SARASWATI BUILDCON,AMBERNATH vs. ITO, KALYAN

At the outset, the Registry has pointed out that the appeal is filed with a delay of 118 days. The assessee has filed a petition for condonation of delay supported by a notarized affidavit of its partner. It has been explained that one of the key partners, Shri Jeetu Ramchand Dhanwani, who was actively looking after the affairs of the firm including taxation and appellate matters, was suffering from a serious hepatology-related ailment and remained hospitalized and under continuous medical supervision. The affidavit further states that immediately after stabilization of his health, necessary steps were taken for filing the appeal. The medical records placed along with the affidavit corroborate the hospitalization.

The assessee is a partnership firm engaged in the business of builders and developers. For A.Y. 2020-21, the assessee filed its return of income on 09.01.2021 declaring total income of Rs.180/- after claiming deduction under section 80-IBA of the Act. The case was selected for scrutiny under CASS and assessment was completed under section 143(3) r.w.s. 144B of the Act on 21.09.2022. The controversy before us is confined to the addition of Rs.10,00,000/- under section 68 of the Act, representing unsecured loan received by the assessee from Shri Pravin J. Patil during F.Y. 2019-20. During assessment proceedings, the assessee furnished confirmation of account, ITR, computation of income and bank statement of the lender. The Ld. AO noticed that the assessee had received Rs.10,00,000/- from the lender on 06.11.2019. The Ld. AO further noticed cash deposits aggregating to Rs.5,50,000/- in the lender's bank account prior to advancement of the loan and, principally on the issue of creditworthiness, treated the loan as unexplained under section 68.

The Ld. AR submitted that the assessee has filed a paper book comprising pages 1 to 28. He drew our attention to the loan confirmations of Shri Pravin J. Patil for F.Ys. 2017-18, 2018-19 and 2019-20, enclosed at APB pages 3 to 5, to demonstrate that the lender had financial transactions with the assessee over more than one financial year. The Ld. AR further submitted that, so far as the year under consideration is concerned, the assessee received only Rs.10,00,000/- through normal banking channel. The identity of the lender and the factum of the transaction were supported by the PAN, ITR, loan confirmation and bank statement. The assessment order itself records that the assessee furnished the confirmation, ITR, computation of income and bank statement of Shri Pravin J. Patil.

The Ld. AR contended that the dispute raised by the Revenue is essentially confined to the creditworthiness of the lender, particularly because cash aggregating to Rs.5,50,000/- was deposited in the lender's bank account before advancement of the loan. It was submitted that the lender was engaged in the retail business of supplying building material and the cash deposits represented his business receipts/past savings. The Ld. AR, therefore, prayed 3 that an opportunity may be granted to substantiate the source of the aforesaid cash deposits by producing the cash-flow statement of the loan creditor and other supporting evidence before the Ld. AO.

Per contra, the Ld. DR relied upon the orders of the revenue authorities. The Ld. DR submitted that in proceedings under section 68 of the Act, the initial onus rests upon the assessee to establish, inter alia, the creditworthiness of the creditor and genuineness of the transaction. Merely routing the amount through banking channels would not, by itself, establish the financial capacity of the lender.

The Ld. DR further submitted that the Ld. AO had specifically noticed cash deposits of Rs.1,00,000/-, Rs.1,50,000/-, Rs.1,50,000/- and Rs.1,50,000/-, aggregating to Rs.5,50,000/-, in the lender's bank account before the loan was advanced. The Ld. AO had consequently disputed the lender's creditworthiness. The assessment order also records the Ld. AO's finding that the assessee was required to establish the creditworthiness of the lender with cogent and credible evidence.

We have heard the rival submissions and perused the material available on record. The limited controversy requiring examination is the creditworthiness of Shri Pravin J. Patil, particularly the source of the cash deposits aggregating to Rs.5,50,000/- appearing in his bank account prior to advancement of the loan of Rs.10,00,000/- to the assessee. The assessment order itself records the four cash deposits aggregating to Rs.5,50,000/- and the subsequent transfer of Rs.10,00,000/- to the assessee.

The Ld. AO shall verify the cash-flow statement and supporting evidence and adjudicate only this specific aspect concerning the source of the cash deposits of Rs.5,50,000/- and the consequential creditworthiness of the lender, in accordance with law, after granting reasonable opportunity of being heard to the assessee. The assessee is directed to cooperate with the proceedings and furnish the requisite documents without seeking unnecessary adjournments.

In the result, the appeal of the assessee bearing ITA No. 3956/Mum/2026 is allowed for statistical purposes. Order pronounced in the open court on 08th day of September 2026. Sd/- Sd/- (RATNA DASGUPTA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, िदनांक/Dated: 08/09/2026 Soumili, PS