ITO-41(1)(2), MUMBAI vs. HINA NARAIN NARWANI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH; MUMBAI BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA No. 1954/Mum/2026 (Assessment Year: 2023-24)

Income Tax Officer-41(1)(2) Hina Narain Narwani 830A Kautilaya Bhawan, Flat No. 61, Bldg No. 6-B, 6th Mumbai, Maharashtra, vs. Floor S. S. Nagar, Sion 400051. Koliwada, Mumbai 400037.

PAN: ADBPN6281C (Appellant) (Respondent) For Assessee : Shri Prakash Jhunjhunwala For Revenue : Shri Dheeraj Singh Baghel, JCIT Date of Hearing : 13.07.2026 Date of Pronouncement : 11.08.2026 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 23.12.2025, pertaining to Assessment Year (AY) 2023-24, wherein the Revenue has taken the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in holding that only the net fresh advance of ₹1,42,848/- was liable for examination, ignoring the fact that the case was selected for scrutiny specifically to verify the source of loans advanced aggregating to ₹1,72,08,848/- during the year and that each advance required independent explanation at the time of payment? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing netting off of repayments received during the year against the loans advanced, without appreciating that subsequent repayments do

ITA No. 1954/Mum/2026; A.Y. 2023-24 Hina Narain Narwani not absolve the assessee from explaining the source and capacity for advancing the funds at the time when such advances were made? 3. Whether the Ld. CIT(A) was correct in law and on facts in accepting the assessee's explanation merely on the basis that the transactions were routed through banking channels, despite the settled position that mere movement of funds through bank accounts does not establish the genuineness or source of funds? 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the assessee had sufficient financial capacity to advance unsecured loans of ₹1,72,08,848/-, despite the assessee having declared meagre or nil income under the presumptive taxation scheme in earlier years and having failed to maintain regular books of account? 5. Whether the Ld. CIT(A) was justified in relying upon the existence of a sanctioned cash credit facility of ₹80 lakhs without the assessee having established a clear and contemporaneous nexus between the withdrawal from such facility and the loans advanced to Shri Hariom Tarachand Narwani? 6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the provisions of section 69 of the Income-tax Act, 1961 were not applicable, despite the assessee's fallure to satisfactorily explain the source and capacity for advancing unsecured loans of such substantial magnitude?” 2. Briefly, the facts of the case are that the assessee is an individual resident, filed her return of income for the year under consideration, declaring a total income of Rs. 4,88,380/-. The case was selected for scrutiny under the faceless assessment scheme on the specific issue of “Source of Loan Advanced,” and notice u/s.143(2) and 142(1) were issued calling for necessary information/documentation regarding her business or professional activities, sources of income, computation of income, bank statements, and particularly the details relating to unsecured loans advanced during the year. The Assessing Officer noted from departmental records, including Form 3CD filed by Shri. Hariom Tarachand Narwani (PAN: AAAPN6275A), that the assessee had advanced unsecured loans aggregating to Rs.1,72,08,848/- to the said person. It was observed that the assessee had been filing returns under presumptive taxation with nil or meagre taxable income in earlier years and that no business return or

ITA No. 1954/Mum/2026; A.Y. 2023-24 Hina Narain Narwani audit report had been filed under her PAN in the past. In view of the substantial quantum of loans advanced, the Assessing Officer sought a detailed explanation regarding the source of funds, mode of payment, confirmations, and supporting documentary evidence. In response, the assessee submitted that she had already furnished details earlier and reiterated that during the relevant year, the net fresh advance was only Rs.1,42,848/-, while the remaining balance represented opening balances brought forward from earlier years. The assessee stated that the loans were advanced out of accumulated capital and day-today business funds, supported by balance sheet, bank statements, and loan confirmations. It was also claimed that all advances were made through banking channels by account payee cheques or RTGS. However, the Assessing Officer was not satisfied with the explanation furnished. It was noted that despite the assessee’s claim of advancing loans from business funds, her income-tax return history reflected nil or negligible taxable income under presumptive taxation and no maintenance of regular books of account for such high-value transactions. According to the Assessing Officer, the assessee failed to satisfactorily establish the source and capacity for advancing unsecured loans of such magnitude. Consequently, a show cause notice was issued proposing to treat the amount of Rs.1,72,08,848/- as unexplained investment u/s.69 of the Act, taxable u/s.115BBE of the Act. The assessment order records that no effective reply was furnished by the assessee to the show cause notice. After considering the material available on record and the assessee’s earlier submissions, the Assessing Officer concluded that the unsecured loans advanced to Shri Hariom Tarachand Narwani amounting to Rs. 1,72,08,848/- were not satisfactorily explained in terms of source and capacity. Accordingly, the said amount was treated as unexplained investment u/s.69 of the Act, and added to the total income of the assessee. As a result, the returned income of Rs.4,88,380/- was enhanced by Rs. 1,72,08,848/-, and the total assessed income was

ITA No. 1954/Mum/2026; A.Y. 2023-24 Hina Narain Narwani determined at Rs.1,76,97,230/-. The assessment was completed u/s.143(3) read with section 144B of the Act.

ITA No. 1954/Mum/2026; A.Y. 2023-24 Hina Narain Narwani part of business fund rotation. These facts are corroborated by the CC account statement and transaction-wise working furnished by the assessee. The ld CIT(A) further held that Section 69 contemplates unexplained investments where the assessee is found to have made investments not recorded in the books of account, and the assessee offers no explanation or the explanation offered is not satisfactory. In the present case, the ld. CIT(A) held that the transactions are duly recorded in the bank statements, supported by confirmations, and explained as arising out of business funds and sanctioned bank credit. Merely because the appellant has opted for presumptive taxation u/s.44AD of the Act, it cannot be inferred that she lacked financial capacity, particularly when the existence and utilisation of a bank-sanctioned CC facility stands established. Further, the Assessing Officer has proceeded to treat the gross movement of funds as unexplained investment without appreciating the concept of running accounts and netting of receipts and payments. The law is well settled that where there are frequent transactions in a running account, only the peak or net unexplained amount, if any, can be brought to tax, and not the entire turnover of funds. In the present case, even such an exercise has not been undertaken, and the net fresh advance of Rs.1,42,848/- has not been shown to be unexplained. In view of the above factual matrix, the ld. CIT(A) held that the Assessing Officer was not justified in treating the entire sum of Rs.1,72,08,848/- as unexplained investment u/s.69 of the Act. The addition has been made by ignoring the repayments received during the year, the availability of bank credit, and the documentary evidence furnished by the appellant. The explanation offered by the assessee regarding the source and nature of advances is found to be reasonable and supported by contemporaneous records. Accordingly, ld. CIT(A) deleted the addition of Rs.1,72,08,848/- made u/s.69 of the Act and taxed u/s.115BBE.

ITA No. 1954/Mum/2026; A.Y. 2023-24 Hina Narain Narwani 4. Against the said order and findings of the ld CIT(A), the Revenue is in appeal before us.

ITA No. 1954/Mum/2026; A.Y. 2023-24 Hina Narain Narwani

Order pronounced in the Open Court on 11.08.2026

Sd/- Sd/- BEENA PILLAI VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 11.08.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai