SHABBIR HUSAINIBHAI RAJKOTWALA,BARDOLI vs. ITO WARD-3(2)(1), SURAT

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ITA 1430/SRT/2025Status: DisposedITAT Surat10 July 2026AY 2018-195 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the loan was received through banking channels and repaid within the same financial year, the addition under Section 68 was unwarranted. The Tribunal followed the jurisdictional High Court's precedent in a similar case.

What were the facts?

The assessee received an unsecured loan of Rs. 5,00,000/- from Mr. Naranlal Soni. The Assessing Officer made an addition under Section 68, considering the lender's limited bank balance and income. The CIT(A) upheld this addition.

What were the issues?

Whether the addition under Section 68 is justified when the loan is repaid within the same financial year. Whether the creditworthiness of the lender was properly assessed.

Which sections of the Income-tax Act were involved?

Section 68,Section 147,Section 144B,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: Shri T.R. Sentil Kumar & Shri Ratnesh Nandan Sahay

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT (PHYSICAL HEARING) Before: Shri T.R. Sentil Kumar, Judicial Member And Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 1430/SRT/2025 Assessment Year: 2018-19

Shabbir Husainibhai Rajkotwala Income Tax Lifeline Hospital, Officer Opp. New Police Line Surti V Ward-3(2)(1), Jakatnaka Bardoli, s Surat Gujarat-394601 PAN: AGMPR7559K (Appellant) (Respondent) Assessee Represented: Shri Sunil Maloo, CA Revenue Represented: Ms. Neerja Sharma, Sr. D.R. Date of hearing : 05-05-2026 Date of pronouncement -07-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the assessee as against the appellate order dated 17.11.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment order passed under section 147 r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19.

I.T. A No. 1430//SRT/2025 A.Y. 2018-19 Page No 2 Shabbir Husainibhai Rajkotwala vs. ITO

2.

Brief facts of the case are, the assessee is an individual and doctor by profession. The assessee filed his return of income for the A.Y. 2016-17 on 03.08.2016 declaring total income of Rs. 2,76,600/-. Since, there was huge financial transaction which was not reflecting in the return of income, the assessment was reopened by issuing notice u/s 148 of the Act on 09.04.2022. During the reassessment proceedings, the assessee explained about the financial transactions. However, the Assessing Officer confirmed the additions of Rs. 5,00,000/- being unsecured loan u/s 68 of the Act received from Mr. Naranlal Soni. The AO also taxed the income u/s 115BBE of the Act.

3.

Aggrieved against the reassessment order, assessee filed an appeal before ld. CIT(A) who has confirmed the addition on the ground that the lender made cash deposits of Rs. 5,01,000/- and on 05.01.2018, then issued cheque of Rs. 5,00,000/- to the assessee herein. Further the bank balance in the lender’s bank account was Rs. 143.75/- only and lenders return of income shown total income of Rs. 4.53 lakhs only. Therefore, ld. CIT(A) confirmed the addition made by the Assessing Officer.

4.

Aggrieved against the appellate order, assessee is in appeal before us, raising following Grounds of Appeal:-

1.

The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 5,00,000/- made by the Ld. AO u/s 68 of the Income-tax Act, 1961 disregarding the fact that same is duly repaid within the same AY. 2. The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 5,00,000/- made by the Ld. AO u/s 68 of the Income-tax Act, 1961 contrary to the ratio laid down by the Hon'ble Gujarat High Court in the case of CIT v.

I.T. A No. 1430//SRT/2025 A.Y. 2018-19 Page No 3 Shabbir Husainibhai Rajkotwala vs. ITO

Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj) and PCIT v. Merrygold Gems (P.) Ltd. (2024) 164 taxmann.com 764 (Gujarat). 3. The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 5,00,000/- made by the Ld. AO u/s 68 of the Income-tax Act, 1961 despite source of source was duly proved. 4. The Appellant reserves the right to add, alter, amend or modify any of the grounds of appeal during the course of appellant proceedings.

5.

Ld. Counsel for the assessee submitted before us, the credit- worthiness of the lender as follows:- “Shri Naranlal Kanaiyalal Soni, PAN AWXPS1749P is regular tax payers and have filed his income tax return as under:- For A.Y. Gross Taxable Income 2016-2017 Rs. 3,47,650/-. 2017-2018 Rs. 4,53,505/-. Shri Naranlal Soni has filed ITR-4 for both the Years. The A.O. has taken into considered transections mentioned in the Passbook of IDBI Bank Ltd., Bardoli Branch. Shri Naranlal Soni has another Bank account with Punjab National bank, Bardoli bearing Account number 6699000100001866. We have attached a copy of Bank Statement for your perusal. A copy of IDBI Bank Ltd Statement is already re- produced in the Order and hence not attached. It is observed that Shri Naranlal Soni has maintained sufficient balance in Bank account with Punjab National Bank Ltd. Moreover, Shri Naranlal Soni has made Cash withdrawals of Rs. 3,00,000/- on 03-01- 2018 and further on 04-01-2018 Rs. 15,000/-. Cash Flow Statement Cash withdrawal from Punjab National Bank, Bardoli On Dt 03-01-2018 Rs. 3,00,000/- Cash withdrawal from Punjab National Bank, Bardoli On Dt. 04-01-2018 Rs. 15,000/- Rs. 3,15,000/- This cash withdrawals were deposited in IDBI Bank Ltd. account to Make payment of Rs. 5,00,000/- on 05/01/2018 to Dr. Shabbir Rajkotwala The assessee wish to draw your kind attention to the fact mentioned in Para No 3.5 and 3.6. The A.O. has not taken into consideration Business Income declared in the Return of Income filed by Shri Naranlal Soni. The A.O. has decided creditworthiness based on only One Bank Statement. A.O. has reached to erroneous conclusion because of the non-consideration of below mentioned two vital information {a} Non-consideration of Bank Statement of Punjab National bank, Bardoli

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{b} Business income declared for A.Y. 2016-2017 Rs. 3,47,650/- & 2017-2018 Rs. 4,53,505/- in his return of income filed. Therefore, the assessee has justified creditworthiness of Shri Naranlal Soni taking into account ………Cash withdrawals on the nearby dated from Punjab National Bank Rs. 3,00,000/- & Rs. 15,000/- …….Business Income declared in his return of Income filed.”

5.1 Further, ld. Counsel filed before us, the return of income filed by the lender, Mr. Naranlal Soni for the A.Ys. 2016-17 & 2017-18. Ld Counsel further submitted that the assessee availed loan by way of cheque on 05.01.2018 and repaid the loan through RTGS on 26.02.2018 within the same financial year. Thus claimed that no question of addition to be made u/s 68 of the Act on the loan repaid within the financial year. Ld. Counsel relied upon the jurisdictional High Court Judgment in the case of PCIT vs. Merrygold Gems (P.) Ltd. reported in [2024] 164 taxmann.com 764 (Gujarat).

6.

Ld. Sr. DR appearing for the Revenue could not dispute the repayment of loan by the assessee through RTGS mode.

7.

We have given our thoughtful consideration and perused the materials available on record. It is undisputed fact that the assessee borrowed the loan through banking channel on 05.01.2018 and repaid the same through RTGS on 26.02.2018 which is reflecting in the bank statement of the creditor, Mr. Naranlal Soni. The Hon’ble jurisdictional High Court judgment in the case of Merrygold Gems (P.) Ltd. (supra) held that where amount of loan received by the assessee was returned within same financial year, appellate authorities had rightly deleted addition made under section 68 of the Act in respect of such loan.

I.T. A No. 1430//SRT/2025 A.Y. 2018-19 Page No 5 Shabbir Husainibhai Rajkotwala vs. ITO

Respectively, following above jurisdictional High Court precedent, we have no hesitation in deleting the addition made u/s 68 of the Act. Thus, the Grounds raised by the assessee are hereby allowed.

8.

In the result, the appeal filed by the assessee is allowed.

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 10-07-2026

Sd/- Sd/- (RATNESH NANDAN SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat: Dated 10/07/2026 * Ganesh Kumar, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, सूरत

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