RAHANDA MAL GEHANI, BHATAPARA,BALODA BAZAR vs. DCIT, CENTRAL CIRCLE-1, RAIPUR, RAIPUR

आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM

The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals), Raipur-3, dated 31.07.2025 for the assessment year 2017-18 as per the following grounds of appeal: “Gr. No.1 On the facts and circumstances of the case and in law, assessment made u/s.143(3) dt.28-12-2019 by ITO- Bhatapara is invalid, since notice issued u/s143(2) by ITO on 11-8-18 is invalid who was not having pecuniary jurisdiction over the assessee for issuing notice u/s143(2) for AY17-18 as per CBDT Instruction No.1/2011, dt.31-1-11, Instruction No.6 dt.8-4-11 & Notification issued by Chief CIT, Raipur dt.30-5-11 which is binding on IT authorities u/s.119, since returned income is Rs.12,24,340; assessment made u/s.143(3) by the ITO, who was not having valid authority of law for making assessment over the assessee, is invalid & is liable to be quashed." Gr.No.2 "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining addition of Rs.14,00,000 on account of unsecured loan u/s. 68 as unexplained cash credits, which is unjustified and is liable to be deleted. Gr.No.3 "On the facts and circumstances of the case and in law, ld. CIT(A) has erred in sustaining addition of Rs.55,245, which is unjustified & is liable to be deleted." Gr.No.4 "On the facts and circumstances of the case and in law, ld. CIT(A) has erred in sustaining addition of Rs.25,000, which is unjustified & is liable to be deleted."

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The above lenders have shown a meager income of Rs. 2,96,990/- in their ITR of 2017-. It is further noticed that the above lenders has shown income from business in which no books of account are kept. No specified business is found shown and income has been shown on estimate basis and no payment of any income tax. Mere filing of return is not sufficient ground to establish that the income shown by any person is genuine. Further verification of their bank statement reveals no major transaction except with the assessee is reflected in the said bank account. Thus the genuineness of transaction and the creditworthiness of the lender are not found established. The contention of the assessee firm that the lender is assessed to tax since long is not a sufficient ground to establish the creditworthiness of the lender. Thus the genuineness and creditworthiness of the loan totaling to Rs.14,00,000/-from the above four lender is not established. In this regard, reliance is place on the decision of Hon'ble Chhattisgarh High Court in the case of Kushal Prasad Manhar Vs CIT reported in [2014] 52 Taxman.com335(Chhattisgarh)/[2011] 198 Taxman 137 (Chhattisgarh) wherein on similar issue, the Hon'ble High Court has decided the case in favour of the department. In view of the above discussion, the said loan of Rs. 14,00,000/- is treated as unexplained cash credit of the assessee firm and the same is added back to the income returned u/s 68 of the Income tax Act, 1961 and taxed in accordance with the provisions of section 115BBE of the Income tax Act, 1961. Penalty proceedings u/s 271AAC is separately initiated in respect of addition made u/s 68 of the Income tax Act, 1961. (Addition : Rs.14,00,000/-)”

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creditworthiness to provide loans as stated to be given by them. That further, the assessee had failed to establish genuineness of the business conducted by these lenders. That when a person does not have any source of income, he cannot provide loan to other. It was also observed by the Ld. CIT(Appeals) that bank statements of these lenders did not show any other transactions apart from that with the assessee and that too the amounts were credited in their accounts just before the said loan transactions. It is nothing but circular transaction and the unaccounted money of the assessee being channelized through these lenders in the garb of banking channels and there is no genuineness of such transactions. The relevant observations of the Ld. CIT(Appeals) are extracted as follows:

“During the appellate proceedings, the appellant has furnished reply which was kept on record. I have considered the facts of the issue and submission of the appellant, the returned income and loan given by the respective lenders are as under: S. Name of the Gross total Income Loan given No. lender income tax payment 1. Shri 4,99,940/- 25,859/- Rs.4,00,000/- Rehandamal Gehani & Sons 2. Amar Gehani 5,40,010/- 34,000/- Rs.4,00,000/- & Sons 3. Shri Sundeep 5,76,234/- 27,291/- Rs.4,00,000/- Gehani

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The lenders have shown income from business in which no books of account are kept, no specified business is found shown and income has been shown on estimate basis. Mere filing of return was not sufficient ground to establish that the income shown by any person was genuine. Further verification of bank account statement reveals no major transaction except with the assessee is reflected in bank account. On the question of creditworthiness and genuineness, it was worth mentioning that the money no doubt was received through banking channels, but did not reflect actual genuine business activity. The assessee crediting money did not have their own profit-making apparatus and were not involved in business activity. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. Summarizing the legal position in Nova promoters and Finlease (P) Ltd (2012) 342 ITR 169 (Delhi) and highlighting the legal effect of section 68 of the Act, the Division Bench has held as under:- "Section 68 permits the assessing officer to add the credit appearing in the books of account of the assessee if the latter offer no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. It places no duty upon him to point to the source from which the money was received by the assessee." In respect of the genuineness of the transaction and creditworthiness of creditor it would be incorrect to state that the onus to prove the same stands discharged in all cases if payment is made through banking channels. Thus, the genuineness of transaction and the creditworthiness of the lender are not found established. The contention of the assessee firm that the lender is assessed to tax since long is not a sufficient ground to establish the creditworthiness of the lender. Thus, the genuineness and creditworthiness of the loan totalling to Rs.14,00,000/- from the above four lenders was not established. In this regard, reliance is place on the decision of Hon'ble Chhattisgarh High Court in the case of Kushal Prasad Manhar Vs CIT reported in [2014] 52 Taxman. Corn 335 (Chhattisgarh)/[2011] 198 Taxman 137 (Chhattisgarh) wherein on similar issue, the Hon'ble High

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Court has decided the case in favour of the department. In view of the above discussion, I find that the Ld. AO justified the making addition of Rs.14,00,000/- and is hereby confirmed. Therefore, appeal on this ground No.1 is dismissed.”

The Hon’ble High Court of Chhattisgarh in the case of Kushal 5. Prasad Manhar Vs. Commissioner of Income Tax, (2010) 236 CTR 192 on the applicability of Section 68 and onus on the assessee to prove has held and observed as follows:

“12. In order to appreciate the controversy involved in the matter, it would be appropriate to reproduce s. 68 of the Act which reads thus : "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that, previous year." 13. As per s. 68 of the Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. 14. We have considered the case law cited by Shri G.N. Purohit, learned senior counsel appearing for the appellant. List of the same is that the assessee has to prove three conditions : (i) Identity of the creditor; (ii) Capacity of such creditor to advance money; and (iii) Genuineness of transaction. Burden of assessee to prove genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the

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transactions, which have taken place between the assessee and the creditor. It is not the business of the assessee to find out the source of money of his creditor [(2005) 199 CTR (All) 69 : (2006) 282 ITR 236 (All), para 9; (2003) 185 CTR (Gau) 635 : (2003) 264 ITR 254 (Gau) paras 13 and 14]. 15. A three Judge Bench of the Supreme Court in case of Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : 1995 Supp.(2) SCC 453 while dealing with the facts: "During the asst. yr. 1971-72, the appellant received a total amount of ₹ 3,11,831 by way of race winnings in Jackpots and Treble events in races at Turf Clubs in Bangalore, Madras and Hyderabad. The said amount was shown by the appellant in the capital amount in the books. The appellant filed a return on 27th March, 1972 declaring an income of ₹ 27,829. The appellant also made a sworn statement on 6th Jan., 1973 before the ITO and on the basis of the said statement the ITO made an assessment order dt. 27th March, 1974 where he held that the sum of ₹ 3,11,831 is not winnings in races and he treated the said receipts as income from undisclosed sources and assessed the same as income from other sources. For the asst. yr. 1972-73 the appellant showed receipts of ₹ 93,500 as race winnings in two Jackpots at Bangalore and Madras and the said amount was credited in the capital account in the books. The appellant filed a return declaring an income of ₹ 3,827 on 3rd Feb., 1973. In his assessment order dt. 31st Aug., 1974 the ITO included the amount of ₹ 93,500 as income. from other sources and assessed the income of the appellant on that basis. The appeals filed by the appellant against the two assessment orders were disposed of by the AAC by order dt. 12th Dec., 1975 whereby the assessment of ₹ 3,11,831 as income under the head other sources for the asst. yr. 1971- 72 and Rs, 93,500 for the asst. yr. 1972-73 was confirmed. The assessee had taken the matter before the Settlement Commission. The two Members constituting majority on the Settlement Commission, came to the conclusion that the apparent is not the real and that the appellant's claim about her winning in races is contrived and not genuine for the following reasons : (a) The appellant's knowledge of racing is very meagre. (b) A Jackpot is a stake of five events in a single day and one can believe a regular and experienced punter clearing a Jackpot occasionally but the claim of the appellant to have

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won a number of Jackpots in three or four seasons not merely at one place but at three different centres, namely, Madras, Bangalore and Hyderabad appears, prima facie, to be wild and contrary to the statistical theories and experience of the frequencies and probabilities. (c) The appellant's books do not show any drawings on race days or on the immediately preceding days for the purchase of Jackpot combination tickets, which entailed sizeable amounts varying generally between ₹ 2000 and ₹ 3000. The drawings recorded in the books cannot be correlated to the various racing events at which the appellant made the alleged winnings. (d) While the appellant's capital account was credited with the gross amounts of race winnings, there were no debits either for expenses and purchase of tickets or for losses. (e) In view of the exceptional luck, claimed to have been enjoyed by the appellant, her loss of interest in races from 1972 assumes significance. Winnings in racing became liable to income-tax, from 1st April, 1972 but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different, however, if the claim of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources. The majority opinion includes that it would not be unreasonable to infer that the appellant had not really participated in any of the races except to the extent of purchasing the winning tickets after the events presumably with unaccounted funds. The Chairman of the Settlement Commission, in his dissenting opinion has laid emphasis on the fact that the appellant had produced evidence in support of the credits in the form of certificates from the racing clubs giving particulars of the crossed cheques for payment of the amounts for winning of Jackpots etc. The Chairman has rejected the contention regarding lack of expertise in respect of the appellant and has observed that the expertise is the last thing that is necessary for a game of chance and anybody has to go and call for five numbers in a counter and obtain a Jackpot ticket and that books containing information are available which are quite cheap." has observed in para 12 of its judgment as under : "12. This, in

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our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our opinion, a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that 'fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice' ignores the prevalent malpractice that was noticed by the Direct Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972 whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc, was withdrawn. Similarly the observation made by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about much a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by' the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence." 16. The Supreme Court in case of CIT vs. P. Mohanakala (2007) 210 CTR (SC) 20 : (2007) 6 SCC 21 after considering the cases of Sumati Dayal (supra), CIT vs. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509 : (1997) 11 SCC 198, CIT vs. Bharat Engineering & Construction Co. 1972 CTR

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(SC) 247 : (1972) 4 SCC 401, CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) Supp. SCC 110, has observed in paras 24 and 26 of its judgment as under: "24. It is true that even after rejecting the explanation given by the assessees if found unacceptable, the crucial aspect whether on the facts and circumstances of the case it should be inferred that the sums credited in the books of the assessees constituted income of the previous year must receive the consideration of the authorities provided the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. We are required to notice that s. 68 of the Act itself provides, where any sum is found credited in the books of the assessees for any previous year the same may be charged to income-tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is in the opinion of the AO not satisfactory. Such opinion found (sic formed) itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessees by holding that it if as a receipt of an income nature. In the case in hand the authorities concurrently found the explanation offered by the assessees unacceptable. The authorities upheld the opinion formed by the AO that the explanation offered was not satisfactory. The assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority. All the decisions cited and referred to hereinabove are required to be appreciated and understood in the light of the law declared by this Court in Sumati Dayal (supra). 26. Relying on the decisions of this Court in Bejoy Gopal Mukherji vs. Pratul Chandra Ghose AIR 1953 SC 153 and Orient Distributors vs. Bank of India Ltd. & Ors. AIR 1979 SC 867, Shri Iyer, learned senior counsel contended that issue relating to the propriety of legal conclusion that could be drawn on basis of proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the matter since the authorities below failed to draw a proper and logical inference from the proved facts. We are unable to persuade ourselves to accept the submission. The findings of fact arrived at by the authorities below are based

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on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence." By applying the law laid down by the Supreme Court in the dicta of the above-referred two cases, it is clear that where any sum is found credited in the books of assessee for any previous year, the same may be charged to income-tax as income of the assessee of the previous year if the explanation offered by the assessee about nature and source of such sums found credited in the books of assessee is in the opinion of the AO not satisfactory. Such opinion (sic formed) itself constitutes a prima facie evidence against the assessee viz. the receipt of money, and if the assessee fails to rebut the said evidence the same can be used against the assessees by holding that it was a receipt of an income nature. In the case in hand the AO has formed the opinion that the explanation offered by the assessee is not satisfactory, is based on cogent material which shows that the transaction is not genuine. All the decisions cited by Shri Purohit are required to be appreciated and understood in the light of law declared by the Hon'ble apex Court in the cases referred to hereinabove. We have carefully gone through the finding recorded by the AO as referred in para 10 of the judgment in holding the transaction as not genuine and the explanation offered by the assessee as not satisfactory and we do not find any illegality in the said finding. Therefore, the case laws cited by Shri Purohit are of no help to him. The Tribunal has confirmed the above finding. The appellant did not take the plea that even if explanation is not accepted, the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as receipt of income nature, the burden in this regard was on the assessee as held by Supreme Court in case of CIT vs. Mohankala (supra). So far as the claim of the assessee regarding transportation expenses amounting to ₹ 4,21,150 is concerned, it is also a

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finding of fact and we do not find any illegality or perversity in the finding arrived at by the AO as well as by the Tribunal. In view of above, in our considered opinion, the case in hand does not involve any substantial question of law. The findings of fact arrived at by the AO as well as the Tribunal are based on proper appreciation of fact and material on record and surrounding circumstances. The doubtful nature of the transaction in the manner in which the sum was found credited in the books of accounts maintained by the assessee has been duly taken into consideration by the above authorities. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. In the result, the appeal preferred by the appellant deserves to be and is hereby dismissed.”

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the Ld. CIT(Appeals) which is therefore upheld. Thus, Ground of appeal No.2 is dismissed.

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not of the character of ad-hoc disallowance but it is in the nature of considering practicalities involved in functioning of the business and at the same time, it has to be seen that provisions of law are correctly applied. In view thereof, the findings of the Ld. CIT(Appeals) on this issue is upheld. Thus, the Ground of appeal No.3 is dismissed.

Regarding Ground of appeal No.4, the A.O has held and observed 12. as follows:

“3. Verification of profit and loss account of M/s. Krishna Food reveals that the assessee has debited advance freight of Rs.25,000/- in the P & L account. The same is found to be prepaid expenses and not found allowable to claim as an expenses for the financial year under consideration. Accordingly, the same is disallowed and added back to the income returned. Penalty proceedings u/s. 270A is separately initiated for misreporting the income. [Disallowance : Rs.25,000/-]

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pertains to the relevant year or not that was not brought out through any documentary evidence, hence, findings of the Ld. CIT(Appeals) is upheld. Thus, the Ground of appeal No.4 of the assessee is dismissed.

Order pronounced in open court on 22nd day of May, 2026.

Sd/- (PARTHA SARATHI CHAUDHURY) �या�यक सद�य/JUDICIAL MEMBER रायपुर / Raipur; �दनांक / Dated : 22nd May, 2026. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The Pr. CIT-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, रायपुर / DR, ITAT, “SMC” Bench, Raipur. गाड� फ़ाइल / Guard File. 5.

Samiran Bera, आदेशानुसार / BY ORDER, Sr. PS, ITAT, // True Copy // Raipur Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur Digitally signed by Samiran Bera, Sr. PS, ITAT, Raipur Date: 2026.05.22 11:02:57 +05'30'