SONIKA YADAV,HYDERABAD vs. ITO, WARD -7(1), HYDERABAD

आयकर अपीलीय अिधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad Before Shri Manjunatha G., Accountant Member and Shri Ravish Sood, Judicial Member आ.अपी.सं /ITA No.1665/Hyd/2025 (िनधा�रण वष�/Assessment Year:2020-21) Sonika Yadav, Vs. Income Tax Officer, Hyderabad. Ward-7(1), PAN: AEJPY2096K Hyderabad. (Appellant) (Respondent) िनधा��रती �ारा/Assessee by: Shri A. Srinivas, CA राज� व �ारा/Revenue by: Dr. Sachin Kumar, Sr. AR सुनवाई की तारीख/Date of Hearing: 06/05/2026 घोषणा की तारीख/Date of 20/05/2026 Pronouncement: आदेश / ORDER PER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dated 20/08/2025, which in turn arises from the order passed by the Assessing Officer(for short, “AO”) under section 143(3) r.w section 144B of the Income Tax Act, 1961 (for short, “the Act”), dated 29/09/2022 for the Assessment Year 2020-21. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds of appeal before us:

2 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO “1. The order of the CIT(A) is in gross violation of the provisions of law and hence is bad in law. 2. The CIT(A) has erred in upholding the order of the Assessing Officer and dismissing the appeal. 3. The CIT(A) has erred in upholding the addition to income on opening balance of loans received as unexplained money u/s 69A of Rs.56,25,186. 4. The CIT(A) has erred in upholding the addition of unsecured Grounds of Appeal 4 loans to income as unexplained money u/s 69A of Rs. 1,16,20,000. 5. The CIT(A) has erred in upholding the disallowance of deduction claimed u/s 57. Of Rs.68,39,643. 6. The CIT(A) has erred in upholding the assessment u/s 143(3) r.w.s. 144 7. The CIT(A) has erred in not allowing credit for the taxes paid at the time of filing of the original return. 8. Any other ground that may considered at the time of hearing.”

3 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO towards interest expenditure paid/payable on the unsecured loans obtained from various parties.

4 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO 8. We shall first take up the addition of Rs. 56,25,186/-, which, as claimed by the Ld. AR pertains to the “Opening balances” in the accounts of certain creditors, as under:

Sr. Particulars Amount Page No. (of No. Paper book) 1. Dinesh Rathi Rs. 21,17,996 Page No. 92 2. Vandana Kabra Rs. 4,50,497 Page No. 151 3. Mukeshwar Rao Rs. 16,51,136 Page No. 119 4. Mohammed Essa Rs. 62,158 Page No. 109 5. Zareena Rs. 13,43,399 Page No. 152 6. Total RS. 56,25,186

We have perused the ledger accounts and financial statements placed before us hereinabove, and find that the aforesaid amounts added by the AO are the “Opening balances” of the aforementioned respective creditors brought forward from the earlier years, and no fresh credits, to the said extent, were introduced by them during the subject year under consideration.

5 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO the aforesaid position of law, which can safely be gathered on a bare reading of Section 68 of the Act, even otherwise, is supported by the judgment of the Hon’ble High Court of Delhi in the case of CIT vs. Usha Stud Agricultural Farms Ltd. (2008) 301 ITR 384 (Delhi), wherein it has been held that the “opening balances” cannot be added as an unexplained cash credit under section 68 of the Act while framing the assessment for the subject year under consideration. As the revenue has not disputed that the aforesaid amounts represented brought forward balances, therefore, the addition upheld by the CIT(A) in respect of “opening balances” amounting to Rs. 56,25,186/- is unsustainable and is hereby deleted.

(A). Aryan Investment Solutions: Rs. 8,00,000/-

(i). As is discernible from the record, the assessee had furnished a copy of the income-tax return (along with computation of income), confirmation letters, affidavit, and PAN particulars to substantiate the veracity of the loan received from M/s Aryan Investment Solutions, Page

6 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO Nos. 30-37 of APB. On a perusal of the record, we find that the amount of Rs. 8,00,000/- was received by the assessee through the banking channel on 14.05.2019. Apart from that, the assessee had demonstrated that there were prior transactions between the parties and that amounts had also been repaid to the said concern earlier. As per the copy of the ledger account of M/s Aryan Investment Solution as appearing in the books of account of the assessee, there is an “Op. balance” of Rs. 7,00,000/- (Cr) on 01.04.2019, which, after receipt of the fresh loan and repayment of Rs. 10 lac during the subject year, was scaled down to Rs. 5,59,174/- (including interest) on 31/03/2020. Apart from that, we find that the lender concern had duly credited the interest on the loan advanced to the assessee of Rs. 59,174/- in its Profit & Loss account for the year under consideration, Page 33 of APB.

(ii). Based on the aforesaid facts, we are of firm conviction that the identity of the lender stood established through PAN and confirmation; the genuineness of the transaction stood established from the fact that the amount was received through a banking channel; and the creditworthiness of the lender stood demonstrated through regular financial dealings between the parties. Also, we find that the AO has not brought any adverse material on record to rebut the evidence produced by the assessee. In our view, mere suspicion, however strong, cannot

7 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO take the place of legal evidence. We find that the Hon’ble Supreme Court in CIT vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC), had observed that once the assessee furnishes names, addresses, and other primary evidence relating to creditors, the burden shifts upon the Revenue to pursue the matter further. We thus, are of the view that as the assessee had discharged the onus that was cast upon her to substantiate the veracity of the loan transaction, i.e., by placing on record documentary evidence to substantiate the identity and creditworthiness of the lender, and the genuineness of the loan transaction, the authorities below without placing on record any material which would dislodge the authenticity of her claim of having received a genuine loan from the subject lender could not have summarily held the same as an unexplained cash credit under section 68 of the Act. Accordingly, the addition relating to Aryan Investment Solutions in terms of our aforesaid deliberations is directed to be deleted.

(B). Syed Razaq Uddin : Rs.82,25,000/-

(i). We find on a perusal of the record that the assessee had during the subject year received amounts from Shri Syed Razaq Uddin through banking channels over various dates aggregating to Rs. 82.25 lacs, as under:

8 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO Date Amount 22.02.2020 Rs. 51,00,000/- 29.02.2020 Rs. 31,00,000/- 03.03.2020 Rs. 10,000/- 12.03.2020 Rs. 15,000/- Total Rs. 82,25,000/-

(ii) We further find that the assessee had furnished a copy of the income-tax return (along with computation of income), and confirmation letters to substantiate the veracity of the loan received from Shri Syed Razaq Uddi, Page Nos. 38-42 of APB evidencing the receipt of funds from the aforesaid lender, who is an income-tax assessee. Further, the receipt of the respective amounts by the assessee is through a banking channel, and the AO has brought no material on record to establish that the transactions represented accommodation entries or unexplained money belonging to the assessee, which had found its way back in the garb of the alleged loan transaction. We find that the Hon’ble Supreme Court in PCIT vs. NRA Iron & Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) has reiterated that once documentary evidence is furnished by the assessee, the AO must conduct a proper inquiry before drawing any adverse inferences regarding the subject loan transaction. We find that, in the present case, the AO, apart from raising suspicion, did not conduct any meaningful inquiry to disprove the documentary evidence filed by the assessee to substantiate the authenticity of the subject loan transaction. We, thus, in terms of our aforesaid deliberations, are of firm

9 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO conviction that the treating of the subject amount received by the assessee from the aforesaid lender as an unexplained cash credit without dislodging the veracity of the supporting documents/material filed by the assessee before him and disproving her claim based on irrefutable documentary evidence cannot be sustained and is liable to be vacated.

(C). Veena Investment Solutions: Rs. 9,00,000/-

(i). As is discernible from the record, the assessee had furnished a copy of the income-tax return (along with computation of income), Profit & Loss A/c, and confirmation letters to substantiate the veracity of the loan received from M/s Veena Investment Solutions, Page Nos. 43-47 of APB evidencing the receipt of Rs. 9,00,000/- from the said concern through the banking channel on 14.05.2019. Apart from that, the assessee had also demonstrated that a substantial “Opening balance” of Rs. 85,10,000/- (Cr.) already existed in the account of the said lender that was brought forward from earlier years. Also, we find that the lender firm had duly credited the interest income accrued on the loan advanced to the assessee, amounting to Rs. 10,64,676/-, in its Profit & Loss a/c for the year under consideration. In our view, the assessee, on the basis of the documentary evidence filed before the lower authorities, had established the identity of the creditor, the genuineness of the

10 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO transaction, and the source of funds. We find that the Hon’ble High Court of Gujarat in DCIT vs. Rohini Builders (2002) 256 ITR 360 (Gujarat), has held that once confirmations, PAN and banking details are furnished, no addition under section 68 can be sustained merely because creditors had failed to explain the “source of the source” of the funds (how the creditor obtained the money). We, thus, respectfully following the aforesaid ratio of the Hon’ble High Court, direct the AO to delete the addition sustained by the CIT(A) by treating the loan received from M/s Veena Investment Solutions as an unexplained cash credit under section 68 of the Act.

(D). Ms. Khatijatul Kubra Khatoon: Rs. 7,00,000/-

(i). We find that the assessee had received a sum of Rs. 7,00,000/- through cheque on 06.03.2020 from Ms. Khatijatul Kubra Khatoon, who was being assessed to tax. Also, we find that the assessee had furnished before the authorities below a copy of the income-tax return (along with computation of income), and confirmation letters to substantiate the veracity of the loan received from Ms. Khatijatul Kubra Khatoon, Page Nos. 48-52 of APB evidencing the receipt of Rs. 7,00,000/- from the said lender. Also, we find that the lender had duly offered for tax the interest accrued on the loan advanced to the assessee, amounting to Rs. 4,489/- in her return of income for the year under consideration.

11 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO (ii). On a perusal of the record, we find that the AO had mainly drawn adverse inferences regarding the authenticity of the subject loan transaction on the ground that the notice issued to the said lender under section 133(6) of the Act had remained uncomplied with. In our considered view, once the assessee furnishes confirmation, income-tax credentials, then non-response by the lender to a notice issued under section 133(6) of the Act cannot, by itself, justify drawing of adverse inferences as regards the genuineness of the loan transaction and a consequential treating of the amount so received by the assessee as an unexplained cash credit under Section 68 of the Act.

(ii) We find that the Hon’ble High Court of Delhi in CIT vs. Kamdhenu Steel & Alloys Ltd. (2014) 361 ITR 220 (Delhi), had held that an addition cannot be sustained merely because creditors failed to appear before the AO. We, thus, in terms of our aforesaid observations, are unable to persuade ourselves to subscribe to the view taken by the authorities below that the amount received by the assessee from the aforesaid lender is an unexplained cash credit under Section 68 of the Act. Accordingly, we direct the AO to vacate the addition of Rs. 7 lac made by the AO w.r.t the loan received by her from Ms. Khatijatul Kubra Khatoon.

12 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO

(E). Syed Ashifaq Uddin: Rs. 9,95,000/-

(i). It transpires on a perusal of the record that the assessee had received a sum of Rs. 9,95,000/- through cheque on 02.03.2020 from Shri. Syed Ashfaq Uddin. The assessee had, in the course of the proceedings before the authorities below, filed a copy of the income-tax return (along with computation of income), and confirmation letters to substantiate the veracity of the loan received from Shri Syed Ashifaq Uddin, Page Nos. 53-57 of APB evidencing the receipt of Rs. 9,95,000/- from the said lender. Also, we find that the lender had duly offered for tax the interest accrued on the loan advanced to the assessee, amounting to Rs. 7,362/- in his return of income for the year under consideration

(ii) We find that the Revenue has not brought any adverse material on record to establish that the subject loan transaction was bogus or fictitious. The Hon’ble High Court of Bombay in CIT vs. Gagandeep Infrastructure Pvt. Ltd. (2017) 394 ITR 680 (Bombay), has held that once PAN, confirmations, and bank statements are furnished, then an addition under section 68 cannot be made in the absence of any contrary material made available on record. We, thus, respectfully follow the aforesaid judicial pronouncement and direct the AO to vacate the

13 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO addition sustained by the CIT(A) by recharacterizing the loan received by the assessee from Shri Syed Ashfaq Uddin as an unexplained cash credit under Section 68 of the Act.

14 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO to the loans received by the assessee company during the year under consideration before us, i.e., AY 2020-21.

"18. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of Sections 68 and 69 of the Act. On the on hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of

15 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO view of such companies (like the assessees herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgments in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export (supra) which holds the fields and is binding. 19. In conclusion, we are of the opinion that once adequate evidence/material is given, as stated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act."

16 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO as an appellate authority, therefore, it has to see whether the assessment framed by the AO, for that matter, orders of the CIT(A) were according to law and purportedly framed on facts and whether there was sufficient material to support it. The Hon'ble High Court has observed that it is not for the Tribunal to initiate an investigation; it is only to determine whether the additions are sustainable and whether there is adequate material to support them; if not, the additions have to be deleted. It was further observed that the tribunal would not order further inquiry. The Hon'ble High Court, while concluding as hereinabove, had observed that it is to be kept in mind that the AO is prosecutor as well as adjudicator, and it is for the AO to collect sufficient material to make an addition. Further, it was observed that there may be exceptional circumstances in which such an inquiry can be ordered, but normally this course is not resorted to. For the sake of clarity, the relevant observations of the Hon'ble High Court are culled out as under:

"20. During the arguments, we had posed these queries. Learned counsel appearing for the Revenue understood the limitation of their case. For this reason, a fervent plea was made that this case be remitted back to the AOs to enable him to make further investigation. 21. However, in the facts and circumstances of these cases, it would be difficult to give such an opportunity to the Revenue. There are number of reasons for denying this course of action which are mentioned below: (i) It is not a case where some procedural defect or irregularity had crept in the order of the AO. Had that been the situation, and the additions made by the AO were deleted because of such infirmity, viz., violation

17 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO of principle of natural justice, the Court could have given a chance to the AO to proceed afresh curing such procedural irregularity. One example of such a case would be when statement of a witness is relied upon, but opportunity to cross-examine is not afforded to the assessee. (ii) On the contrary, it is a case where the AO(s) did not collect the required evidence which they were supposed to do. To put it otherwise, once the assessee had discharged their onus and the burden shifted on the AO(s), they could not come out with any cogent evidence to make the additions. No doubt, as indicate by us above, the AO(s) could have embark upon further inquiry. If that is not done and the AO(s) did not care to discharge the onus which was laid down, for this "negligence" on the part of the AO(s), he cannot be provided with "fresh innings". (iii) The order of the AO(s) had merged in the order of the CIT(A) and in some of the cases before us and before the CIT(A), the assessees had succeeded. (iv) This Court is acting as appellate Court and has to act within the limitations provided under Section 26A of the Act. The appeals can be entertained only on substantial questions of law. In the process, this Court is to examine as to whether the order of the Tribunal is correct and any substantial question of law arises therefrom. The Tribunal has passed the impugned orders, sitting as appellate authority, on the basis of available record. When the matter is to be examined from this angle, there is no reason or scope to remit the case back to the AO(s) once it is found that on the basis of material on record, the order of the Tribunal is justified. Even the Tribunal acts purely as an appellate authority. In that capacity, the Tribunal has to see whether the assessment framed by the AO, all for that matter, orders of the CIT(A) were according to law and purportedly framed on facts and whether there was sufficient material to support it. It is not for the Tribunal to start investigation. The Tribunal is only to see as to whether the additions are sustainable and there is adequate material to support the same if not the addition has to be deleted. At that stage, the tribunal would not order further inquiry. It is to be kept in mind that the AO is prosecutor as well as adjudicator and it is for the AO to collect sufficient material to make addition. There may be exceptional circumstances in which such an inquiry can be ordered, but normally this course is not resorted to." (emphasis supplied by us)

18 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO 14. As in the case before us, though the assessee had duly discharged the primary onus that was cast upon her for proving the genuineness of the loans received from the aforementioned persons, the A.O could not dislodge the veracity of the documentary evidence placed on his record by the assessee and rebut the same based on any cogent evidence. As the A.O had not cared to discharge the onus that was cast upon him, therefore, as observed by the Hon'ble High Court in the case of Commissioner of Income-Tax Vs. Kamdhenu Steel and Alloys Ltd. (supra), for this negligence on the part of the A.O, he could not be provided with "fresh innings". We thus, in terms of our aforesaid observations, are unable to persuade ourselves to concur with the view taken by the CIT(Appeals), who had upheld the aforementioned additions made by the A.O by treating the loans received from the abovementioned persons as an unexplained cash credit under Section 68 of the Act, set aside his order. Accordingly, the additions sustained by the CIT(A) under section 68 of the Act, aggregating to Rs. 1,72,45,186/- (Rs. 56,25,186/- (+) Rs. 1,16,20,000/-), are directed to be deleted.

19 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO 16. We find that the assessee had, during the subject year, earned gross interest income of Rs. 76,70,647/- by advancing funds and had claimed a deduction towards interest expenditure incurred on the borrowed capital that was utilized for earning such income.

20 ITA No.1665/Hyd/2025 Sonika Yadav vs. ITO 18. Apropos the assessee’s claim for credit for taxes paid/tax deducted at source (TDS), we herein direct the AO to grant due credit for taxes paid/TDS in accordance with law after due verification.

Order pronounced in the open court on this 20th day of May, 2026.

Sd/- Sd/- (MANJUNATHA G.) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 20th May, 2026. **OKK / SPS Copy to: S.No Addresses 1 Sonika Yadav, R. Kabra & Co. LLP, Chartered Accountants, 6-3-1089, first floor, Ramky House, Rajbhavan Road, Somajiguda, Hyderabad, Telangana- 500082. 2 Income Tax Officer, Ward 7(1), Signature Towers, Hyderabad, Hyderabad, TELANGANA-500084 3 The Pr. CIT, Hyderabad 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order KAMALA Digitally signed by KAMALA KUMAR KUMAR ORUGANTI Date: 2026.05.21 13:18:38 ORUGANTI +05'30' Sr. Private Secretary, ITAT, Hyderabad.