M/S PRAKASH TRADERS,MUMBAI vs. ITO WARD 42(1)(4), MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No.6782/Mum/2025 (Assessment Year: 2013-14) M/s. Prakash Traders Income Tax Officer – Ward 42(1)(4), 803, Gopal Puri Building, S.V. Mumbai Road, Borivali (East), Mumbai- Vs. Kautilaya Bhavan, Bandra Kurla 400066 Complex, Bandra (East), Mumbai- 400051 PAN:AAOFP4271A Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assessee by : Shri Ketan Vajani : Shri Alok Singh (CIT – DR) Revenue by : 25.06.2026 Date of Hearing : 31.08.2026 Date of Pronouncement

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the assessee, against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 21.08.2025 for the Assessment Year (AY) 2013-14, arises from the order under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 31.03.2016, passed by Income Tax Officer, Ward 32(2)(5), Mumbai [in short, “the Ld.AO”].

ITA No. 6782/Mum/2025 M/s. Prakash Traders 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) NFAC, hereinafter referred to as the "CIT (A)", has erred in confirming the addition of Rs. 11,00,00,000/- made u/s. 68 of the Act by the assessing officer while completing the assessment in the case of the appellant for the above assessment year. 2. The appellant respectfully submits that both the assessing officer and the CIT (A) has failed to appreciate the fact that the appellant has explained the genuineness of the loans aggregating to Rs. 11,00,00,000/- and further substantiated the same by explaining (a) source of the source and also (b) application of the impugned funds. 3. The CIT (A) has erred in confirming the addition on the basis of extraneous factors which are not relevant for section 68 of the Act and also on the basis of the judicial pronouncement which is not relevant on the facts of the case. 4. The CIT (A) has erred in confirming the addition contrary to its own finding of fact that the appellant had borrowed the loans from the creditors and the same has been duly explained. 5. Both the authorities have failed to appreciate that the appellant firm has been incorporated on 22-1-2013 and accordingly by no stretch of imagination it could have had any unaccounted money which is alleged to have been introduced by way of bogus cash credits.” 3. Brief facts of the case are that the assessee has filed its return of income for AY 2013-14 declaring income of Rs.4,97,450/- on 30.09.2013. The case of assessee was selected for scrutiny assessment, accordingly notices u/s 143(2) and 142(1) were issued.

ITA No. 6782/Mum/2025 M/s. Prakash Traders Director of M/s. Bhadresh Trading Corporation Limited (BTCL) and other members i.e., Mr. Parth Bhadresh Mehta and Mrs. Heena Bhadresh Mehta who are the son and wife respectively of Mr. Bhadresh Vasantrai Mehta and also directors in the concerns of Bhadresh Group of Companies.

ITA No. 6782/Mum/2025 M/s. Prakash Traders 6. With such observations, Ld. AO required the assessee to show-cause as to why the loan taken during the year amounting to Rs.11 crores should not be treated as unexplained cash credit u/s 68 of the Act. In response, the assessee did not produce the unsecured loan parties, instead submitted the detailed note on source and utilization of unsecured loan proceeds.

ITA No. 6782/Mum/2025 M/s. Prakash Traders who have obtained loan from M/s. Ratnakar Bank Ltd., list of 'A' set of farmers giving loan to 'B' set of farmers, Bank statement of Abdasa Taluka Bachat and Dhirana Seva Sahakari Mandali Ltd. (Mandali Bank) of 'B' set of farmers, letters of 'C' set of farmers giving direction to 'Mandali Bank' to transfer amount to 'D' set of farmers, letters of 'D' set of farmers giving direction to 'Mandali Bank' to transfer amounts through RTGS to M/s. Prakash Cotton.

ITA No. 6782/Mum/2025 M/s. Prakash Traders 6.13 In the present case, the assessee could not prove the genuineness of loan transactions. The assessee did not produce the unsecured loan parties even after being asked specifically to do so. Further, the assessee failed to prove the identity,genuineness and creditworthiness of the loan parties. The assessee has totally failed to prove the transactions recorded in its books of accounts relating to unsecured loans of Rs. 11,00,00,000/- taken during the year as genuine. 6.14 After careful consideration of the case, the claim of unsecured loans totalling Rs.11,00,00,000/- is hereby rejected and accordingly, addition of Rs.11,00,00,000/- are made u/s.68 of the I. T. Act being unexplained cash credits. Penalty proceedings u/s.271(1)(c) of the L.T. Act, 1961 is initiated separately for furnishing inaccurate particulars of income and concealment of particulars of income.”

ITA No. 6782/Mum/2025 ITA No. M/s. Prakash Traders M/s. Prakash Traders

ITA No. 6782/Mum/2025 ITA No. M/s. Prakash Traders M/s. Prakash Traders

“1. The assessee is engaged in The assessee is engaged in the business of dealing in raw cotton and other agro the business of dealing in raw cotton and other agro commodities. The assessee was incorporated on 22 commodities. The assessee was incorporated on 22-1-2013 and this is the first year of 2013 and this is the first year of the assessee firm. During the year, the assessee has taken loans from 6 farmers During the year, the assessee has taken loans from 6 farmers During the year, the assessee has taken loans from 6 farmers aggregating to Rs. 11 Crores Rs. 11 Crores. The break-up of the loans taken is given in Paragraph up of the loans taken is given in Paragraph 6.2 on page No. [ ] of the assessment order. The party 6.2 on page No. [ ] of the assessment order. The party-wise amounts are as under: wise amounts are as under:

Jaysukh Purshotam Thacker Jaysukh Purshotam Thacker Rs. 2 Crores Mahamadsidhik Ishmail Juneja Mahamadsidhik Ishmail Juneja Rs. 2 Crores Nasimbanu M. Juneja Rs. 2 Crores Nayna Mukesh Thacker Mukesh Thacker Rs. 2 Crores Razak A. Juneja Rs. 1 Crore Sanjay Pratapbhai Soneta Sanjay Pratapbhai Soneta Rs. 2 Crores

ITA No. 6782/Mum/2025 M/s. Prakash Traders

Mr. Bhadresh Mehta AACPM0152D Rs. 5 Crores Mr. Parth Mehta ANWPM9376N Rs. 3 Crores Mrs. Heena Mehta AFPPM2633H Rs. 3 Crores

ITA No. 6782/Mum/2025 M/s. Prakash Traders operative society which is duly registered under The Gujarat Co-operative Societies Act, 1962. This Mandali carries out banking transactions on behalf of its members who are all farmers. The said Mandali also gives credit facility to its members. 8. The Mandali operates in the following way: (a) The Mandali has its own account with a co-operative bank namely Kutch District Co-operative Bank (KDCC). (b) Whenever the Mandali receives any money on behalf of its member, it is usually accompanied by an instruction letter from the payee to credit the said amount in favour of the recipient member. (c) On the basis of such instruction letters, the Mandali will credit the respective member's account. (d) Thereafter any member who wants to transfer the said amount to any other member of the Mandali can do so by using an instrument like an instruction letter directing the Mandali to credit the other member's account. (e) On receipt of such instruction letter from the member, the Mandali debits the account of such payer member and credits the payee member. (f) In case an amount has to be transferred to a non-member, then in that case, the payer member will instruct the Mandali to transfer the amount to a non- member along with its bank account details. (g) On receipt of such instructions, the Mandali will issue a cheque from its own bank account with KDCC bank or will instruct KDCC bank to transfer funds through RTGS. (h) Since the KDCC bank is a co-operative bank and does not participate in clearing, it cannot transfer its funds through RTGS. Therefore, KDCC will transfer the funds to its own account with State Bank of India and from that account to any other account. 9. On receipt of loans from the Ratnakar bank, the Mandali had credited the individual accounts of set 'A' farmers held with the Mandali. Thereafter, the set 'A' farmers had instructed the Mandali to transfer the funds received to a second set of farmers, hereinafter referred to as set 'B' farmers. On receipt of such instruction, the Mandali had debited the accounts of 'A' set of farmers and in turn credited the accounts of 'B' set of Farmers. 10. Subsequently the 'B' set of farmers had further instructed the Mandali to transfer a sum of Rs. 27 crores to BTCL as share application money. On receipt of such instruction, the Mandali had transferred the said amount through its account with KDCC bank to BTCL. On receipt of such amount BTCL had allotted shares to the 'B' set of farmers. Copy of Form No. 2 filed by BTCL with ROC had been filed during the appellate proceedings before the NFAC. 11. M/s. BTCL wanted to advance certain money for the procurement of cotton seeds. It had followed the following modus operandi. BTCL had advanced a sum of Rs. 11 crores and 26 crores to a set of farmers (hereinafter termed as set 'C') through "Mandali" on 19.03.2013 and 20.03.2013. As soon as the Mandali had received funds from BTCL, it had credited the respective member's account in its books of accounts. The farmers on receipt of such credit entries of Rs. 37 crores in their account, had further requested the Mandali to transfer the funds amounting to Rs. 10 crores to another set of farmers (hereinafter termed as set 'D').

ITA No. 6782/Mum/2025 M/s. Prakash Traders 12. Copies of request letters from members to transfer funds to the lenders who are also members of Mandali have been filed in paper book for each of the six lenders with their respective documents. Please refer - Page Nos. 20, 31, 39 & 41 of the paper book. Copies of Bank statements of the farmers from whose accounts the funds have been transferred to the account of the lenders are also filed in the Paper book. Please refer Page Nos. 19, 30, 38, and 40 of the paper book. 13. On receipt of the credit entries amounting to Rs. 10 Crores in their accounts, the 'D' set of farmers i.e. the lenders, requested the Mandali to transfer the said funds to the appellant firm. Copies of instruction letters from these lenders to the Mandali are attached in the paper book. Please refer page Nos. 12, 17, 24, 28, 35 & 36 of the paper book. Copies of lenders' accounts in the books of the Mandali are also filed in the paper book. Please refer Page Nos. 11, 16, 23, 27 and 34 of the paper book. In this manner amount of Rs. 10 Crores (Rs. 2 Crores each for 5 lenders) was transferred by the Mandali through its bank account with Kutch District Central Co-Operative Bank (KDCC) on 20-3-2013. This amount of Rs. 10 Crores consists loans of Rs. 2 Crores each from (i) Jaysukh Purshotam Thacker; (ii) Mahamadsidhik Ishmail Juneja; (iii) Nasimbanu M. Juneja; (iv) Nayna Mukesh Thacker and (v) Sanjay Pratapbhai Soneta. 14. As regards the loan of Rs. 1 Crore, received from Razak A. Juneja, it is to be noted that on 21.03.2013, a sum of Rs. 25.99 crores was advanced by BTCL to one Mr. Jethalal U. Thakkar for trade advances. The said advance was received in his bank account with KDCC. Copy of bank statement of Mr Thakkar is filed in the paper book at Page Nos. 46 to 49. On receipt of such advances, Mr. Thakkar had further advanced a sum of Rs. 1 crores to Mr. Razak A. Juneja (Set 'D' farmer and one of the lenders to the appellant). However, Mr. Razak A. Juneja had in turn instructed Mr. Thakkar, that instead of transferring funds to his personal account, the said funds should be transferred to the appellant's Bank Account on his behalf. Copy of request letter from Mr. Razak A. Juneja instructing Mr. Thakkar to transfer funds to the appellant firm is filed in the paperbook at Page No. 45. Accordingly the loan of Rs. 1 Crore from Razak A. Juneja has also been supported with the documentary evidences. 15. During the course of the assessment and also subsequent remand proceedings, the appellant has filed various documents in connection with the loans taken from each of the lenders. The documents filed include: (a) Loan confirmation of the lenders; (b) PAN Card of the lenders; (c) Bank Statement of lender reflecting the loan given to the appellant; (d) Instruction letter from lenders to Mandali to transfer the amount to the appellant; and also (e) Affidavit from the lenders confirming the amount transferred to the appellant. All these documents have been grouped together for each of the lenders. During the course of the hearing before the Hon'ble Bench, a chart has been filed giving details of various supporting documents in respect of each of the lender. This chart also gives the details of documents evidencing the receipt of funds by the respective lender. Accordingly, the source of the lenders are also explained by way of this chart and various documents filed in the paper book. 16. On the basis of the documents filed and the facts explained hereinabove, it is relevant to note the following factual position: (i) It is clear that the loan from Ratnakar Bank Ltd. was initiated by Bhadresh Trading Corporation Ltd through its director Mr. Bhadresh Mehta. (ii) The loan was given by Ratnakar Bank Ltd. to various farmers on guarantee of 11

ITA No. 6782/Mum/2025 M/s. Prakash Traders Bhadresh Trading Corporation Ltd. (iii) The said loans were routed through different sets of farmers before the amount of Rs. 11 Crores reached the bank account of the appellant firm. (iv) The amount of Rs. 11 Crore was immediately transferred to the accounts of Bhadresh Mehta, Parth Mehta and Heena Mehta. Accordingly, it is absolutely clear that the appellant was not a beneficiary of the said amount but the appellant has just been an intermediary in the chain of transactions. (v) The appellant, having been incorporated only on 22-1-2013, cannot have earned a huge sum of Rs. 11 Crores and therefore the apprehension that the appellant's own money has been introduced by way of loans is not correct. 17. The assessing officer completed the assessment vide order dated 31-3-2016 making addition of Rs. 11 Crores in respect of the unsecured loan from 6 lenders invoking provisions of section 68 of the Act. As per the assessment order, the addition has been made primarily for two reasons as under: (a) That the transaction portrays a systematic misuse of bank funds reserved for Agricultural activity. (Paragraph 6.10 of the assessment order) (b) That the appellant could not prove the genuineness of loan transactions and could not produce the parties. (Paragraph 6.12 of the assessment order) Appeal Filed before the Commissioner of Income-tax (Appeals) The appellant filed appeal before the CIT (A). During the course of the appeal proceedings, the appellant furnished detailed explanation and also furnished evidences which included certain additional evidences in the form of affidavits by the lenders confirming the loan transactions. The submissions made by the appellant before the CIT (A) are filed at Page Nos. 79 to 90 of the paper book. The CIT (A) sent the matter to the assessing officer in remand proceedings. During the remand proceedings, the assessing officer issued notices to the lenders u/s. 133(6) of the Act. All the lenders have responded to the notices issued. This fact has been noted in the remand report (Page Nos. 91 to 96). The replies filed by the lenders and the documents furnished by each of the lender has also been discussed in the remand report. There are no adverse observations in the remand report except that the lenders have not attended before the assessing officer in response to notices issued u/s. 131 of the Act. The appeal of the appellant was transferred to the National Faceless Appeal Centre in accordance with the Faceless Appeal Scheme. The CIT(A) – NFAC has dismissed the appeal of the appellant and confirmed the addition. It is very relevant to note that the CIT (A) - NFAC has not discussed about the remand proceedings and the remand report issued by the assessing officer. There is not even a whisper as regards the remand report in the order of the NFAC. In fact, the NFAC has recorded an incorrect finding on page No. 7 of the order where it is stated that: "Accordingly, notice u/s. 133(6) of the IT Act, 1961 were issued to the unsecured loan parties on the new addresses but no compliance was made till date." The appellant respectfully submits that this is an incorrect finding. It is clear from the remand report that all the lenders have responded to the notices issued u/s. 133(6) of the Act. The CIT (A) confirmed the addition for the following reasons: • Page No. 8 of CIT (A) order: The appellant firm claim to have used to channelize the loan funds originating from Ratnakar Bank Ltd. to BTCL, through various channels clearly portrays a systematic misuse of bank funds reserved for agricultural activities. 12

ITA No. 6782/Mum/2025 M/s. Prakash Traders • Page No. 10 of CIT (A) order: As is seen from earlier discussion, the loans that the initial group of farmers (119) received were agricultural loans i.e. for cultivating mangoes. However, the loan amounts have been given to the appellant following a very circuitous route. These loans were for agricultural purpose for use by farmers and are being given to third parties which are companies itself makes the genuineness of the transaction doubtful. Our Contentions before the Hon'ble Bench 1. The appellant respectfully submits it has proved the identity of lenders, capacity of the lenders and also the genuineness of the transactions as explained hereunder: • Identity: The identity of the lenders has been established by way of the response to notice u/s. 133(6), PAN numbers of the lenders etc. • Capacity: As regards the capacity, the appellant respectfully submits that the same gets established considering the fact that there were layered transactions which originated from Ratnakar Bank. There is no dispute about the fact that the movement of funds started from Ratnakar Bank and it travelled to the directors of Bhadresh Trading Corporation Ltd. through the appellant. The appellant has produced evidences establishing the source of source though the same is not mandatory. This has been done with a view to explain the transactions beyond any doubt. • Genuineness: Appellant borrowed this money and immediately transferred to the Directors of Bhadresh Trading Corporation Ltd. and his family members. It is clear that the appellant is not a beneficiary of the above funds but is merely an intermediary in the series of transactions. 2. Appellant further submits that the appellant was incorporated on 22-1-2013. Considering this fact, it is clear that the appellant could not have such a huge amount of undisclosed income in short span of about two months and therefore there cannot be any apprehension that the appellant's own money has been brought in the books of accounts by way of unsecured loans. 3. As regards the reason for confirming the addition, i.e. the alleged systematic misuse of agricultural loans for non-agricultural purposes, the appellant respectfully submits that this cannot be a reason for making the addition u/s. 68 of the Act. There are no such criteria provided under section 68 of the Act. Once the identity, capacity and genuineness has been proved, there cannot be any addition u/s. 68 of the Act. Further it is also very relevant to note that even the misuse of the funds as alleged is not done by the appellant. It can be seen that the appellant has acted on the instance of the directors of Bhadresh Trading Corporation Ltd and the appellant did not have any role in the alleged misuse of the agricultural loans. 4. In this connection, the appellant also wishes to refer to the provisions of section 68 of the Act which reads as under: "68. Cash credits. — Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year."

The appellant submits that the opinion of the assessing officer as regards the explanation offered by the assessee is to be interpreted in an objective manner keeping 13

ITA No. 6782/Mum/2025 M/s. Prakash Traders in mind the facts and circumstances of each case. The Hon'ble Supreme Court in case of CIT v. P. Mohankala (2007) 291 ITR 278 has observed that the satisfaction of the assessing officer is to be arrived in an objective manner and on the basis of the facts and circumstances of the case. Paragraph – 14 of the judgement is reproduced hereunder: "14. The question is what is the true nature and scope of section 68 of the Act? When and in what circumstances section 68 of the Act would come into play? That a bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by an assessees; such credit has to be of a sum during the previous year, and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion."

The appellant respectfully submits that the explanation offered by it does not lack any infirmity and the same should have been considered by the lower authorities as a satisfactory explanation considering the facts and circumstances of the case as explained hereinabove. Prayer In view of the above, the appellant respectfully submits that the addition deserves to be deleted for all the reasons explained hereinabove. The appellant, therefore, prays the Hon't Bench to delete the addition of Rs. 11,00,00,000/- made u/s. 68 of the Act and allow the appeal of the appellant.”

unsecured loan parties but submitted a detailed note only. Ld. CIT(A) had also called remand report from the Ld. AO wherein the Ld. AO has given detailed

ITA No. 6782/Mum/2025 M/s. Prakash Traders findings qua each of the lender and again it is reiterated that none of the six creditors have submitted complete details as required by the notice u/s 133(6). It is submitted by the Ld. DR that the Ld. CIT(A) had also observed the same findings as were inferred by the Ld. AO that the loan amount has been given to the assessee following a very circuitous route. These lands were for agricultural purpose for use by farmers and are being to third parties which companies itself makes the genuineness of transactions doubtful. During the assessment proceeding, it must be noted that the assessee was unable to produce the parties who gave unsecured loan despite several opportunities. Given the elaborate reasoning by Hon’ble Courts Section 68 places onus on the assessee to establish the genuineness, accordingly the addition made was upheld and appeal of assessee was dismissed by the Ld. CIT(A).It is submitted that the order of Ld. CIT(A) was justified and deserves to be upheld.

ITA No. 6782/Mum/2025 M/s. Prakash Traders through its associate parties. The arrangement letter dated 22 January 2013 and the list of farmers, along with their respective account numbers and sanctioned limits, have been placed before us at pages 55 to 62 of the assessee’s paper book. The loans sanctioned to the 119 farmers were disbursed into their bank accounts maintained with Abdasa Taluka Bachat and Dhirana Seva Sahakari Mandali Ltd. (hereinafter referred to as “the Mandali”). The Mandali is a co-operative society registered under the Gujarat Co-operative Societies Act, 1962. It undertakes banking transactions on behalf of its members, who are farmers, and also extends credit facilities to them. The nature of its activities has been explained in the note furnished by the Ld. AR, as extracted hereinabove. Upon receipt of the loan amounts from Ratnakar Bank Ltd., the Mandali credited the respective accounts of the 119 farmers, referred to as the first set of farmers (“Set A”). Thereafter, at the request of the Set ‘A’ farmers, the amounts were transferred to another group of farmers, referred to as “Set B”. Subsequently, the Set ‘B’ farmers instructed the Mandali to transfer a sum of Rs. 27 crores to BTCL towards share application money. Pursuant to such instructions, the Mandali transferred the said amount through its account maintained with Kutch District Co-operative Bank Ltd. (KDCC) to BTCL. Thereafter, the amounts received by BTCL by way of share capital, along with a further sum of Rs. 26 crores, were advanced to another group of farmers, referred to as “Set C”, through the Mandali during the year 2013. Since, the Mandali received the funds from BTCL, the corresponding credits were recorded in its books of account. 16

ITA No. 6782/Mum/2025 M/s. Prakash Traders 17. The farmers, upon receipt of the credit entries aggregating to Rs. 37 crores in their respective accounts, thereafter requested the Mandali to transfer a sum of Rs. 10 crores to another group of farmers, hereinafter referred to as “Set D”. Copies of the request letters submitted by the members for transfer of funds to the lenders, who were also members of the Mandali, have been placed on record for each of the six lenders along with the respective supporting documents. Relevant copies of the bank statements of the farmers are also placed in the paper book at pages 20, 31, 39 and 41, evidencing the aforesaid transactions.

ITA No. 6782/Mum/2025 M/s. Prakash Traders 19. During the course of assessment proceedings and, subsequently, during the remand proceedings, the assessee furnished various documents in respect of the loans received from each of the lenders, including loan confirmations, PAN cards, bank statements, instruction letters issued by the lenders and affidavits confirming the amounts transferred to the assessee. These documents were compiled separately in respect of each lender.

ITA No. 6782/Mum/2025 M/s. Prakash Traders therefore, had failed to discharge the initial onus cast upon it under section 68 of the Act. The Ld. CIT(A) placed reliance upon the decision of the Hon'ble Delhi High Court in CIT v. Jansampark Advertising & Marketing (P.) Ltd., [2015] 56 taxmann.com 286 (Delhi). The said decision, inter alia, deals with the nature of the assessee's initial burden under section 68 and the requirement of examining the material furnished in support of an unexplained credit.

ITA No. 6782/Mum/2025 M/s. Prakash Traders 22. It is further noticed that the transactions routed through the different groups of farmers were considered non-genuine primarily because the initial loan granted by the bank to Set A farmers were allegedly not utilised in accordance with the purpose for which such loans had been sanctioned. In this regard, it is necessary to examine the scope of the assessee's burden under section 68 in the context of the credit recorded in its own books. The assessee had furnished documentary evidence in respect of the lenders from whom the amounts were directly received, including their confirmations, PAN details, bank statements and other supporting documents. The question, therefore, is whether the assessee would also be expected / liable to establish compliance by the first group of farmers, i.e. Set ‘A’, with the terms and conditions governing the loans originally sanctioned by Ratnakar Bank Ltd., when the funds had subsequently passed through different persons before being received by the assessee. In our considered view, the answer would depend upon the material establishing a nexus between the assessee's receipt and any alleged infirmity in the original transaction. The mere fact that the first recipients of the bank loans may have utilised the funds otherwise than in accordance with the terms of the original loan arrangement, by itself, cannot establish that the subsequent loans received by the assessee were unexplained within the meaning of section 68, particularly when the assessee has furnished documentary evidence in support of the identity of its lenders, their financial capacity and the transactions through which the amounts were received. 20

ITA No. 6782/Mum/2025 M/s. Prakash Traders 23. The assessee's burden under section 68 is required to be examined with reference to the credit recorded in its books and the explanation furnished regarding the nature and source of such credit. The assessee had furnished documentary material in respect of the lenders from whom the amounts were directly received. The material placed on record, as discussed hereinabove, included confirmations, PAN details, bank statements, instruction letters and affidavits. The subsequent finding that the initial source of funds in the hands of Set ‘A’ farmers may not have been utilised in accordance with the terms of the original bank loan, is a matter concerning transactions preceding the transactions entered into by the assessee with its lenders. Unless such circumstance is shown, on the basis of cogent material, to render the assessee's own transactions non- genuine or the explanation furnished by the assessee unsatisfactory, the same cannot, by itself, constitute a sufficient basis for treating the loans received by the assessee as unexplained cash credits under section 68.

ITA No. 6782/Mum/2025 M/s. Prakash Traders 25. The fact that the lenders could not be produced before the Ld. AO, or that notices issued under section 133(6) were returned unserved, cannot, in isolation and without further enquiry, conclusively establish that the transactions recorded in the assessee's books were non-genuine. The evidentiary effect of such circumstances has to be considered along with the other documentary material available on record. 26. We further find that the reliance placed by the Ld. CIT(A) upon the decision in CIT v. Jansampark Advertising & Marketing (P.) Ltd. (supra) is distinguishable on the facts and law, as relied upon in the present case. The said decision emphasises that the material furnished by the assessee in support of a credit must be examined and that the initial burden under section 68 does not stand discharged merely by producing superficial documentation where the surrounding circumstances indicate that the transaction may not be genuine. In the present case, however, the assessee has placed on record documentary evidence concerning the lenders and the movement of funds through banking channels. The issue considered by the authorities was substantially founded upon the utilisation of the funds by the first group of farmers and the inability to produce certain persons before the Ld. AO, rather than upon any specific finding that the documents furnished by the assessee in respect of its own lenders were false, fabricated or otherwise incapable of supporting the explanation offered under section 68.

ITA No. 6782/Mum/2025 M/s. Prakash Traders 27. In view of the foregoing discussion, we find that the assessee had furnished documentary evidence in support of the identity of the lenders, their financial capacity and the genuineness of the transactions resulting in the credits in its books. The material relied upon by the Revenue to doubt the transactions pertain principally to the utilisation and movement of funds at an earlier stage in the chain of transactions. The mere existence of such intervening transactions, without establishing that the loans actually received by the assessee were accommodation entries or otherwise non-genuine, cannot by itself constitute sufficient basis for treating the credits recorded in the assessee's books as unexplained under section 68.Accordingly, on the facts and material available on record, the addition made under section 68 is not sustainable. The same is accordingly directed to be deleted.

ITA No. 6782/Mum/2025 M/s. Prakash Traders section 68 of the Act, the grounds raised by the assessee, thus,stands allowed being supported with material and settled judicial principles.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 31-08-2026. Ankit K., Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai