AASHISH PRAVIN JAIN,THANE vs. IT0, THANE

During the re-assessment proceedings, the Assessing Officer noticed an unsecured loan balance of ₹12,05,982/- standing in the name of Shri Abhishek Jain. The assessee informed the Assessing Officer that Shri Abhishek Jain was outside India and that his confirmation and return of income could therefore not be obtained. The assessee vide reply dated 18.10.2024 stated that all the unsecured loans were old loans and no such loans had been taken during A.Y. 2 2020-21. The Assessing Officer, however, proceeded on the basis that the assessee had received ₹12,05,982/- from Shri Abhishek Jain during the year and, since the assessee had not furnished the creditor’s confirmation, bank statement and return of income, treated the amount as unexplained cash credit under section 68 read with section 115BBE. The Assessing Officer accordingly made total additions of ₹19,25,982/- and assessed the income at ₹62,33,722/-.

In appeal, the learned CIT(A) held that the assessee had failed to establish the identity and creditworthiness of the creditor and genuineness of the transaction because no confirmation, bank statement, return of income or other supporting evidence had been furnished. The learned CIT(A) held that the fact that the creditor was outside India did not discharge the assessee from the statutory onus under section 68 and accordingly confirmed the addition of ₹12,05,982/- under section 68 read with section 115BBE. The learned CIT(A) thus partly allowed the appeal.

The assessee is in appeal before us against the order passed by CIT(Appeals).

We have heard the rival contentions and perused the material available on record.

We find that the Assessing Officer proceeded on the basis that the assessee had received an unsecured loan of ₹12,05,982/- from Shri Abhishek Jain during the year under consideration and made the addition because the assessee could not furnish the creditor’s confirmation, bank statement and return of income. The learned CIT(A) also examined the issue on the same basis and confirmed the addition for failure to establish the identity, creditworthiness and genuineness of the creditor.

However, a material factual aspect requires verification. During the assessment proceedings itself, in the reply dated 18.10.2024, the assessee specifically stated that all the unsecured loans appearing in the books were old loans and that no loan had been taken during A.Y. 2020-21. In the grounds raised before us also, the assessee has specifically contended that the amount of ₹12,05,982/- standing in the name of Shri Abhishek Jain was a loan taken in the earlier years and not any fresh credit received during the year under consideration.

This fact goes to the root of the addition under section 68 of the Act. Section 68 can be applied in a particular assessment year only in respect of a sum credited in the books during the relevant previous year. If the amount of ₹12,05,982/- is merely an opening balance brought forward from an earlier year and there is no fresh credit from Shri Abhishek Jain during the previous year relevant to A.Y. 2020-21, the same amount cannot be treated as an unexplained cash credit under section 68 of the Act in the year under consideration merely because the assessee could not furnish the creditor’s documents during the reassessment proceedings. On the other hand, if the Assessing Officer finds that any fresh loan or additional credit was actually received from Shri Abhishek Jain during the relevant previous year, the Assessing Officer would be entitled to examine such fresh credit in accordance with section 68 and require the assessee to establish the identity and creditworthiness of the creditor and genuineness of the transaction.

Neither the Assessing Officer nor the learned CIT(A) has specifically verified from the ledger account, Balance Sheet of the immediately preceding year and the bank records whether the amount of ₹12,05,982/- was an opening balance as on 01.04.2019 or whether any part thereof was a fresh loan received during the financial year 2019-20. In our view, this factual verification is necessary before deciding the applicability of section 68.

Accordingly, in the interest of justice, we restore the matter to the file of the Assessing Officer for de-novo consideration. The Assessing Officer shall specifically verify the ledger account of Shri Abhishek Jain for the year under consideration, the closing balance appearing in the immediately preceding year, the opening balance as on 01.04.2019, the relevant Balance Sheets and bank statements and ascertain whether ₹12,05,982/- was only an old brought-forward loan or whether any fresh loan or credit was received during the year, preceding year, decide the issue in accordance with law.