INCOME TAX OFFICER, WARD-1(2)(1), SURAT, SURAT vs. DARSHAN ISHWARBHAI CHALODIYA, SURAT

The Revenue has raised the following grounds of appeal: “i. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,31,956/- made on account of unsecured loan u/s.68 of the income tax Act, 1961 when assessee failed to offer any satisfactory explanation about the unsecured loan credited in the books of accounts of the assessee and also not submitted the evidences to prove the rigors of the provisions of section68 of the Act w.r.t unsecured loans. ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,31,956/ made on account of unsecured loan u/s.68 of the income tax Act, 1961by not appreciating the facts that the said loan is accommodation entries as revealed in the action of the Investigation Wing in the case of Shri Darshan P Sadhani and Shri Harshit P Sadhani. iii. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of Rs.50,00,000/- on account of unexplained cash credit claimed as loan accepted form eight parties as the assessee could not submit supporting documents/ evidences to prove that these loan creditors are person of means. iv. On the facts and circumstances of the case and in law, the Ld.CIT(A) has violated the principles of natural justice while admitting the additional evidences and not providing opportunity of being heard to the Assessing Officer as per the provisions of section 250(2) of the Income tax Act, 1961 and Rule 46A(3) of the income tax Rules, 1962? V. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in admitting the additional evidences, which were not produced before the AO during the course of the assessment proceedings, without appreciating the fact that the assessee has not satisfied the basic conditions laid down under Rule 46A(1) of the Income tax Rules, 1962. vi. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. vii. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored. viii. The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal.” 3. The assessee is an individual and runs private tuition classes and was partner in M/s Shreenath ji Extrusion. The original return of income was filed for the year under consideration on 29.03.2016 declaring a total income at Rs.2,84,160/-. As per information, during the year under review, the assessee i.e. Sh. Darshan Ishwarbhai Chalodiya has received Rs. 12,31,956/- in form of fictitious loan through the accommodation entries provided by Darshan P. Sadhani in the name of the parties being managed by him. Subsequently another information was received through mail from the office of the ACIT, Central Circle-2(1), Ahmedabad that during the assessment proceedings u/s 153A of the Act in case of M/s Shreenathji Extrusion (PAN: ACMFS6940B) for AY 2013-14 to 2019-20, it is seen that Sh. Darshan Ishwarbhai Chalodiya has made huge capital contribution amounting to Rs.52,00,000/- (Rs.2,00,000/- in 2 cash and Rs.50,00,000/- through cheque) to the firm both in cash and through bank which is not commensurate with his return of income. Therefore, source of capital contribution remained unexplained. Further, the case was selected for assessment u/s 147 of the Income Tax Act, 1961 (in short “the Act”) and a notice u/s 148 of the Act was issued to the assessee for filing return of income within stipulated time. The return of income was filed on 13.02.2023 in the response of notice u/s 148 of the Act which was same as original return of income. The Assessing Officer (in short “the AO”) made addition on account of unsecured loan to the extent of Rs.12,31,956/-, addition on account of capital contribution to the extent of Rs.50,00,000/-. The AO also proposed variation on the basis of inference as mentioned in the assessment order to the extent of Rs.62,31,956/-.

Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The Ld. Departmental Representative (in short “Ld. DR”) submitted that the addition deleted to the extent of Rs.12,31,956/- made on account of unsecured loan u/s 68 of the Act, the CIT(A) totally ignored the fact that the assessee failed to offer any satisfactory explanation about the unsecured loan credited in the books of accounts of the assessee and did not submit any evidence to prove the said loans. The Ld. DR further submitted that the said loan is accommodation entries as revealed in the action of the investigation wing in the case of Shri Darshan P. Sadhani and Shri Harshit P. Sadhani. The Ld. DR further submitted that the addition of Rs.50,00,000/- on account of unexplained cash credit claim as loan accepted from 8 parties was not correctly deleted by the CIT(A) as the assessee could not submit the supporting documents/evidences to prove that these loan creditors are person of means. The Ld. DR further submitted that the assessee failed to establish the genuineness/creditworthiness of the said loans, therefore, the Ld. DR relied upon the assessment order and prayed that the addition to be sustained.

The Ld. Authorised Representative (in short “Ld. AR”) for the assessee relied upon the order of the CIT(A).

We have heard both the parties and perused all the relevant materials available on record. The CIT(A) has categorically mentioned that the AO has wrongly added unsecured loans twice. With the duplication of addition, the head addition on account of unsecured loan was deleted and with respect to unsecured loans reflected in the balance sheet as the assessee has brought the identity, creditworthiness and genuineness of the transaction by submitting all the details before the AO, both the additions of Rs.12,31,956/- under the head addition on account of unsecured loan and addition under the head addition on account of capital contribution amounting to Rs.50,00,000/- were rightly deleted. The cognizance of the evidences produced before the CIT(A) was rightly taken into account by the CIT(A) in fact these very documents were present before the AO which were not at all considered by the AO. But at the time of appellate proceedings the CIT(A) has taken cognizance and no discrepancy was pointed out by the Ld. DR at the time of hearing except submitting that the assessee has not proved the creditworthiness and genuineness of the transaction. From the perusal of records, it appears that the assessee has shown/proved the genuineness, creditworthiness and the identity of the said loans and the parties. Therefore, there is no need to interfere with the findings of the CIT(A).

In result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 02.09.2026