again as unexplained cash credit would tantamount to double taxation. 6.6 Since the cash sales are found to have been duly recorded in the Books of the appellant, the addition of cash deposits in the bank as unexplained by the AO is not justified. It would be tantamount to double taxation. The AO is therefore directed to delete the addition of Rs. 34,56,000/-.”
Against the said findings, the Revenue is in appeal before us.
During the course of hearing, the Ld.DR submitted that the Ld.CIT(A) has erred in deleting the addition, without appreciating the fact that the assessee-company did not provide relevant supporting documentation during the course of assessment proceedings and the AO did not get a chance to examine the additional evidences filed by the assessee before the Ld.CIT(A). It was further submitted that the Ld.CIT(A) instead of deciding the matter should have remanded the matter back to the AO by drawing our reference to proviso to section 251(1)(a) of the Act.
We have heard the Ld.DR and perused the material available on record. Firstly, it is noted that it is a case where the assessment proceedings were completed u/s 144 and during the course of appellate proceedings, the assessee moved an application seeking submission of additional evidence before the Ld.CIT(A). The Ld.CIT(A) thereafter has sought remand report from the AO and for reasons best known to the AO, no remand report was submitted by the AO inspite of reminder letter being issued by the Ld.CIT(A). Even during the course of hearing, nothing has been brought on record which prevented the AO in submitting the remand report. In such a situation, where the Ld.CIT(A) has proceeded with examining the additional evidences, no fault can be found with the approach and action of the Ld.CIT(A). Merely the fact that power to remand has been granted to the Ld.CIT(A) doesn‟t mean that in all cases where the assessment has been completed u/s 144 and additional evidences are submitted, the matter has to be necessarily remanded to the AO. It is for the Ld.CIT(A) to exercise his discretion and apply his mind and based on facts and circumstances of each case, he is duly empowered either to call for the remand report or remit the matter to the file of the AO. In either case, there is no fetter on the power of the Ld.CIT(A) to examine the additional evidence submitted before him. In the instant case, Ld. CIT(A) looking into facts of the case has sought remand report from the AO and as we have noted earlier, there is complete silence on the part of the AO and there has been no compliance on his part to submit the remand report. In such a situation, we find that the Ld.CIT(A) has proceeded and examined the evidences thoroughly and rightly so and has passed detailed findings regarding the nature and source of unsecured loans availed by the assessee from M/s Manba Finance Ltd., a registered NBFC and others lenders during the year under consideration and has recorded a clear finding that the loan transactions are genuine transactions and the assessee has duly discharged the initial onus cast on it and therefore, there is no legal and justifiable basis to invoke provisions of section 68 and the addition so made by the AO has rightly been set-aside by him.
Further, in respect of cash deposits as well, the Ld.CIT(A) has duly examined the evidences and has come to a finding that these deposits are in respect of cash sales which are duly recorded in the books of accounts and there is no basis to make double addition in hands of the assessee and the addition so made by the AO has been rightly set-aside.
We concur with the approach and findings of the Ld.CIT(A) and don‟t see any justifiable basis to intervene with the order of the Ld.CIT(A) and the same is hereby confirmed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 19-09-2025.