ASSISTANT COMMISSIONER OF INCOME TAX, VELLORE vs. RAMANAICKENPET RAMAMOORTHY VASU, AMBALUR

In the instant appeals, the registry has noted the delay of 322 days in filing the captioned appeal. We have gone through the condonation petition along with affidavit filed, we find that the reasons given by the assessee are sufficient cause for delay in filing the captioned appeal. Hence, we condone the delay and admit the appeal for adjudication.

The revenue has raised following grounds of appeal:

The Ld.CIT(A), in deleting the addition made by the AO, ought to have noted that out of the above eight loan lenders, in respect of balance three persons, though they filed their return of income, they are not financially sound as evident from their income admitted and hence their credit worthiness to lend such loans remained doubtful and unexplained.

The Ld.CIT(A), while deleting the addition on the ground that all transactions were done through banking channels, failed to note that no evidence of bank account was produced before AO and that only because transactions done through banking channels cannot be a strong ground to accept them as genuine transactions, unless the assessee proves them with evidences/documentary proof.

The Ld.CIT(A), while deleting the addition on the ground that all transactions were done through banking channels, failed to afford an opportunity to AO u/s, 46A(3) of Income-tax Rules, 1962, on additional evidences produced during the appeal proceedings, l.e., bank account details etc., when the fact remains that as evident from the assessment order, the assessee did not respond to notice u/s 142(1) dated 11-12- 2019 issued by AO, calling for returns of income, sources of income and copies of bank statements of loan lenders.

For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the Appellate Authority, i.e., NFAC, Delhi, may be set aside and that of the Assessing Officer restored.

Brief facts of the case are that the assessee, an individual carrying on business under the names Saravana Borewells, Vaniyambadi and Srinivas Wines, Yana, besides having income from house property and other sources, filed his return of income for AY 2017-18 on 29.09.2017 declaring total income of Rs.25,02,490/- .The case was selected for scrutiny under CASS and assessment was completed under section 143(3) of the Income Tax Act, 1961, vide order dated 26.12.2019. The Assessing Officer (AO) determined the total income at Rs.3,46,75,990/-, inter alia, by making an addition of Rs.2,79,23,500/- under section 68 towards unsecured loans and an addition of Rs.42,50,000/- towards advance received against sale of property.

As per the financial statements, the assessee had unsecured loans of Rs.2,79,23,500/-, comprising an opening balance of Rs.64,43,500/- and loans stated to have been received during the relevant previous year amounting to Rs.2,14,80,000/-. The assessee also claimed that the advance of Rs.42,50,000/- against sale of property represented an opening balance and that there was no fresh transaction during the year.

During the course of the assessment proceedings, the Assessing Officer (“AO”) called upon the assessee to furnish complete details in respect of the loan creditors, including their returns of income, sources of income and bank statements. The AO observed that the assessee had not furnished the complete details called for. According to the AO, confirmations had been furnished only in respect of certain lenders, while some of the lenders had either not filed their returns of income or were not financially sound. The AO, therefore, held that the assessee had failed to satisfactorily establish the identity and creditworthiness of the creditors and the genuineness of the loan transactions, and accordingly invoked the provisions of section 68 of the Income Tax Act.

The AO noted that the assessee had shown unsecured loans aggregating to Rs.2,79,23,500/-. According to the AO, despite being afforded opportunities, the assessee failed to furnish complete documentary evidence in support of the said loans. In particular, pursuant to notice dated 11.12.2019, the assessee was required to furnish the returns of income, sources of income and bank statements of the respective lenders. However, the AO observed that the requisite details were not furnished. The AO further noted that some of the lenders had not filed their returns of income, while the financial position and income of certain other lenders did not, in the AO’s view, establish their capacity to advance the amounts claimed to have been received by the assessee.On the basis of the above observations, the AO concluded that the assessee had failed to discharge the onus cast upon him under section 68 of the Income-tax Act. Accordingly, the AO treated the unsecured loans aggregating to Rs.2,79,23,500/- as unexplained credits and made an addition of the said amount under section 68. ACIT Vs Ramanaickenpet Ramamoorthy Vasu 4. 4. The AO also considered the amount of Rs.42,50,000/-, stated by the assessee to have been received as an advance against sale of property. Since, according to the AO, no satisfactory evidence in support of the said amount was furnished during the assessment proceedings, the AO treated the amount of Rs.42,50,000/- as unexplained and made a corresponding addition.

Aggrieved, the assessee preferred an appeal before the ld.CIT(A).Before the ld.CIT(A), the assessee furnished written submissions, confirmations of lenders, PAN and address details, details of transactions and bank statements. The assessee contended that the loan transactions had been carried out through banking channels and that the identity of the lenders had been established. The ld.CIT(A) noticed that the assessee had furnished the details of the lenders and confirmations and had also produced bank statements. According to the ld.CIT(A), the AO had not brought any adverse material on record to establish that the transactions were not genuine and had merely expressed doubts regarding the creditworthiness of the lenders.

The CIT(A) further observed that the assessee had an opening unsecured-loan balance of Rs.64,43,500/- and that the AO had added the entire amount of Rs.2,79,23,500/- without properly appreciating the distinction between the opening balance and loans received during the year. Holding that the assessee had discharged his onus and that the AO had not made adequate enquiries, the CIT(A) deleted the addition of Rs.2,79,23,500/-. 5. 2. With regard to the addition of Rs.42,50,000/-, the CIT(A) accepted the assessee's contention that the amount represented an opening balance and did not pertain to the year under consideration. Relying, inter alia, upon the decision of the Hon'ble

The ld. Authorised Representative submitted that the assessee had furnished the details of the loan creditors, including their names, PANs, addresses and confirmation letters. It was contended that the loan transactions were carried out through banking channels and the corresponding bank statements were also furnished before the CIT(A). He submitted that the assessee had discharged the primary onus cast upon him under section 68 by establishing the identity of the creditors and producing confirmations and banking details. The AO, however, had not conducted any independent enquiry or brought any material on record to establish that the transactions were accommodation entries or otherwise non-genuine.The assessee further contended that the AO had wrongly treated the entire unsecured-loan balance of Rs.2,79,23,500/- as a current-year unexplained credit, even though Rs.64,43,500/- represented an opening balance and only Rs.2,14,80,000/- related to transactions during the relevant previous year.

1 With regard to the advance of Rs.42,50,000/-, he submitted that the amount was an opening balance and there was no fresh credit during the relevant previous year. Hence, according to the ACIT Vs Ramanaickenpet Ramamoorthy Vasu assessee, the same could not be brought to tax u/s.68 for AY 2017- 18.The assessee therefore supported the order of the CIT(A).

2 We have considered the rival submissions and perused the material available on record. The dispute before us, inter alia, concerns the deletion by the ld.CIT(A) of the addition made under section 68 in respect of unsecured loans. The assessment order records that the assessee was called upon to furnish the returns of income, sources of income and bank statements of the lenders, but the AO found that the requisite details had not been furnished during the assessment proceedings. On the other hand, the ld.CIT(A), while deleting the addition, has relied upon confirmations, banking details and bank statements stated to have been furnished during the appellate proceedings. The ld.CIT(A) has also observed that the transactions were through banking channels and that the AO had not made adequate enquiries regarding the creditworthiness of the lenders.

We find considerable force in the contention of the Revenue that, where documents such as bank statements and other material were furnished before the ld.CIT(A) and were relied upon for deleting the addition, the AO ought to have been afforded an effective opportunity to examine and verify such material in terms of Rule 46A of the Income Tax Rules, 1962. The question whether the respective lenders had sufficient financial capacity to advance the amounts, whether the amounts were actually advanced from their disclosed sources, and whether the transactions were genuine are matters requiring factual verification. Further, there appears to be a ACIT Vs Ramanaickenpet Ramamoorthy Vasu factual issue regarding the exact quantum of the current-year credits. The assessee's own statement indicates an opening unsecured-loan balance of Rs.64,43,500/- and current-year transactions of Rs.2,14,80,000/-, whereas the AO has made an addition of Rs.2,79,23,500/-. This aspect also requires proper reconciliation and verification from the books of account and supporting records. In these circumstances, we are of the considered view that the issue should be examined afresh by the ld.CIT(A) after obtaining a proper remand report from the AO. The ld.CIT(A) shall forward to the AO all the additional evidence and supporting documents relied upon by the assessee and call for a factual verification/report regarding the identity, creditworthiness and genuineness of the lenders, the actual movement of funds through their bank accounts, the opening balances and the current- year credits. The ld.CIT(A) shall also specifically examine whether the amount of Rs.64,43,500/- represents an opening balance and whether the amount of Rs.2,14,80,000/- represents the actual unsecured loans received during the relevant previous year. The issue relating to the advance of Rs.42,50,000/- shall likewise be examined with reference to the books of account and the relevant preceding-year records to ascertain whether the amount is indeed an opening balance. After receipt of the remand report, the ld.CIT(A) shall provide a copy thereof to the assessee and afford the assessee a reasonable opportunity to file a rejoinder and supporting evidence, if any. Thereafter, the ld.CIT(A) shall adjudicate the grounds of appeal afresh, after considering the assessment order, the remand report, the assessee's rejoinder, the material available on record and the applicable provisions of law.

Accordingly, the order of the ld. CIT(A) on the issues under consideration is set aside and the matter is restored to the file of the ld.CIT(A) for fresh adjudication in accordance with the above directions. Needless to say, the ld. CIT(A) shall pass a speaking and reasoned order after granting adequate opportunity of being heard to both sides.

In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open court on the 10th day of August,2026 in Chennai. (एस. आर. रघुनाथा) (मनु कुमार िग"र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद*य/ACCOUNTANT MEMBER "या"यक सद*य/JUDICIAL MEMBER चे"नई/Chennai, +दनांक/Dated: 10th August 2026. SNDP, Sr. PS

""थ"/Respondent 3. आयकरआयु"/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय"ितिनिध/DR 5. गाड"फाईल/GF SANDE EP KUMAR Date: 2026.08.11 KUMAR 17:40:29 +05'30'