ULKA CHANDRASHEKHAR NAIR,MUMBAI vs. ITO, WD-26(3)(5), MUMBAI

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ITA 902/MUM/2026Status: DisposedITAT Mumbai29 June 2026AY 2012-136 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that if a receipt is accepted as a loan transaction, it cannot simultaneously be treated as an unexplained cash credit. The remedy for accepting a cash loan in violation of Section 269SS lies in penalty proceedings under Section 271D, not in taxing the loan amount as income.

What were the facts?

The assessee received information about a cash loan of ₹10,00,000/-. The Assessing Officer initiated reassessment proceedings and treated the loan as unexplained cash credit, making an addition to the assessee's income. The CIT(A) upheld this addition.

What were the issues?

Whether a cash loan accepted in violation of Section 269SS can be treated as taxable income, or if the remedy is limited to penalty proceedings. Whether the reassessment notice was validly issued.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 151,Section 269SS,Section 271D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “H(SMC

Before: SHRI OM PRAKASH KANT & SHRI KAVITHA RAJAGOPAL

For Appellant: Shri Pravin Salunkhe (SR. DR)
Pronounced: 29/06/2026

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H(SMC)” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI KAVITHA RAJAGOPAL (JUDICIAL MEMBER)

ITA No. 902/MUM/2026 Assessment Year: 2012-13

Ulka Chandrashekhar Nair, 28 Income Tax Officer, Ward Swastik Plaza, V L. Mehta 26(3)(5), Kautilya Bhavan, BKC, Road, JVPD Scheme, JUHU, Vs. Bandra East, Mumbai – 400051, Vile Parle West, Mumbai – Maharashtra. 400049, Maharashtra. PAN NO. AABPN 4147 Q Appellant Respondent

: Shri. Ketan Vajani (Virtually Assessee by Appeared) : Shri Pravin Salunkhe (SR. DR) Revenue by

: 11/05/2026 Date of Hearing Date of pronouncement : 29/06/2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 10.11.2025, passed by the learned, Additional Commissioner of Income-Tax (Appeals) – 1, Chennai [in short, ‘the Ld. CIT(A)’], for Assessment Year (in short ‘A.Y’), 2012-13, raising following grounds:

Ulka Chandrashekhar Nair 2 ITA No. 902/MUM/2026

“1. On the facts and circumstances of the case and in law, the learned Addl./JCIT (A)-1, Chennai (hereafter "the Ld. Addl./JCIT (A)") erred in not appreciating that the Assessing Officer has issued Notice under Section 148 of Income Tax Act, 1961 mechanically and without application of mind and on borrowed satisfaction and hence the Notice issued under Section 148 of Income Tax Act, 1961 is bad in law. 2. On the facts and circumstances of the case and in law, Ld. Addl./JCIT (A) erred in not appreciating that approval to the issue of Notice under Section 148 of Income Tax Act, 1961has been granted by the Pr.CIT-26. Mumbai under Section 151 of Income Tax Act, 1961 in a mechanical manner and moreover no such approval has been provided to the appellant. 3. On the facts and circumstances of the case and in law, Ld. Addl./JCIT (A) erred in not appreciating that the Assessing Officer did not provide to the appellant copy of the seized/impounded materials or statements recorded which are relied by him to issue Notice under Section 148 of Income Tax Act, 1961 and hence the Notice issued under Section 148 of Income Tax Act, 1961 is bad in law. 4. On the facts and circumstances of the case and in law, Ld. Addl./JCIT (A) erred in not appreciating that the Assessing Officer did not provide to the appellant copy of the seized/impounded materials or statements recorded which are relied by the Assessing Officer to make addition of Rs. 10,00,000/- in assessment and hence the addition made is only on surmises and presumptions. 5. On the facts and circumstances of the (A) erred in not appreciating that the assessing officer has made addition of Rs. 10,00,000/- without mentioning the charging section and hence the addition made by the Assessing Officer is bad in law, null and void. 6. On the facts and circumstances of the case and in law, Ld. Addl./JCIT (A) erred in sustaining the addition of Rs. 10,00,000/- on account of alleged loan of Rs. 10,00,000/- taken by the appellant as no such loan is credited in the accounts of the appellant and hence the addition made is null and void ab initio.” 2. The material facts, in brief, are that the assessee filed her return of income for the year under consideration on 18.12.2012 declaring a total income of ₹6,00,570/-. Subsequently, information was received by the Assessing Officer from the Deputy Director of Income Tax (Investigation), Mumbai, alleging that the assessee had obtained a cash loan of ₹10,00,000/- through Shri Nilesh

Ulka Chandrashekhar Nair 3 ITA No. 902/MUM/2026

Bharani/M/s Evergreen Enterprises during the Financial Year 2011-12 relevant to the assessment year under consideration.

3.

On the basis of the aforesaid information, the Assessing Officer recorded reasons to believe that income chargeable to tax had escaped assessment within the meaning of Section 147 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) and accordingly issued notice under Section 148 of the Act.

4.

During the reassessment proceedings, the Assessing Officer observed that the assessee had allegedly accepted a cash loan of ₹10,00,000/-. Proceeding on the premise that such acceptance was in contravention of the provisions of Section 269SS of the Act, he initiated penalty proceedings under Section 271D. Simultaneously, the said amount was also brought to tax in the reassessment order.

5.

Aggrieved by the reassessment order, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A), however, dismissed the appeal and sustained the addition substantially on the ground that information received from the Investigation Wing and the material unearthed during the search conducted in the case of M/s Evergreen Enterprises established the involvement of various persons in cash lending and borrowing transactions and that the assessee had failed to furnish any material to rebut the findings recorded by the Assessing Officer.The relevant finding of ld CIT(A) is reproduced as under:-

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“4. DECISION:

The appellant is an individual and had filed her return of income for assessment year 2012-13 on 18.09.2012 declaring total income of Rs. 6,00,570/-. A Search and Survey action u/s 132 of the Income Tax Act, 1961 was carried out in the case of M/s Evergreen Enterprises (AADFE8617J). Mr Nilesh Bharani is one of the partners in M/s Evergreen Enterprise. The documentary evidences found in the search as well as statement on oath of Mr. Nilesh Bharani recorded u/s 132(4) of the Income Tax Act, 1961 unearthed an undisclosed activity of money lending and borrowing in unaccounted cash being operated at the premise M/s. Evergreen on the basis of documents found and seized at the premise M/s Evergreen Enterprises during the course of search action u/s 132 of the Income Tax Act, 1961 and statements recorded on oath u/s 132(4) of the Income Tax Act, 1961 Mr. Nilesh Bharani, one of the partner of M/s Evergreen Enterprises and Mr. Jagdish T Ramani, Ashwin Rathod, Vibha Sachin Rawate & Shankar Jadhav (Employees of Evergreen Enterprises), several individuals and business concerns, who have lent cash loans through M/s Evergreen Enterprises are identified. Further, through 360-degree profiling in the ITBA of the mobile number of the individuals mentioned in the seized documents/statement and through ITD profiling of those individuals, identity of certain individuals and their business concerns who have borrowed cash loan to / through M/s Evergreen Enterprises are established. The appellant did not submit any evidences denying the Assessing Officer's order in the appellant stage. And the Assessing Officer made addition based on the information received from the DDIT (INV.) unit 5(4) Mumbai. Hence no interference required in this case. So, the appeal is rejected. The order of the Assessing Officer is upheld.”

6.

We have heard the rival submissions, perused the orders of the authorities below and carefully examined the material available on record.

6.1 Ground No. 6 relates to the sustainability of the addition of ₹10,00,000/- on merits. Upon a careful consideration of the facts emerging from the assessment order itself, we find that the Assessing Officer has proceeded on the admitted premise that the

Ulka Chandrashekhar Nair 5 ITA No. 902/MUM/2026

impugned amount represented a cash loan allegedly received by the assessee. Once the nature of the receipt is accepted by the Revenue as a loan transaction, the same cannot simultaneously be treated as unexplained cash credit liable to be brought to tax under the provisions of the Act. The statutory consequence flowing from acceptance of a cash loan in violation of Section 269SS is specifically provided under the Act by way of penalty proceedings under Section 271D. In fact, the Assessing Officer himself has acknowledged the alleged violation of Section 269SS and has accordingly initiated penalty proceedings under Section 271D. Having treated the transaction as a loan for the purpose of invoking penal consequences under Section 271D, the Revenue cannot, in the same breath, seek to assess the very same amount as taxable income of the assessee. Such a course is legally impermissible and runs contrary to the scheme of the Act.

6.2 In our considered opinion, once the receipt is accepted as a loan transaction, no addition thereto can be sustained merely on account of the mode in which the loan was accepted. The remedy available to the Revenue in such circumstances lies in the penal provisions enacted under Section 271D and not in treating the amount of loan itself as taxable income.

6.3 We, therefore, hold that the addition of ₹10,00,000/- sustained by the learned CIT(A) is devoid of legal foundation and

Ulka Chandrashekhar Nair 6 ITA No. 902/MUM/2026

cannot be upheld. The same is accordingly directed to be deleted. Ground No. 6 raised by the assessee is allowed.

7.

Since the addition itself has been deleted on merits, the adjudication of the remaining grounds challenging the validity of the reassessment proceedings has become purely academic. We, therefore, refrain from expressing any opinion on those grounds and leave the questions raised therein open.

8.

In the result, appeal of the Assessee is accordingly allowed.

Order pronounced in the open Court on 29/06/2026.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 29/06/2026 M. Ranganath Vittal , Sr. P.S.

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

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai

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