AJAY JAYASINH MARIWALA ,MUMBAI vs. DCIT, 19(1), MUMBAI

This appeal by the assessee is directed against the order dated 30.12.2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [‘CIT(A)’], under section 250 of the Income-tax Act, 1961 (‘the Act’), arising from the assessment order dated 21.03.2024 passed under section 143(3) read with section 144B of the Act for the Assessment Year 2022-23.

The assessee has raised the following grounds of appeal:

Briefly stated, the assessee filed his return of income on 30.07.2022 declaring total income of Rs.6,19,82,990/-. The case was selected for scrutiny, inter alia, on the issues of deduction claimed against capital gains and high creditors/liabilities. The Assessing Officer noted that the assessee had sold 61,207 shares of VKL Seasoning Pvt. Ltd. on 23.12.2021 for Rs.35 crore and had computed long-term capital gain of Rs.33,97,37,369/-. Against the said gain, the assessee claimed deduction of Rs.29,37,82,589/- under section 54F in respect of investment in a residential duplex at 2803, Tower B, Three Sixty West, Dr. Annie Besant Road, Worli, Mumbai. Since the purchase deed contained the names of the assessee and his wife, the Assessing Officer treated them as equal owners, restricted the deduction to 50 per cent and made an addition of Rs.14,68,91,295/-.

The Assessing Officer further examined unsecured loans aggregating to Rs.42,41,48,604/- received from eleven parties. He accepted the loans from the assessee’s father and NHJ Trading Consultants Pvt. Ltd., but treated credits aggregating to Rs.33,94,83,123/- from eight lenders as unexplained under section 68. Although all the lenders responded to notices issued under section 133(6), the Assessing Officer doubted their creditworthiness and the genuineness of the transactions principally on the grounds that their returned income was not commensurate with the quantum of loans and that, in several instances, funds were credited to their bank accounts on or around the dates on which loans were advanced. The returned income was accordingly assessed at Rs.54,83,57,408/-.

The learned CIT(A) sustained both additions. In relation to section 54F, he held that the purchase deed conferred equal ownership on the assessee and his wife and that the assessee had not established that the wife had made no separate claim. He also referred to Prakash v. ITO [2009] 312 ITR 40 (Bom), Kamal Kant Kamboj v. ITO [2017] 397 ITR 240 (P&H) and Hem Chandra R. Gavankar v. ITO, ITA No.7451/Mum/2017. In relation to the loan credits, the learned CIT(A) held that identity alone was proved, whereas creditworthiness and genuineness were not established, and relied upon, inter alia, PCIT v. NRA Iron & Steel Pvt. Ltd. [2019] 412 ITR 161 (SC).

Before us, the learned Authorised Representative submitted that the shares sold were exclusively owned by the assessee. They were acquired on 04.02.2013 at Rs.10 per share and were held in the assessee’s single-name demat account. Out of the larger holding, 61,207 shares were sold on 23.12.2021 and the gain was offered in the year under consideration. It was further submitted that the entire consideration for the new residential property, including stamp duty and 3 registration charges, was paid by the assessee; the wife’s name was included only for convenience and she neither contributed any amount nor claimed deduction under section 54F. Reliance was placed on CIT v. Ravinder Kumar Arora [2012] 342 ITR 38 (Delhi) and the decision of the Mumbai Bench in Jaybharat Mehta v. ITO, ITA No.1085/Mum/2024 dated 13.01.2025. The learned Authorised Representative also placed on record the assessment order dated 06.02.2026 passed in the case of the assessee’s wife for Assessment Year 2021-22, wherein, after verification of the documentary evidence and bank trail, the Assessing Officer accepted that the entire investment in the property was made by the present assessee and made no variation.

In respect of the addition under section 68, the learned Authorised Representative submitted that the assessee had furnished confirmations, PAN, returns of income, ledger accounts and bank statements of the lenders. Every lender had directly complied with the notice issued under section 133(6). These were short-term interest-bearing loans, generally for about 90 to 150 days, which were repaid through the same banking channel together with interest after deduction of tax at source. Creditor- wise bank statements explained the sources of the funds; the inference that the assessee had first provided unaccounted money to the lenders was unsupported by any material. The learned Departmental Representative relied upon the orders of the authorities below and submitted that the assessee had failed to establish the immediate sources in the lenders’ accounts and their capacity to advance loans of such magnitude.

We have heard the rival submissions and perused the material placed on record. Ground No.1 is general. Grounds Nos.2 and 3 raise two distinct issues, which we deal with in seriatim.

As regards section 54F, the material placed before us shows that the original asset, namely 61,207 shares of VKL Seasoning Pvt. Ltd., stood exclusively in the assessee’s name and the resulting long-term capital gain was assessed in his hands. The new residential property was purchased in the joint names of the assessee and his wife. However, the entire purchase consideration and incidental charges were paid from the assessee’s disclosed bank accounts and stood reflected in his books. There is no evidence of any contribution by the wife. More importantly, in the subsequent reassessment of the wife, initiated on the premise that she owned 50 per cent of the property, the Assessing Officer examined the payment trail and recorded that the entire investment was made by the husband. Her returned income was accepted without any variation on this issue. This contemporaneous departmental finding removes the apprehension of a double claim.

The Hon’ble Delhi High Court in CIT v. Ravinder Kumar Arora (supra), on substantially similar facts, recorded the following material findings:

The ratio squarely applies. The cases relied upon by the learned CIT(A) are distinguishable. In Prakash (supra), the new property was acquired in the name of the adopted son; in Kamal Kant Kamboj (supra), it was in the sole name of the wife; and in Hem Chandra R. Gavankar (supra), the assessee’s name did not appear in the purchase document. In the present case, the assessee is himself a named purchaser, is the sole source of the entire investment, and the wife made neither a contribution nor a claim. We, therefore, direct the Assessing Officer to allow the balance deduction of Rs.14,68,91,295/- under section 54F. Ground No.2 is allowed.

We now turn to the addition under section 68. The creditor-wise amounts comprised Behram N. Gamadia - Rs.18,70,66,849/-; Simoneel Gamadia/Gardenscape - Rs.2,88,50,275/-; Jehangir N. Gamadia - Rs.3,68,39,589/-; Erawan Advisors - Rs.3,63,83,089/-; Harvinder Singh Sethi HUF - Rs.1,45,58,236/-; Jvaleen Kaur Sethi - Rs.85,68,219/-; Namrata Kaur - Rs.26,18,164/-; and Shuban Avighna - Rs.2,45,98,702. Their identities are not in dispute. Each lender responded directly to the statutory notice under section 133(6). The record contains the respective confirmations, tax returns and bank statements. Thus, these are not merely self-serving ledger entries produced by the assessee.

The bank trail also does not support the uniform inference that money was first introduced by the assessee into the lenders’ accounts. By way of illustration, Behram Gamadia’s bank statement reflected substantial balances and receipts from mutual funds aggregating to about Rs.9.76 crore; the bank statement of Simoneel Gamadia and her proprietary concern showed pre-existing balances before several 6 advances; and the receipts in the account of Jehangir Gamadia were preceded by available balances after earlier repayments. The five Sethi- group lenders likewise furnished bank statements identifying the sources and available balances. In the case of Namrata Kaur, the solitary loan of Rs.26 lakh was preceded by a receipt of Rs.28 lakh from Harvinder Singh Sethi HUF and not from the assessee. The returned incomes referred to in the material were Rs.3,18,68,330/- in the case of Behram Gamadia, Rs.8,11,570/- in the case of Simoneel Gamadia, Rs.19,01,790/- in the case of Jehangir Gamadia, Rs.31,50,930/- in the case of Erawan Advisors, Rs.44,14,960/- in the case of Harvinder Singh Sethi HUF, Rs.48,86,250/- in the case of Jvaleen Kaur Sethi, Rs.46,09,880/- in the case of Namrata Kaur and Rs.30,99,660/- in the case of Shuban Avighna. Creditworthiness is to be judged from the totality of financial resources and the bank trail, and not merely by comparing the loan amount with the income returned for one year.

Equally significant is the conduct of the parties. The transactions were recurring short-term borrowings. The assessee repaid the principal amounts through banking channels and paid agreed interest after deduction of tax at source. The repayments and interest credits are reflected in the same lender accounts from which the loans originated. No material has been brought on record to show that cash moved from the assessee to any lender, that any repayment came back to the assessee, or that the lenders denied the transactions. A same-day or proximate credit by itself cannot render a loan non-genuine when its source is identifiable from the bank statement and the lender has independently confirmed the transaction.

The reliance on NRA Iron & Steel Pvt. Ltd. (supra) is misplaced on these facts. In that case, detailed field enquiries revealed that the investor companies lacked genuine business activity and 7 creditworthiness, and the assessee failed to produce them or satisfactorily answer the adverse material. Here, the lenders were assessed to tax, directly responded under section 133(6), produced their bank records, and the loans were repaid with interest. There is no field enquiry or independent material discrediting those responses. Once the assessee furnished the primary evidence and the statutory enquiries confirmed the credits, the burden shifted to the Revenue. Suspicion founded only on the timing of bank entries or the absence of formal loan agreements cannot substitute evidence, particularly in the face of actual repayment and interest subjected to TDS.

On a cumulative consideration of the confirmations, direct responses under section 133(6), income-tax particulars, bank statements demonstrating the sources and available funds, and the subsequent repayment with interest, we hold that the assessee has established the identity and creditworthiness of the lenders and the genuineness of the loan transactions. The addition of Rs.33,94,83,123/- under section 68 is, therefore, directed to be deleted. The consequential application of section 115BBE does not survive. Ground No.3 is allowed.

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