LATE REKHA KESHARWANI L/H KUSHAL KESHARWANI,RAKABGANJ, GORAKHPUR vs. INCOME TAX OFFICER, WARD 2(3), GORAKHPUR

PER ANADEE NATH MISSHRA:A.M.

(A) This appeal has been filed by the assessee against the impugned appellate order of ld. CIT(A)/National Faceless Appeal Centre (NFAC), Delhi dated 11.05.2023 for Assessment Year (AY) 2016-17. The assessee has raised the following grounds of appeal:

“1. Because none of the notices of hearing as claimed to have been issued by the Ld. CIT(A)/NFAC u/s 250 of the IT Act 1961 was neither served physically nor on the email ID provided by the appellant in Form 35, and as such the ex-parte order passed by the Ld. CIT(A) is bad in law, unjustified and against the principle of natural justice and the same deserves to be quashed. 2. Because the Ld. CIT(A)/NFAC erred in law and on the facts in affirming the addition of Rs. 11,00,000/- unsecured loans from friends and relatives through banking channel by taking pretext one or the other whereas the fact

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is that all the loan are genuine and justified for which documentary evidence was submitted before the Ld. AO during the assessment proceedings and was available on record but the Ld. AO as well Ld. CIT(A) failed to consider the same and as such the order passed by the Ld. CIT(A) is bad in law, unjustified and against the principle of natural justice and the same deserves to be quashed. 3. Because the Ld. CIT(A)/NFAC erred in law and on the facts in affirming the addition of Rs.4,75,844 on account of unexplained investment in purchase of property, whereas the fact is that the investment was made out of past savings, stridhan and current year income of the appellant and as such addition confirmed by the Ld. CIT(A) is bad in law, unjustified and against the principle of natural justice and the same deserves to be quashed. 4. Because all the additions and disallowances are specifically challenged in the present appeal.”

(B) In this case assessment order dated 22.12.2018 was passed under section 143(3) of the Income Tax Act, 1961 (the Act) whereby the assessee’s total income was determined at Rs. 26,12,812/- (rounded off to Rs. 26,12,810/-) as against the returned income of Rs. 4,41,400/-. In the aforesaid assessment order, additions were made amounting to Rs. 5,78,344/- on account of addition to capital account and an addition of Rs. 11,00,000/- was further made on account of unsecured loans totaling Rs. 11,00,000/- taken from Smt. Sakuntala Devi, Mr. Sushil Kesharwani, Mr. Arvind Kumar Sahu and Mr. Ajay Kesharwani. The assessee’s appeal against the assessment order was disposed off by the learned CIT(A) vide impugned appellate order dated 11.05.2023. In the aforesaid impugned appellate order, the aforesaid additions totaling Rs. 11,00,000/- were confirmed on the ground that supporting documentary evidences were not filed by the assessee. Further, out of the aforesaid addition of Rs. 5,78,344/-, an amount of Rs. 1,02,500/- was deleted and the remaining amount of Rs. 4,75,844/- was confirmed. The present appeal has been filed by the assessee against the aforesaid impugned appellate

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order dated 11.05.2023 of the learned CIT(A). The relevant part of the impugned order of the learned CIT(A) is reproduced as under: “Ground No.-1 This ground being general in nature is dismissed. Ground No.-2 The appellant runs an 'Aatachakki'. For A.Y. 2016-17, she has filed her Return of Income on 29.03.2017, showing total income of Rs. 4,34,417/-. This income included Rs. 2,65,000/- as taxable income u/s 56 representing inadequate consideration for acquisition of Immovable Property. The return was picked up for limited scrutiny and later on expanded to complete scrutiny. The AO noted that the appellant has purchased land on 20.07.2015 for Rs. 38 lakhs, paying stamp duty of Rs. 2,74,550/- and registration charges of Rs. 10,020/-, thus, totalling to Rs. 40,84,570/-. The AO noted that out of the total consideration of Rs. 40,84,570/-, Rs. 5,78,344/- was paid as appellant's own capital representing cash in hand. However, the AO noted that cash balance shown in ITR for A.Y. 2016-17 was Rs. 1,02,500/-only. The AO asked the appellant to explain the sources of this capital. The appellant replied that she was running the business of 'Aatachakki' for around 20 years and the investment of Rs. 5,78,344/- represented accumulated savings during last 20 years. The AO held that there was no documentary proof to establish accumulation of Rs. 5,78,344/- in the hands of the appellant and that the reply of the appellant was nothing but after thought.

Facts on records and appellant's submission have been examined. It is an undeniable fact that there was a cash balance of Rs. 1,02,500/- and this facts has not been controverted by the AO. The AO therefore ought to have allowed infusion own capital to this extent. The addition made by the AO is therefore reduced to Rs. 5,78,344 Rs. 1,02,500 Rs. 4,75,844/-. This ground of appeal is thus partly allowed.

Ground No.-3

The appellant has purchased a property worth Rs. 40,84,570/-. One of the sources of this purchase was explained to be unsecured loan from friends and relatives. The AO noted that one of the lenders to the appellant named Shri Arvind Kumar Sahu has lent Rs. 6 lakh to the appellant but the lender had received deposit of Rs. 5 lakh between 1st to 9th July, 2015 in his account

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with Punjab National Bank and on 11.07.2015, a cheque of Rs. 6 lakh was given by him to the appellant. The lender explained to the AO that the source of deposit into his account between 1st to 9th July, 2015 was (a) some cash lying with him at his home and (b) cash belonging to his mother who had expired in March, 2015. The AO asked if there was any evidence of receiving cash from his mother to which the lender replied that there was no evidence. Based on this statement of the lender, the AO held that appellant's own fund of Rs. 5 lakh was deposited into lender's bank account between 1st to 9th July and subsequently loan of Rs. 6 lakh was given by the lender to the appellant on 11.07.2015. The AO, therefore, held this amount of Rs. 5 lakh as income of the appellant.

Facts on records and appellant's submission have been examined. The appellant has given complete details of his lender Shri Arvind Kumar Sahu. Mr. Sahu has been summoned and examined on oath by the AO. The AO found that there was deposit of Rs. 5 lakh in lenders account between 1st to 9th July, 2015 and subsequently, cheque no. 90361 dated 11.07.2015 was issued to the appellant by the lender giving a loan of Rs. 6 lakh. The AO did not find the reply of the lender regarding source of deposit in his account as satisfactory. The AO, therefore, held that this was appellant's own money deposited into lender's account. The lender has explained that source of deposit into his account between 1st to 9th July, 2015 was partly his own money and partly belonging to his mother, who has died recently in March-2015. The lender has truthfully stated that he did not have any evidence of receiving money from his late mother. There are normally no evidences or recording of events in such situations. Therefore, just because the lender did not have evidence, it cannot be conclusively said that the said money was not belonging to his mother. Therefore, it cannot be concluded that lender's reply was incorrect or untruthful. Even if it is assumed that lender was lying then it cannot be naturally assumed that money in his account was belonging to the appellant. At best, it could be lender's unexplained income. Complicity between lender and appellant has not been demonstrated by AO. AO's conclusion is therefore based upon presumption. This ground of appeal is therefore allowed.

Ground No.-4 As explained above, the appellant has purchased a landed property and paid for it out of her own finances and unsecured loans taken from friends and relatives. Out of such loans, the AO has held that an amount of Rs. 11 lakh remained unexplained as the appellant could not filed any documentary

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evidence in regard to loans taken from these persons. Details of such loans are as under.

Sl. Name Amount No. 1. Smt. Sakuntala Devi Rs. 2 Lakh 2. Shri Sushil Kesharwani Rs. 1 Lakh 3. Shri Arvind Kumar Sahu Rs. 6 lakh 4. Shri Ajay kumar Kesharwavi Rs. 2 Lakh Total 11 Lakh

Facts on records and appellant's submission have been examined. Since no documentary evidence with respect to loans taken from these persons is filed by the appellant, additions made by the AO on this ground is sustained and appellant's appeal is dismissed.”

(C) At the time of hearing, the learned Authorized Representative for the assessee submitted that the aforesaid amount of Rs. 4,75,844/- was confirmed by the learned CIT(A) disregarding the fact that it was assessee’s accumulated savings of the past 20 years. He further submitted that the learned CIT(A) disregarded the fact that the assessee was running the business of ‘AATA CHKKI’ for around 20 years. The learned Departmental Representative for the revenue supported the order of the learned CIT(A).

(C.1) As regards the aforesaid addition of Rs. 11,00,000/-, the learned Authorized Representative for the assessee submitted during that the relevant details were submitted during the assessment proceedings. The learned Departmental Representative supported the impugned appellate order of the learned CIT(A) on this issue also.

(D) Materials on record have been perused. Both sides have been heard. It is not in dispute that the assessee has been running ‘AATA CHKKI’ for the last 20 years. Moreover it is also common knowledge that in Indian families

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the ladies save a part of the money meant for house-hold expenses, which is the accumulated over prolonged periods. Having regard to these facts, the assessee’s explanation that the aforesaid amount of Rs. 4,75,844/- was from out of past savings of about 20 years, is found to be acceptable. Therefore, the Assessing Officer is directed to delete the aforesaid amount of Rs. 4,75,844/-. As regards the aforesaid addition of Rs. 11,00,000/- on account of unsecured loan claimed to have been received by the assessee, it is found on perusal of assessment records as well as the impugned appellate order of the learned CIT(A) that the supporting evidences were not filed by the assessee during either of the two proceedings. However, it is also found that the assessee did not get reasonable opportunity during the assessment proceedings and during the appellate proceedings before the learned CIT(A). Therefore, the dispute regarding the aforesaid addition of Rs. 11,00,000/- is restored back to the file of the Assessing Officer with the direction to pass fresh order in accordance with law, on this specific issue, after providing reasonable opportunity to the assessee.

(E) In the result, the appeal of assessee is partly allowed.

(Order was pronounced in the open court on 08/07/2026)

Sd/- (ANADEE NATH MISSHRA) Accountant Member Date: 08/07/2026 SK, Sr.PS

Copy of the order forwarded to : 1. The Appellant 2. The Respondent.

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