K K GROUP OF TEXTILE,MUMBAI vs. ACIT, CIR-23(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI

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

ITA No. 9081/MUM/2025 Assessment Year: 2017-18

K K Group of Textile, ACIT, Circle 23(1) 94/96, Bhuleshwar, II Floor, Room No. 511, 5th floor, Piramal Vs. Kalbadevi H.O., Chambers, Lalbaug, Parel, Mumbai-400 002. Mumbai-400012. PAN NO. AAQFK 4813 R Appellant Respondent

: Mr. Vijay Mehta Assessee by Revenue by : Mr. Hemanshu Joshi, Sr. DR

Date of Hearing : 13/05/2026 Date of pronouncement : 15/05/2026

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 18.12.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds:

1) The Ld. CIT(A) has erred in confirming the addition of Rs. 3,09,95,030/- made by the A.O. u/s. 68 of the Act.

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2) The Ld. CIT(A) fa 2) The Ld. CIT(A) failed to appreciate that the A.O. has merely iled to appreciate that the A.O. has merely compared the figures of cumulative amounts of loans taken compared the figures of cumulative amounts of loans taken compared the figures of cumulative amounts of loans taken during the year from group entities (as appearing in the tax audit during the year from group entities (as appearing in the tax audit during the year from group entities (as appearing in the tax audit report) with corresponding figures of cumulative amounts report) with corresponding figures of cumulative amounts report) with corresponding figures of cumulative amounts received during the year (incl received during the year (including repayment of loans taken by uding repayment of loans taken by the assessee) while making the addition. The Ld. CIT(A) also the assessee) while making the addition. The Ld. CIT(A) also the assessee) while making the addition. The Ld. CIT(A) also failed to appreciate that the Assessing Officer has arrived at the failed to appreciate that the Assessing Officer has arrived at the failed to appreciate that the Assessing Officer has arrived at the amount of addition by applying ad hoc 20% rate on such amount of addition by applying ad hoc 20% rate on such amount of addition by applying ad hoc 20% rate on such differences. 2. The brief facts, as borne out from the record, are that the The brief facts, as borne out from the record, are that the The brief facts, as borne out from the record, are that the assessee, a partnership firm engaged in the business of trading in assessee, a partnership firm engaged in the business of trading in assessee, a partnership firm engaged in the business of trading in textile products, filed its return of income textile products, filed its return of income on 14.10.2017 on 14.10.2017 declaring total income of ₹21,52,980/ 21,52,980/-. The case was selected for scrutiny, . The case was selected for scrutiny, inter alia, to examine the introduction of substantial capital during , to examine the introduction of substantial capital during , to examine the introduction of substantial capital during the year and statutory notices under the Income and statutory notices under the Income-tax Act, 1961 (in tax Act, 1961 (in short ‘the Act’) were issued and duly served short ‘the Act’) were issued and duly served. In the course of . In the course of assessment proceedings, the Assessing Officer noted nt proceedings, the Assessing Officer noted from the Tax nt proceedings, the Assessing Officer noted Audit Report(TAR) that the assessee had availed unsecured loans that the assessee had availed unsecured loans that the assessee had availed unsecured loans aggregating to ₹18.46 crores from sixteen parties. Upon being called 18.46 crores from sixteen parties. Upon being called 18.46 crores from sixteen parties. Upon being called upon to substantiate the same, the assessee furnished supporting upon to substantiate the same, the assessee furnished supporting upon to substantiate the same, the assessee furnished supporting evidences in respect of eleven vidences in respect of eleven loan creditors, which were accepted creditors, which were accepted by the Assessing Officer. However, in respect of the remaining five by the Assessing Officer. However, in respect of the remaining five by the Assessing Officer. However, in respect of the remaining five loan creditors, the assessee could furnish only confirmations and creditors, the assessee could furnish only confirmations and creditors, the assessee could furnish only confirmations and income-tax return, but failed to produce their bank stat , but failed to produce their bank statements. , but failed to produce their bank stat

2.1 The Assessing Officer further observed material discrepancies The Assessing Officer further observed material discrepancies The Assessing Officer further observed material discrepancies between the amounts reflected in the tax audit report and those between the amounts reflected in the tax audit report and those between the amounts reflected in the tax audit report and those appearing in the confirmations furnished by the said creditors. The appearing in the confirmations furnished by the said creditors. appearing in the confirmations furnished by the said creditors. led to prove the Assessing Officer concluded that the assessee fai Assessing Officer concluded that the assessee failed to prove the

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creditworthiness of those loans, since their returned income were creditworthiness of those loans, since their returned income were creditworthiness of those loans, since their returned income were low as compared to the huge loan given and the genuineness of the low as compared to the huge loan given and the genuineness of the low as compared to the huge loan given and the genuineness of the transaction was doubtful in absence of bank statement and the transaction was doubtful in absence of bank statement and the transaction was doubtful in absence of bank statement and the assessee gave no explanation for the differen assessee gave no explanation for the difference between the loans ce between the loans reported in the tax audit report and the confirmations. On this reported in the tax audit report and the confirmations. reported in the tax audit report and the confirmations. basis, and having regard to the absence of satisfactory evidence basis, and having regard to the absence of satisfactory evidence basis, and having regard to the absence of satisfactory evidence regarding creditworthiness and genuineness of the transactions, the regarding creditworthiness and genuineness of the transactions, the regarding creditworthiness and genuineness of the transactions, the Assessing Officer treated the differen Assessing Officer treated the differential amount aggregating to tial amount aggregating to ₹15,49,75,156/- as unexplained and, adopting an estimated as unexplained and, adopting an estimated as unexplained and, adopting an estimated approach, made an addition of 20% thereof, amounting to approach, made an addition of 20% thereof, amounting to approach, made an addition of 20% thereof, amounting to ₹3,09,95,030/- under section 68 of the Act. under section 68 of the Act. The Assessing Officer The Assessing Officer referred to the legal precedents in the case of referred to the legal precedents in the case of Sumati Dayal v. CIT Sumati Dayal v. CIT 214 ITR 801 (SC) wherein it is held that assessee’s explanation is 214 ITR 801 (SC) wherein it is held that assessee’s explanation is 214 ITR 801 (SC) wherein it is held that assessee’s explanation is unsatisfactory, can be treated as unexplained income. The unsatisfactory, can be treated as unexplained income. The unsatisfactory, can be treated as unexplained income. The Assessing Officer also relied on the decision of the Hon’ble Delhi Assessing Officer also relied on the decision of the Hon’ble Delhi Assessing Officer also relied on the decision of the Hon’ble Delhi High Court in the case of Oasis Hospitalitie High Court in the case of Oasis Hospitalities (P.) Ltd. 9 Taxman.com s (P.) Ltd. 9 Taxman.com 179 wherein proving only identity of the creditors is not enough and 179 wherein proving only identity of the creditors is not enough and 179 wherein proving only identity of the creditors is not enough and the assessee must also prove creditworthiness and genuineness. the assessee must also prove creditworthiness and genuineness. the assessee must also prove creditworthiness and genuineness.

2.2 On further appeal before the Ld. CIT(A), the assessee On further appeal before the Ld. CIT(A), the assessee On further appeal before the Ld. CIT(A), the assessee furnished additional evidences and assai furnished additional evidences and assailed the addition on the led the addition on the ground that the sole basis adopted by the Assessing Officer was the ground that the sole basis adopted by the Assessing Officer was the ground that the sole basis adopted by the Assessing Officer was the alleged non-production of bank statements of certain loan creditors. production of bank statements of certain loan creditors. production of bank statements of certain loan creditors. It was contended that such an approach was legally untenable and It was contended that such an approach was legally untenable and It was contended that such an approach was legally untenable and

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that the impugned addition, be that the impugned addition, being ad hoc in nature, is ing ad hoc in nature, is impermissible under the scheme of the Act. impermissible under the scheme of the Act.

2.3 The assessee further explained that the transactions with the The assessee further explained that the transactions with the The assessee further explained that the transactions with the impugned creditors were in the nature of running/current impugned creditors were in the nature of running/current impugned creditors were in the nature of running/current accounts, involving both inflows and outflows during the relevant accounts, involving both inflows and outflows during the relevant accounts, involving both inflows and outflows during the relevant financial year. It was submitted that, in several instances, amounts financial year. It was submitted that, in several instances, amounts financial year. It was submitted that, in several instances, amounts advanced by the assessee to such parties were subsequently advanced by the assessee to such parties were subsequently advanced by the assessee to such parties were subsequently returned, and therefore, the credits appearing in the accounts could returned, and therefore, the credits appearing in the accounts could returned, and therefore, the credits appearing in the accounts could not, in a mechanical manner, be construed as fresh loans. not, in a mechanical manner, be construed as fresh loans. not, in a mechanical manner, be construed as fresh loans. According to the assessee, the Assessing Officer failed to appreciate According to the assessee, the Assessing Officer failed to appreciate According to the assessee, the Assessing Officer failed to appreciate this fundamental aspect and proceeded on an erroneous premise by this fundamental aspect and proceeded on an erroneous premise by this fundamental aspect and proceeded on an erroneous premise by comparing figures which were inherently not comparable, thereby comparing figures which were inherently not comparable, thereby comparing figures which were inherently not comparable, thereby vitiating the very foundation of the addition. vitiating the very foundation of the addition.

2.4 It was also submitted that due to lack of adequate opportunity s also submitted that due to lack of adequate opportunity s also submitted that due to lack of adequate opportunity at the assessment stage, the assessee could not place all relevant at the assessment stage, the assessee could not place all relevant at the assessment stage, the assessee could not place all relevant materials on record. The additional evidences so filed were materials on record. The additional evidences so filed were materials on record. The additional evidences so filed were forwarded by the Ld. CIT(A) to the Assessing Officer for forwarded by the Ld. CIT(A) to the Assessing Officer for forwarded by the Ld. CIT(A) to the Assessing Officer for examination. In the remand proceedings, while the Assessing n the remand proceedings, while the Assessing n the remand proceedings, while the Assessing Officer alleged layering and rotation of funds, the assessee, by way Officer alleged layering and rotation of funds, the assessee, by way Officer alleged layering and rotation of funds, the assessee, by way of a detailed illustration in the case of M/s. Abhishek, of a detailed illustration in the case of M/s. Abhishek, of a detailed illustration in the case of M/s. Abhishek, demonstrated that the figures reflected in the tax audit report demonstrated that the figures reflected in the tax audit report demonstrated that the figures reflected in the tax audit report represented net borr represented net borrowings after adjusting reciprocal transactions owings after adjusting reciprocal transactions and could not be equated with the aggregate of credits appearing in and could not be equated with the aggregate of credits appearing in and could not be equated with the aggregate of credits appearing in

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the confirmation accounts. the confirmation accounts. The relevant submission The relevant submission of assessee is reproduced as under: reproduced as under:

“17. In order to appreciate the submission of the assessee that the “17. In order to appreciate the submission of the assessee that the “17. In order to appreciate the submission of the assessee that the figure of the loan taken by the assessee firm from M/s. Abhishek as figure of the loan taken by the assessee firm from M/s. Abhishek as figure of the loan taken by the assessee firm from M/s. Abhishek as reflected in the Tax Audit Report cannot be compared with the total reflected in the Tax Audit Report cannot be compared with the total reflected in the Tax Audit Report cannot be compared with the total of the credit side of the loan confirmation, your ho of the credit side of the loan confirmation, your honour's attention is nour's attention is invited to the account confirmation of M/s. Abhishek which is at invited to the account confirmation of M/s. Abhishek which is at invited to the account confirmation of M/s. Abhishek which is at pages 245 to 248 of the paper book. This account confirmation is pages 245 to 248 of the paper book. This account confirmation is pages 245 to 248 of the paper book. This account confirmation is the account of M/s. Abhishek in the books of the assessee firm and the account of M/s. Abhishek in the books of the assessee firm and the account of M/s. Abhishek in the books of the assessee firm and therefore, when the amounts are lent by therefore, when the amounts are lent by the assessee firm, the the assessee firm, the account of M/s. Abhishek is debited by the assessee firm in its account of M/s. Abhishek is debited by the assessee firm in its account of M/s. Abhishek is debited by the assessee firm in its books. On perusal of the aforesaid loan confirmation account of M/s. On perusal of the aforesaid loan confirmation account of M/s. On perusal of the aforesaid loan confirmation account of M/s. Abhishek it will be seen that on 25.11.2016 for the first time, M/s. Abhishek it will be seen that on 25.11.2016 for the first time, M/s. Abhishek it will be seen that on 25.11.2016 for the first time, M/s. Abhishek gave a sum of Rs.8,00 Abhishek gave a sum of Rs.8,00,000/- to the assessee firm to the assessee firm converting its debit balance into the credit balance of Rs.6,80,000/ converting its debit balance into the credit balance of Rs.6,80,000/ converting its debit balance into the credit balance of Rs.6,80,000/-, In other words, the assessee firm took a loan of Rs.6,80,000/ In other words, the assessee firm took a loan of Rs.6,80,000/ In other words, the assessee firm took a loan of Rs.6,80,000/- for the first time from M/s. Abhishek. Between 25.11.2016 and the first time from M/s. Abhishek. Between 25.11.2016 and the first time from M/s. Abhishek. Between 25.11.2016 and 19.01.2017, M/s. Abhishek had a 19.01.2017, M/s. Abhishek had a credit balance in the books of the credit balance in the books of the assessee firm. During this period M/s. Abhishek had given a further assessee firm. During this period M/s. Abhishek had given a further assessee firm. During this period M/s. Abhishek had given a further loan of Rs.12,25,000/ loan of Rs.12,25,000/- to the assessee firm. Therefore, the net loan to the assessee firm. Therefore, the net loan amount given to the assessee firm was Rs.19,05,000/ amount given to the assessee firm was Rs.19,05,000/ amount given to the assessee firm was Rs.19,05,000/- (i.c., Rs.6,80,000/ Rs.6,80,000/- + Rs.12,25,000/-). From 20.01.2017, the said credit ). From 20.01.2017, the said credit balance of M/s. Abhishek in the books of the assessee firm was balance of M/s. Abhishek in the books of the assessee firm was balance of M/s. Abhishek in the books of the assessee firm was converted into a debit balance and the said debit balance remained converted into a debit balance and the said debit balance remained converted into a debit balance and the said debit balance remained till 23.02.2017 (i.е., Rs.12,500/ till 23.02.2017 (i.е., Rs.12,500/-). Again between 23.02.2017 and ). Again between 23.02.2017 and 07.03.2017, M/s. A 07.03.2017, M/s. Abhishek gave Rs.5,55,000/- to the assessee to the assessee firm and converted its debit balance of Rs.12,500/ firm and converted its debit balance of Rs.12,500/- into the credit into the credit balance of Rs. 5,42,500/ balance of Rs. 5,42,500/- on 07-03-2017 in the books of the 2017 in the books of the assessee firm. Thus, the assessee firm got the aggregate loan of assessee firm. Thus, the assessee firm got the aggregate loan of assessee firm. Thus, the assessee firm got the aggregate loan of Rs.24,47,500/ Rs.24,47,500/- from M/s. M/s. Abhishek Abhishek (i.e., (i.e., Rs.19,05,000/- Rs.19,05,000/ +Rs.5,42,500/ +Rs.5,42,500/-). Between 08-03-2017 and 24-03 03- 2017 the assessee firm paid Rs.15,000/ assessee firm paid Rs.15,000/- to M/s. Abhishek and reduced its to M/s. Abhishek and reduced its credit balance to Rs.5,27,500/ credit balance to Rs.5,27,500/-. On 29.03.2017 the assessee firm . On 29.03.2017 the assessee firm gave Rs.10,10,000/ gave Rs.10,10,000/- which converted the credit balance into the the credit balance into the debit balance in the account of /s. Abhishek. In other words, M/s. debit balance in the account of /s. Abhishek. In other words, M/s. debit balance in the account of /s. Abhishek. In other words, M/s. Abhishek had given loan of Rs.24,47,500/ Abhishek had given loan of Rs.24,47,500/- (i.e., Rs.19,05,000/ (i.e., Rs.19,05,000/- + Rs. 5,42,500/ Rs. 5,42,500/-) to the assessee firm during the year ended 31 ) to the assessee firm during the year ended 31-03- 2017 after returning all the 2017 after returning all the amounts of the loans taken from the amounts of the loans taken from the assessee firm and therefore, the assessee's auditor has shown assessee firm and therefore, the assessee's auditor has shown assessee firm and therefore, the assessee's auditor has shown Rs.24,47,500/ Rs.24,47,500/- as the amount of loan taken by the assessee firm as the amount of loan taken by the assessee firm from M/s. Abhishek during the year ended 31 from M/s. Abhishek during the year ended 31-03 03-2017. It is, therefore, submitted that the fig therefore, submitted that the figure of Rs.24,47,500/ ure of Rs.24,47,500/- being the

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amount of loan taken by the assessee firm from M/s. Abhishek amount of loan taken by the assessee firm from M/s. Abhishek amount of loan taken by the assessee firm from M/s. Abhishek cannot be compared with the total amount given by M/s. Abhishek cannot be compared with the total amount given by M/s. Abhishek cannot be compared with the total amount given by M/s. Abhishek to the assessee firm during the year ended 31.03.2017 because the to the assessee firm during the year ended 31.03.2017 because the to the assessee firm during the year ended 31.03.2017 because the said figure includes the amount o said figure includes the amount of loan returned by M/s. Abhishek f loan returned by M/s. Abhishek to the assessee firm. The figure of Rs.24,47,500/ to the assessee firm. The figure of Rs.24,47,500/- is composed of is composed of the following amounts (see pages 333 & 334): the following amounts (see pages 333 & 334): Date Amount 25-11-2016 2016 6,80,000/- 06-01-2017 2017 6,00,000/- 06-01-2017 2017 6,25,000/- 23-02-2017 2017 2,67,500/- 28-02-2017 2017 2,25,000/- 07-03-2017 2017 50,000/- TOTAL 24,47,500/- 18. Similarly in respect of other four parties the AO compared the 18. Similarly in respect of other four parties the AO compared the 18. Similarly in respect of other four parties the AO compared the figure of loan taken by the assessee firm as recorded in the Tax figure of loan taken by the assessee firm as recorded in the Tax figure of loan taken by the assessee firm as recorded in the Tax Audit Report with the total of the credit side of the account Audit Report with the total of the credit side of the account Audit Report with the total of the credit side of the account statement (confirmation) of the said four parties and accordingly statement (confirmation) of the said four parties and accordingly statement (confirmation) of the said four parties and accordingly made the same error of comparing two figures which are not made the same error of comparing two figures which are not made the same error of comparing two figures which are not comparable. The details of the said four parties are as under:” comparable. The details of the said four parties are as under:” comparable. The details of the said four parties are as under:” Loan taken during the year shown by Loan taken by the Loan taken by the the assessee in the assessee during assessee during Page no. Tax Audit Report the F.Y. 2016-17 17 Sr. Name of the loan Name of the loan of the and submission as per the No. creditor paper during the confirmation of confirmation of book assessment loan creditors (in loan creditors (in proceedings (in Rs.) Rs.) (Pgs 10-11) 1. M/s. K. Tex 2,11,54,000/- 8,17,40,045/- 521 - 526 M/s. Kishanlal & M/s. Kishanlal & 2. 4,87,04,176/- 7,41,29,211/- 649 - 653 Sons 3. M/s. R. K. Tex 1,63,96,000/- 2,78,01,305/- 556 - 557 4. M/s. Shubham 4,69,57,692/- 9,15,20,804/- 414 - 419 19. As explained hereinabove the 19. As explained hereinabove the comparison of the aforesaid two comparison of the aforesaid two figures is incorrect as they are not comparable and therefore, the figures is incorrect as they are not comparable and therefore, the figures is incorrect as they are not comparable and therefore, the conclusion drawn by the AO that the difference between the loan conclusion drawn by the AO that the difference between the loan conclusion drawn by the AO that the difference between the loan reflected in the Tax Audit Report and the aggregate amount reflected in the Tax Audit Report and the aggregate amount reflected in the Tax Audit Report and the aggregate amount reflected in the account statement reflected in the account statement of loan is unexplained cash credit of loan is unexplained cash credit is beyond imagination and hence the addition of 20% of the said is beyond imagination and hence the addition of 20% of the said is beyond imagination and hence the addition of 20% of the said alleged difference of Rs.15,49,75,156/ alleged difference of Rs.15,49,75,156/- is incorrect and contrary to is incorrect and contrary to the facts on record and hence the same is required to be deleted. the facts on record and hence the same is required to be deleted. the facts on record and hence the same is required to be deleted. 20. The edifice creat 20. The edifice created by the AO was based on the wrong ed by the AO was based on the wrong foundation as explained hereinabove and therefore, the allegation of foundation as explained hereinabove and therefore, the allegation of foundation as explained hereinabove and therefore, the allegation of the AO that the assessee firm did not furnish bank statement of the the AO that the assessee firm did not furnish bank statement of the the AO that the assessee firm did not furnish bank statement of the

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said five parties has no relevance because the AO has not made said five parties has no relevance because the AO has not made said five parties has no relevance because the AO has not made addition of Rs.3,09, addition of Rs.3,09,95,030/- to the income of assessee firm on the to the income of assessee firm on the ground that the AO could not verify the creditworthiness of the ground that the AO could not verify the creditworthiness of the ground that the AO could not verify the creditworthiness of the parties due to non parties due to non-availability of the bank statement of the said five availability of the bank statement of the said five parties.” 2.5 The assessee further contended that the Assessing Officer The assessee further contended that the Assessing Officer The assessee further contended that the Assessing Officer committed a manifest error in comparing the figure of loans committed a manifest error in comparing the figure of loans committed a manifest error in comparing the figure of loans disclosed in the tax audit report with the gross credits appearing in disclosed in the tax audit report with the gross credits appearing in disclosed in the tax audit report with the gross credits appearing in the the the loan loan loan confirmations, confirmations, confirmations, without without without appreciating appreciating appreciating that that that such such such confirmations also included repayments and reversal entries. It was also included repayments and reversal entries. It was also included repayments and reversal entries. It was thus urged that the very basis of computing the alleged discrepancy thus urged that the very basis of computing the alleged discrepancy thus urged that the very basis of computing the alleged discrepancy of ₹15,49,75,156/- was misconceived and contrary to the settled was misconceived and contrary to the settled was misconceived and contrary to the settled principles of accounting. On this premise, the assessee submitted principles of accounting. On this premise, the assessee submitted principles of accounting. On this premise, the assessee submitted that the conclusion drawn by the Assessing Officer, treating such t the conclusion drawn by the Assessing Officer, treating such t the conclusion drawn by the Assessing Officer, treating such differential amount as unexplained cash credit, was wholly differential amount as unexplained cash credit, was wholly differential amount as unexplained cash credit, was wholly unsustainable and based on a fundamentally flawed appreciation of unsustainable and based on a fundamentally flawed appreciation of unsustainable and based on a fundamentally flawed appreciation of facts. Consequently, the ad hoc addition of 20% thereof, amounting facts. Consequently, the ad hoc addition of 20% thereof, amounting facts. Consequently, the ad hoc addition of 20% thereof, amounting to ₹3,09,95,030/-, was contended to be arbitrary, devoid of any , was contended to be arbitrary, devoid of any , was contended to be arbitrary, devoid of any rational basis and liable to be deleted. It was further urged that, rational basis and liable to be deleted. It was further urged that, rational basis and liable to be deleted. It was further urged that, once the very edifice of the addition, namely, the alleged once the very edifice of the addition, namely, the alleged once the very edifice of the addition, namely, the alleged discrepancy, stands discredited, the ancillary observation regarding discrepancy, stands discredited, the ancillary observation regardi discrepancy, stands discredited, the ancillary observation regardi non-furnishing furnishing furnishing of of of bank bank bank statements statements statements loses loses loses all all all significance, significance, significance, particularly when the addition was not directly founded on any particularly when the addition was not directly founded on any particularly when the addition was not directly founded on any independent finding regarding lack of creditworthiness, but rather independent finding regarding lack of creditworthiness, but rather independent finding regarding lack of creditworthiness, but rather on an erroneous comparison of figures. on an erroneous comparison of figures.

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2.6 The Ld. CIT(A), after The Ld. CIT(A), after forwarding the remand report to the forwarding the remand report to the assessee and duly considering the rejoinder filed thereto, proceeded assessee and duly considering the rejoinder filed thereto, proceeded assessee and duly considering the rejoinder filed thereto, proceeded to adjudicate the issue on the basis of the assessment order, to adjudicate the issue on the basis of the assessment order, to adjudicate the issue on the basis of the assessment order, remand findings, written submissions and the entire material remand findings, written submissions and the entire material remand findings, written submissions and the entire material available on record. Upon a available on record. Upon a comprehensive evaluation of the factual comprehensive evaluation of the factual matrix and the applicable legal principles, the Ld. CIT(A) concurred matrix and the applicable legal principles, the Ld. CIT(A) concurred matrix and the applicable legal principles, the Ld. CIT(A) concurred with the conclusions drawn by the Assessing Officer and upheld the with the conclusions drawn by the Assessing Officer and upheld the with the conclusions drawn by the Assessing Officer and upheld the impugned addition.

2.7 The appellate authority recorded a categorical finding The appellate authority recorded a categorical finding The appellate authority recorded a categorical finding that the Assessing Officer had not proceeded in a mechanical or arbitrary Assessing Officer had not proceeded in a mechanical or arbitrary Assessing Officer had not proceeded in a mechanical or arbitrary manner, but had undertaken a creditor manner, but had undertaken a creditor-wise examination and wise examination and accepted the loans from eleven parties as genuine, while making accepted the loans from eleven parties as genuine, while making accepted the loans from eleven parties as genuine, while making addition only in respect of five creditors where the statutory addition only in respect of five creditors where the statut addition only in respect of five creditors where the statut requirements under section 68 were found to be unfulfilled. Such a requirements under section 68 were found to be unfulfilled. Such a requirements under section 68 were found to be unfulfilled. Such a selective and reasoned approach, according to the Ld. CIT(A), lends selective and reasoned approach, according to the Ld. CIT(A), lends selective and reasoned approach, according to the Ld. CIT(A), lends credence to the findings recorded by the Assessing Officer. Dealing credence to the findings recorded by the Assessing Officer. credence to the findings recorded by the Assessing Officer. with the principal contention of the assessee tha with the principal contention of the assessee that the onus stood t the onus stood discharged upon furnishing confirmations, PAN, returns of income discharged upon furnishing confirmations, PAN, returns of income discharged upon furnishing confirmations, PAN, returns of income and bank statements, the Ld. CIT(A) held that mere production of and bank statements, the Ld. CIT(A) held that mere production of and bank statements, the Ld. CIT(A) held that mere production of such documentary evidence does not ipso facto establish the such documentary evidence does not ipso facto establish the such documentary evidence does not ipso facto establish the creditworthiness of the creditors or the genuineness of the creditworthiness of the creditors or the genuinen creditworthiness of the creditors or the genuinen transactions. It was observed that the material brought on record, transactions. It was observed that the material brought on record, transactions. It was observed that the material brought on record, particularly particularly particularly during during during remand remand remand proceedings, proceedings, proceedings, revealed revealed revealed glaring glaring glaring inconsistencies, including a stark disproportion between the income inconsistencies, including a stark disproportion between the income inconsistencies, including a stark disproportion between the income

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declared by the creditors and the magnitude of loans advanced, declared by the creditors and the magnitude of loans declared by the creditors and the magnitude of loans absence of commensurate capital base, and lack of any cogent absence of commensurate capital base, and lack of any cogent absence of commensurate capital base, and lack of any cogent explanation as to the real source of funds. explanation as to the real source of funds. The Ld. CIT(A) further The Ld. CIT(A) further took note of the pattern of transactions reflected in the bank took note of the pattern of transactions reflected in the bank took note of the pattern of transactions reflected in the bank accounts of the creditors, wherein substantial funds were credited accounts of the creditors, wherein substantial funds we accounts of the creditors, wherein substantial funds we immediately prior to issuance of cheques to the assessee, often immediately prior to issuance of cheques to the assessee, often immediately prior to issuance of cheques to the assessee, often through layered transfers from related concerns, with negligible through layered transfers from related concerns, with negligible through layered transfers from related concerns, with negligible closing balances. This, in his considered view, indicated that the closing balances. This, in his considered view, indicated that the closing balances. This, in his considered view, indicated that the accounts were being used as conduits for routing accounts were being used as conduits for routing funds rather than funds rather than reflecting independent financial capacity. The absence of normal reflecting independent financial capacity. The absence of normal reflecting independent financial capacity. The absence of normal commercial attributes, such as arm’s length interest rates, formal commercial attributes, such as arm’s length interest rates, formal commercial attributes, such as arm’s length interest rates, formal agreements, and defined repayment terms, was also held to militate agreements, and defined repayment terms, was also held to militate agreements, and defined repayment terms, was also held to militate against the genuineness of the transac against the genuineness of the transactions. Applying the settled Applying the settled legal position, including the doctrine of human probabilities as legal position, including the doctrine of human probabilities as legal position, including the doctrine of human probabilities as propounded by the Hon’ble Supreme Court in propounded by the Hon’ble Supreme Court in Sumati Dayal v. CIT Sumati Dayal v. CIT, and the requirement of establishing identity, creditworthiness and and the requirement of establishing identity, creditworthiness and and the requirement of establishing identity, creditworthiness and genuineness as reiterated in genuineness as reiterated in CIT v. Oasis Hospitalities (P.) Ltd. v. Oasis Hospitalities (P.) Ltd. and other precedents, the Ld. CIT(A) concluded that the assessee had other precedents, the Ld. CIT(A) concluded that the assessee had other precedents, the Ld. CIT(A) concluded that the assessee had failed to discharge the burden cast upon it under section 68. It was failed to discharge the burden cast upon it under section 68. It was failed to discharge the burden cast upon it under section 68. It was emphasized that mere routing of funds through banking channels emphasized that mere routing of funds through banking channels emphasized that mere routing of funds through banking channels or furnishing of basi or furnishing of basic documentation cannot override the c documentation cannot override the substantive deficiencies in establishing the real source and substantive deficiencies in establishing the real source and substantive deficiencies in establishing the real source and financial capacity of the creditors.The Ld. CIT(A) also repelled the financial capacity of the creditors.The Ld. CIT(A) also repelled the financial capacity of the creditors.The Ld. CIT(A) also repelled the assessee’s reliance on judicial precedents, holding that the same assessee’s reliance on judicial precedents, holding that the same assessee’s reliance on judicial precedents, holding that the same were distinguishable on were distinguishable on facts, particularly where, in the present facts, particularly where, in the present

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case, adequate opportunity had been afforded both at the case, adequate opportunity had been afforded both at the case, adequate opportunity had been afforded both at the assessment and remand stages, yet the assessee failed to furnish assessment and remand stages, yet the assessee failed to furnish assessment and remand stages, yet the assessee failed to furnish satisfactory explanation or credible evidence to rebut the adverse satisfactory explanation or credible evidence to rebut the adverse satisfactory explanation or credible evidence to rebut the adverse findings. Significantly, Significantly, the Ld. CIT(A) noted that the Assessing the Ld. CIT(A) noted that the Assessing Officer had not brought to tax the entire amount but had restricted Officer had not brought to tax the entire amount but had restricted Officer had not brought to tax the entire amount but had restricted the addition to 20% of the differential figure, thereby adopting a the addition to 20% of the differential figure, thereby adopting a the addition to 20% of the differential figure, thereby adopting a moderated and balanced approach. In the absence of any material moderated and balanced approach. In the absence of any material moderated and balanced approach. In the absence of any material to demonstrate that even such restricted addition was unwarranted, at even such restricted addition was unwarranted, at even such restricted addition was unwarranted, the same was held to be justified. the same was held to be justified. In view of the cumulative effect of In view of the cumulative effect of the disproportionate financial profile of the creditors, the layered the disproportionate financial profile of the creditors, the layered the disproportionate financial profile of the creditors, the layered movement of funds, absence of commercial substance and the movement of funds, absence of commercial substance and the movement of funds, absence of commercial substance and the failure of the assessee to satisfactorily explain the true source of the of the assessee to satisfactorily explain the true source of the of the assessee to satisfactorily explain the true source of the impugned credits, the Ld. CIT(A) held that the requirements of impugned credits, the Ld. CIT(A) held that the requirements of impugned credits, the Ld. CIT(A) held that the requirements of section 68 stood unfulfilled. Consequently, the addition of section 68 stood unfulfilled. Consequently, the addition of section 68 stood unfulfilled. Consequently, the addition of ₹3,09,95,030/- was confirmed and the grounds raised by the was confirmed and the grounds raised by the was confirmed and the grounds raised by the assessee were dismissed. were dismissed. The relevant finding of the Ld. CIT(A) is The relevant finding of the Ld. CIT(A) is reproduced as under: reproduced as under:

“8.2.4 I have carefully considered the assessment order, remand “8.2.4 I have carefully considered the assessment order, remand “8.2.4 I have carefully considered the assessment order, remand report furnished by the Assessing Officer, the written submissions report furnished by the Assessing Officer, the written submissions report furnished by the Assessing Officer, the written submissions and the detailed rejoinder filed by the appel and the detailed rejoinder filed by the appellant in response to the lant in response to the remand report issued by AO, the arguments were put forth during remand report issued by AO, the arguments were put forth during remand report issued by AO, the arguments were put forth during the course of video the course of video-conference hearing and all other material and conference hearing and all other material and documents available on record. The arguments made by both sides documents available on record. The arguments made by both sides documents available on record. The arguments made by both sides have been examined after considering t have been examined after considering the said documents on record he said documents on record and the relevant legal provisions. and the relevant legal provisions. 8.2.5 As already mentioned, the Assessing Officer has accepted the 8.2.5 As already mentioned, the Assessing Officer has accepted the 8.2.5 As already mentioned, the Assessing Officer has accepted the loans from eleven parties as genuine and has made the impugned loans from eleven parties as genuine and has made the impugned loans from eleven parties as genuine and has made the impugned addition only in respect of five creditors. This conduct itself addition only in respect of five creditors. This conduct itself addition only in respect of five creditors. This conduct itself shows that the Assessing Officer has not proceeded in a mechanical or that the Assessing Officer has not proceeded in a mechanical or that the Assessing Officer has not proceeded in a mechanical or

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arbitrary manner, but has applied his mind to the material arbitrary manner, but has applied his mind to the material arbitrary manner, but has applied his mind to the material produced, appreciated the differences in the factual pattern of produced, appreciated the differences in the factual pattern of produced, appreciated the differences in the factual pattern of various creditors and made a selective addition only wherein h various creditors and made a selective addition only wherein h various creditors and made a selective addition only wherein he found that the basic requirements of section 68 were not fulfilled. found that the basic requirements of section 68 were not fulfilled. found that the basic requirements of section 68 were not fulfilled. This selective approach lends credibility to the factual findings This selective approach lends credibility to the factual findings This selective approach lends credibility to the factual findings recorded by the Assessing Officer in respect of the remaining five recorded by the Assessing Officer in respect of the remaining five recorded by the Assessing Officer in respect of the remaining five creditors. 8.2.6 The appellant's main contention is t 8.2.6 The appellant's main contention is that, in respect of the five hat, in respect of the five disputed creditors, it has already furnished confirmation letters, disputed creditors, it has already furnished confirmation letters, disputed creditors, it has already furnished confirmation letters, copies of PAN, copies of ITR acknowledgements, bank statements of copies of PAN, copies of ITR acknowledgements, bank statements of copies of PAN, copies of ITR acknowledgements, bank statements of the creditors and ledger accounts in the appellant's books. On the the creditors and ledger accounts in the appellant's books. On the the creditors and ledger accounts in the appellant's books. On the strength of these documents, strength of these documents, the appellant argued that the statutory the appellant argued that the statutory onus lies under section 68 stood fully discharged and that no onus lies under section 68 stood fully discharged and that no onus lies under section 68 stood fully discharged and that no addition could be made in respect of loans for which such addition could be made in respect of loans for which such addition could be made in respect of loans for which such documentary evidences were filed. The appellant further stated that documentary evidences were filed. The appellant further stated that documentary evidences were filed. The appellant further stated that once the identity of the cr once the identity of the creditor and the movement of funds through editor and the movement of funds through banking channels are demonstrated, the Assessing Officer is not banking channels are demonstrated, the Assessing Officer is not banking channels are demonstrated, the Assessing Officer is not justified in insisting on any further corroboration. justified in insisting on any further corroboration. 8.2.7 In support of this line of argument, the appellant has placed 8.2.7 In support of this line of argument, the appellant has placed 8.2.7 In support of this line of argument, the appellant has placed reliance on the decisions in reliance on the decisions in Naveen Infradevelopers & Engineers Naveen Infradevelopers & Engineers Pvt. Ltd. Vs. DCIT (Delhi ITAT), Prabhatbhai S. Shah Vs. CIT (231 Pvt. Ltd. Vs. DCIT (Delhi ITAT), Prabhatbhai S. Shah Vs. CIT (231 Pvt. Ltd. Vs. DCIT (Delhi ITAT), Prabhatbhai S. Shah Vs. CIT (231 ITR 1, Bombay High Court) and Rajesh Kumar Vs. DCIT (287 ITR ITR 1, Bombay High Court) and Rajesh Kumar Vs. DCIT (287 ITR ITR 1, Bombay High Court) and Rajesh Kumar Vs. DCIT (287 ITR 91, Supreme Court). Relying on these decisions, the appellant has 91, Supreme Court). Relying on these decisions, the appellant has 91, Supreme Court). Relying on these decisions, the appellant has contended that where the app contended that where the appellant furnishes basic documentary ellant furnishes basic documentary evidences such as PAN, confirmations and bank statements, the evidences such as PAN, confirmations and bank statements, the evidences such as PAN, confirmations and bank statements, the Assessing Officer is required to carry out a proper and meaningful Assessing Officer is required to carry out a proper and meaningful Assessing Officer is required to carry out a proper and meaningful enquiry and an addition under section 68 cannot be made in a enquiry and an addition under section 68 cannot be made in a enquiry and an addition under section 68 cannot be made in a routine or mechanical manner wi routine or mechanical manner without such enquiry. The appellant thout such enquiry. The appellant has further submitted that an appellant should not be prejudiced has further submitted that an appellant should not be prejudiced has further submitted that an appellant should not be prejudiced merely due to any inadequacy or incompleteness of enquiry at the merely due to any inadequacy or incompleteness of enquiry at the merely due to any inadequacy or incompleteness of enquiry at the assessment stage when all the relevant papers have subsequently assessment stage when all the relevant papers have subsequently assessment stage when all the relevant papers have subsequently been placed on record. been placed on record. 8.2.8 During the appellate proceedings, the appellant filed During the appellate proceedings, the appellant filed During the appellate proceedings, the appellant filed substantial additional evidences in support of the five loan substantial additional evidences in support of the five loan substantial additional evidences in support of the five loan creditors, including copies of their returns of income, audited creditors, including copies of their returns of income, audited creditors, including copies of their returns of income, audited financial statements, tax audit reports, running account statements financial statements, tax audit reports, running account statements financial statements, tax audit reports, running account statements and bank statements. These additional evidences were forwarded statements. These additional evidences were forwarded statements. These additional evidences were forwarded to the Assessing Officer and requested to examine the same and to the Assessing Officer and requested to examine the same and to the Assessing Officer and requested to examine the same and furnish a remand report. The Assessing Officer has submitted a furnish a remand report. The Assessing Officer has submitted a furnish a remand report. The Assessing Officer has submitted a detailed remand report after considering the additional material and detailed remand report after considering the additional material and detailed remand report after considering the additional material and re-verifying the facts. The findings of the report and the assessment ifying the facts. The findings of the report and the assessment ifying the facts. The findings of the report and the assessment order show that several serious gaps and contradictions in the order show that several serious gaps and contradictions in the order show that several serious gaps and contradictions in the explanation were given by the appellant, which are discussed here. explanation were given by the appellant, which are discussed here. explanation were given by the appellant, which are discussed here.

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8.2.9 An important point pointed out in the remand report is t 8.2.9 An important point pointed out in the remand report is t 8.2.9 An important point pointed out in the remand report is that the comparison between the loans given by the five creditors and their comparison between the loans given by the five creditors and their comparison between the loans given by the five creditors and their own income. For each creditor, the Assessing Officer prepared a own income. For each creditor, the Assessing Officer prepared a own income. For each creditor, the Assessing Officer prepared a chart showing the amount of loan given to the appellant, the highest chart showing the amount of loan given to the appellant, the highest chart showing the amount of loan given to the appellant, the highest balance in their running account and the income balance in their running account and the income shown in their shown in their income-tax return. From this, it is noticed that in more than one case tax return. From this, it is noticed that in more than one case tax return. From this, it is noticed that in more than one case the creditors had shown very low income, but had still given very the creditors had shown very low income, but had still given very the creditors had shown very low income, but had still given very large unsecured loans to the appellant. Further, their capital and large unsecured loans to the appellant. Further, their capital and large unsecured loans to the appellant. Further, their capital and net worth, as seen from their balance net worth, as seen from their balance sheets or capital accounts, sheets or capital accounts, were also not sufficient to justify giving such large loans to one were also not sufficient to justify giving such large loans to one were also not sufficient to justify giving such large loans to one concern. The appellant has also not given any satisfactory concern. The appellant has also not given any satisfactory concern. The appellant has also not given any satisfactory explanation as to how these persons, with such limited income and explanation as to how these persons, with such limited income and explanation as to how these persons, with such limited income and capital, could arrange or accumulat capital, could arrange or accumulate funds to give these loans in the e funds to give these loans in the absence of any clear business reason or independent source. absence of any clear business reason or independent source. absence of any clear business reason or independent source. 8.2.10 The Assessing Officer has, therefore, concluded in the 8.2.10 The Assessing Officer has, therefore, concluded in the 8.2.10 The Assessing Officer has, therefore, concluded in the remand report that the loan remand report that the loan-to-income ratio in the case of these income ratio in the case of these creditors is so skewed and disprop creditors is so skewed and disproportionate that it is not consistent ortionate that it is not consistent with normal human conduct or commercial prudence. In ordinary with normal human conduct or commercial prudence. In ordinary with normal human conduct or commercial prudence. In ordinary commercial dealings, a person of modest means does not part with commercial dealings, a person of modest means does not part with commercial dealings, a person of modest means does not part with very large sums as unsecured advances without adequate security very large sums as unsecured advances without adequate security very large sums as unsecured advances without adequate security or commercial return. The hig or commercial return. The highly disproportionate nature of the hly disproportionate nature of the loans vis-à-vis the declared income and net worth of the creditors vis the declared income and net worth of the creditors vis the declared income and net worth of the creditors casts serious doubt on their real capacity to advance the amounts in casts serious doubt on their real capacity to advance the amounts in casts serious doubt on their real capacity to advance the amounts in question. The appellant, in its rejoinder, has attempted to counter question. The appellant, in its rejoinder, has attempted to counter question. The appellant, in its rejoinder, has attempted to counter this by stating t this by stating that creditworthiness should be seen with reference hat creditworthiness should be seen with reference to the overall funds available and not merely with reference to to the overall funds available and not merely with reference to to the overall funds available and not merely with reference to return of income. However, beyond reiterating that the parties are return of income. However, beyond reiterating that the parties are return of income. However, beyond reiterating that the parties are income-tax assessees who have filed their returns, nо concrete tax assessees who have filed their returns, nо concrete tax assessees who have filed their returns, nо concrete material has been brought on record to show that they actually s been brought on record to show that they actually s been brought on record to show that they actually possessed independent financial strength commensurate with the possessed independent financial strength commensurate with the possessed independent financial strength commensurate with the loans allegedly advanced. Mere filing of income tax returns and loans allegedly advanced. Mere filing of income tax returns and loans allegedly advanced. Mere filing of income tax returns and possession of PAN cannot, by themselves, establish the financial possession of PAN cannot, by themselves, establish the financial possession of PAN cannot, by themselves, establish the financial capacity to advance large loans. advance large loans. 8.2.11 Another important aspect examined in the remand report is 8.2.11 Another important aspect examined in the remand report is 8.2.11 Another important aspect examined in the remand report is that the cash trail and movement of funds through the bank that the cash trail and movement of funds through the bank that the cash trail and movement of funds through the bank accounts of the five creditors. The Assessing Officer has pointed out accounts of the five creditors. The Assessing Officer has pointed out accounts of the five creditors. The Assessing Officer has pointed out that in several instances large amounts w that in several instances large amounts were credited into the ere credited into the creditors' bank accounts immediately before issuing cheques in creditors' bank accounts immediately before issuing cheques in creditors' bank accounts immediately before issuing cheques in favour of the appellant and that these credits are transfers from favour of the appellant and that these credits are transfers from favour of the appellant and that these credits are transfers from other concerns or related parties, without any substantive other concerns or related parties, without any substantive other concerns or related parties, without any substantive explanation about their source. The pattern th explanation about their source. The pattern that emerges from the at emerges from the bank statements, as noticed by the Assessing Officer, is one of bank statements, as noticed by the Assessing Officer, is one of bank statements, as noticed by the Assessing Officer, is one of frequent deposit and withdrawal with very low closing balances, frequent deposit and withdrawal with very low closing balances, frequent deposit and withdrawal with very low closing balances, suggesting that the accounts were used primarily as pass suggesting that the accounts were used primarily as pass suggesting that the accounts were used primarily as pass-through

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channels to route funds to the appellant ra channels to route funds to the appellant rather than for Independent ther than for Independent and regular business activities of the creditors. and regular business activities of the creditors. 8.2.12 Based on this analysis, the Assessing Officer has concluded 8.2.12 Based on this analysis, the Assessing Officer has concluded 8.2.12 Based on this analysis, the Assessing Officer has concluded that the money was simply being rotated from one concern to that the money was simply being rotated from one concern to that the money was simply being rotated from one concern to another and that the creditors did not have their own another and that the creditors did not have their own another and that the creditors did not have their own independent source of funds. The money moved through related persons and source of funds. The money moved through related persons and source of funds. The money moved through related persons and concerns and finally reached the appellant, without any clear concerns and finally reached the appellant, without any clear concerns and finally reached the appellant, without any clear business reason. The appellant has not been able to give a proper business reason. The appellant has not been able to give a proper business reason. The appellant has not been able to give a proper explanation for the large deposits made just before is explanation for the large deposits made just before issuing cheques suing cheques or for the several layers through which the money passed before or for the several layers through which the money passed before or for the several layers through which the money passed before reaching it. Because of this, it is clear from the remand report that reaching it. Because of this, it is clear from the remand report that reaching it. Because of this, it is clear from the remand report that the real source of funds remains unexplained and that the bank the real source of funds remains unexplained and that the bank the real source of funds remains unexplained and that the bank accounts of the said lenders were used only t accounts of the said lenders were used only to pass on the funds. o pass on the funds. The appellant has also not proved that the creditors had their own The appellant has also not proved that the creditors had their own The appellant has also not proved that the creditors had their own genuine financial capacity to give the loans. genuine financial capacity to give the loans. 8.2.13 The remand report further comments on the terms of the 8.2.13 The remand report further comments on the terms of the 8.2.13 The remand report further comments on the terms of the loans, particularly the rate of interest and the overall com loans, particularly the rate of interest and the overall com loans, particularly the rate of interest and the overall commercial conditions. in several of the impugned cases, interest has been conditions. in several of the impugned cases, interest has been conditions. in several of the impugned cases, interest has been charged at a significantly lower rate than what is ordinarily charged at a significantly lower rate than what is ordinarily charged at a significantly lower rate than what is ordinarily prevalent for unsecured loans in the open market; in some cases, prevalent for unsecured loans in the open market; in some cases, prevalent for unsecured loans in the open market; in some cases, interest has not been paid periodically and there is abse interest has not been paid periodically and there is abse interest has not been paid periodically and there is absence of any systematic interest working, despite large sums being claimed as systematic interest working, despite large sums being claimed as systematic interest working, despite large sums being claimed as loans. There are also deficiencies in respect of proper written loan loans. There are also deficiencies in respect of proper written loan loans. There are also deficiencies in respect of proper written loan agreements, clearly defined repayment schedules and security agreements, clearly defined repayment schedules and security agreements, clearly defined repayment schedules and security arrangements. The Assessing Officer has, therefore arrangements. The Assessing Officer has, therefore, observed that , observed that such abnormally low or irregular interest pattern and the absence of such abnormally low or irregular interest pattern and the absence of such abnormally low or irregular interest pattern and the absence of usual commercial safeguards show that these are not genuine, usual commercial safeguards show that these are not genuine, usual commercial safeguards show that these are not genuine, arm's length commercial loans. These transactions, therefore, arm's length commercial loans. These transactions, therefore, arm's length commercial loans. These transactions, therefore, appear to be only accommodation entries, where i appear to be only accommodation entries, where i appear to be only accommodation entries, where interest is sometimes shown only to make the transactions look like genuine sometimes shown only to make the transactions look like genuine sometimes shown only to make the transactions look like genuine on paper. The appellant has also not given any examples or market on paper. The appellant has also not given any examples or market on paper. The appellant has also not given any examples or market evidence to show that such low interest rates or loosely written loan evidence to show that such low interest rates or loosely written loan evidence to show that such low interest rates or loosely written loan arrangements are normal in its type of busine arrangements are normal in its type of business, or that similar ss, or that similar terms are followed by other independent lenders. terms are followed by other independent lenders. 8.2.14 After considering all these points such as the unusually high 8.2.14 After considering all these points such as the unusually high 8.2.14 After considering all these points such as the unusually high loans compared to income, the unclear movement and rotation of loans compared to income, the unclear movement and rotation of loans compared to income, the unclear movement and rotation of funds, the abnormal and non funds, the abnormal and non- commercial nature of inter commercial nature of interest and the way the accounts were operated, the Assessing Officer has clearly way the accounts were operated, the Assessing Officer has clearly way the accounts were operated, the Assessing Officer has clearly concluded in the remand report that the five creditors are not concluded in the remand report that the five creditors are not concluded in the remand report that the five creditors are not financially capable and that the loans are not genuine. The financially capable and that the loans are not genuine. The financially capable and that the loans are not genuine. The appellant's rejoinder, though detailed, mostly repeats appellant's rejoinder, though detailed, mostly repeats appellant's rejoinder, though detailed, mostly repeats the earlier arguments and tries to explain the transactions as internal fund arguments and tries to explain the transactions as internal fund arguments and tries to explain the transactions as internal fund adjustments due to business restructuring. However, no new solid adjustments due to business restructuring. However, no new solid adjustments due to business restructuring. However, no new solid or independent evidence has been produced to effectively disprove or independent evidence has been produced to effectively disprove or independent evidence has been produced to effectively disprove

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the specific findings made in the remand report. the specific findings made in the remand report. Mere statements Mere statements about business needs or internal arrangements cannot take the about business needs or internal arrangements cannot take the about business needs or internal arrangements cannot take the place of real proof showing that the creditors had their own genuine place of real proof showing that the creditors had their own genuine place of real proof showing that the creditors had their own genuine sources of funds. sources of funds. 8.2.15 The appellant has relied on the decisions in the cases of 8.2.15 The appellant has relied on the decisions in the cases of 8.2.15 The appellant has relied on the decisions in the cases of Naveen Infradevelopers & Naveen Infradevelopers & Engineers Pvt. Ltd., Prabhatbhai S. Shah Engineers Pvt. Ltd., Prabhatbhai S. Shah and Rajesh Kumar. After carefully examining these judgments, it is and Rajesh Kumar. After carefully examining these judgments, it is and Rajesh Kumar. After carefully examining these judgments, it is seen that they do not help the appellant in the present case. In seen that they do not help the appellant in the present case. In seen that they do not help the appellant in the present case. In those cases, the appellant had already produced sufficient evidence those cases, the appellant had already produced sufficient evidence those cases, the appellant had already produced sufficient evidence to prove the fi to prove the financial capacity of the creditors and the genuineness nancial capacity of the creditors and the genuineness of the transactions, or the issue was mainly about not giving proper of the transactions, or the issue was mainly about not giving proper of the transactions, or the issue was mainly about not giving proper opportunity. In the present case, however, the facts are very opportunity. In the present case, however, the facts are very opportunity. In the present case, however, the facts are very different. The assessment order and the remand report clearly show different. The assessment order and the remand report clearly show different. The assessment order and the remand report clearly show that the Assessing Officer issued several notices and gave enough the Assessing Officer issued several notices and gave enough the Assessing Officer issued several notices and gave enough opportunity, including during the remand proceedings. Even after opportunity, including during the remand proceedings. Even after opportunity, including during the remand proceedings. Even after this, the appellant was not able to give a satisfactory and clear this, the appellant was not able to give a satisfactory and clear this, the appellant was not able to give a satisfactory and clear explanation about the real source of funds of the five creditor explanation about the real source of funds of the five creditor explanation about the real source of funds of the five creditors, the pattern of deposits made before giving the loans, and the abnormal pattern of deposits made before giving the loans, and the abnormal pattern of deposits made before giving the loans, and the abnormal loan-to-income position. income position. 8.2.16 The appellant has itself admitted that there was delay in 8.2.16 The appellant has itself admitted that there was delay in 8.2.16 The appellant has itself admitted that there was delay in furnishing replies during the original assessment proceedings due furnishing replies during the original assessment proceedings due furnishing replies during the original assessment proceedings due to lack of time. Such dela to lack of time. Such delay or omission on the part of the appellant y or omission on the part of the appellant cannot dilute or extinguish the statutory burden under section 68, cannot dilute or extinguish the statutory burden under section 68, cannot dilute or extinguish the statutory burden under section 68, which squarely lies on the appellant to prove, to the satisfaction of which squarely lies on the appellant to prove, to the satisfaction of which squarely lies on the appellant to prove, to the satisfaction of the Assessing Officer, the identity of the creditor, the genuineness of the Assessing Officer, the identity of the creditor, the genuineness of the Assessing Officer, the identity of the creditor, the genuineness of the transaction and the creditworthiness of the creditor. None of the transaction and the creditworthiness of the creditor. None of the transaction and the creditworthiness of the creditor. None of the decisions cited by the appellant lay down any proposition contrary decisions cited by the appellant lay down any proposition contrary decisions cited by the appellant lay down any proposition contrary to this settled legal rule. It is well established that mere proof of to this settled legal rule. It is well established that mere proof of to this settled legal rule. It is well established that mere proof of identity of the creditor is not sufficient and that t identity of the creditor is not sufficient and that the appellant must he appellant must also affirmatively establish the genuine financial capacity of the also affirmatively establish the genuine financial capacity of the also affirmatively establish the genuine financial capacity of the creditor and the reality of the transaction. creditor and the reality of the transaction. 8.2.17 On the other hand, the action of the Assessing Officer finds the other hand, the action of the Assessing Officer finds the other hand, the action of the Assessing Officer finds firm support from well firm support from well-settled judicial principles as well as recent settled judicial principles as well as recent authoritative pronouncements. The Hon'ble Supreme Court in authoritative pronouncements. The Hon'ble Supreme Court in authoritative pronouncements. The Hon'ble Supreme Court in Sumati Dayal v. CIT has laid down that where the explanation Sumati Dayal v. CIT has laid down that where the explanation Sumati Dayal v. CIT has laid down that where the explanation offered by the assessee is not satisfactory and the surrounding by the assessee is not satisfactory and the surrounding by the assessee is not satisfactory and the surrounding facts and circumstances, viewed in the light of human probabilities, facts and circumstances, viewed in the light of human probabilities, facts and circumstances, viewed in the light of human probabilities, indicate that the transaction is not genuine, the unexplained amount indicate that the transaction is not genuine, the unexplained amount indicate that the transaction is not genuine, the unexplained amount is liable to be treated as income. The Hon'ble Delhi High Cour is liable to be treated as income. The Hon'ble Delhi High Cour is liable to be treated as income. The Hon'ble Delhi High Court in CIT v. Oasis Hospitalities (P.) Ltd. has reiterated that merely CIT v. Oasis Hospitalities (P.) Ltd. has reiterated that merely CIT v. Oasis Hospitalities (P.) Ltd. has reiterated that merely establishing the identity of the creditors is not sufficient for the establishing the identity of the creditors is not sufficient for the establishing the identity of the creditors is not sufficient for the purposes of section 68 and that the assessee must independently purposes of section 68 and that the assessee must independently purposes of section 68 and that the assessee must independently establish both the creditworthiness of the lenders and establish both the creditworthiness of the lenders and establish both the creditworthiness of the lenders and the genuineness of the transactions. Further strengthening this legal genuineness of the transactions. Further strengthening this legal genuineness of the transactions. Further strengthening this legal

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position, the Hon'ble Calcutta High Court in Balgopal Merchants (P.) position, the Hon'ble Calcutta High Court in Balgopal Merchants (P.) position, the Hon'ble Calcutta High Court in Balgopal Merchants (P.) Ltd. v. PCIT [2024] 162 taxmann.com 465 (Cal) / [2024] 468 ITR Ltd. v. PCIT [2024] 162 taxmann.com 465 (Cal) / [2024] 468 ITR Ltd. v. PCIT [2024] 162 taxmann.com 465 (Cal) / [2024] 468 ITR 136 (Cal) has reiterated that the test of human proba 136 (Cal) has reiterated that the test of human proba 136 (Cal) has reiterated that the test of human probabilities and surrounding circumstances must prevail over mere documentary surrounding circumstances must prevail over mere documentary surrounding circumstances must prevail over mere documentary compliance and that where the explanation offered by the assessee compliance and that where the explanation offered by the assessee compliance and that where the explanation offered by the assessee is found to be unsatisfactory, artificial or lacking commercial is found to be unsatisfactory, artificial or lacking commercial is found to be unsatisfactory, artificial or lacking commercial substance, the addition under section 68 is fully ju substance, the addition under section 68 is fully ju substance, the addition under section 68 is fully justified; it has also been held that mere routing of funds through banking channels also been held that mere routing of funds through banking channels also been held that mere routing of funds through banking channels does not, by itself, establish genuineness when the real source of does not, by itself, establish genuineness when the real source of does not, by itself, establish genuineness when the real source of funds remains unexplained. Similar principles have also been laid funds remains unexplained. Similar principles have also been laid funds remains unexplained. Similar principles have also been laid down by the Hon'ble Delhi High Court in down by the Hon'ble Delhi High Court in CIT v. Nipun Builders & CIT v. Nipun Builders & Developers (P.) Ltd., wherein it was held that even where the Developers (P.) Ltd., wherein it was held that even where the Developers (P.) Ltd., wherein it was held that even where the identity of the creditor is established, the assessee is still required identity of the creditor is established, the assessee is still required identity of the creditor is established, the assessee is still required to prove the creditworthiness and the genuineness of the to prove the creditworthiness and the genuineness of the to prove the creditworthiness and the genuineness of the transaction, and that mere production of transaction, and that mere production of basic documents does not basic documents does not discharge the statutory onus under section 68. Accordingly, in the discharge the statutory onus under section 68. Accordingly, in the discharge the statutory onus under section 68. Accordingly, in the facts of the present case, where the appellant has failed to facts of the present case, where the appellant has failed to facts of the present case, where the appellant has failed to satisfactorily establish the creditworthiness of the creditors, the real satisfactorily establish the creditworthiness of the creditors, the real satisfactorily establish the creditworthiness of the creditors, the real source of funds and the genuin source of funds and the genuineness of the transactions, the eness of the transactions, the addition made by the Assessing Officer under section 68 is hereby addition made by the Assessing Officer under section 68 is hereby addition made by the Assessing Officer under section 68 is hereby confirmed as legally sustainable. confirmed as legally sustainable. 8.2.18 After applying the principles laid down in the above court 8.2.18 After applying the principles laid down in the above court 8.2.18 After applying the principles laid down in the above court decisions to the facts of this case and considering the det decisions to the facts of this case and considering the det decisions to the facts of this case and considering the detailed findings in the remand report, I am of the considered view that the findings in the remand report, I am of the considered view that the findings in the remand report, I am of the considered view that the appellant has not been able to prove the loans as required under appellant has not been able to prove the loans as required under appellant has not been able to prove the loans as required under section 68 in respect of the five creditors. Though the appellant has section 68 in respect of the five creditors. Though the appellant has section 68 in respect of the five creditors. Though the appellant has filed documents such as confirmations, PAN, ITR filed documents such as confirmations, PAN, ITR acknowledgements acknowledgements and bank statements, these papers, when examined along with the and bank statements, these papers, when examined along with the and bank statements, these papers, when examined along with the loan-to-income comparison, the money trail and layering seen in the income comparison, the money trail and layering seen in the income comparison, the money trail and layering seen in the bank accounts, the abnormal pattern of interest and the manner in bank accounts, the abnormal pattern of interest and the manner in bank accounts, the abnormal pattern of interest and the manner in which funds were routed, do not give pro which funds were routed, do not give proper confidence about the per confidence about the real financial capacity of the creditors or the genuine nature of the real financial capacity of the creditors or the genuine nature of the real financial capacity of the creditors or the genuine nature of the loan transactions. The explanation given by the appellant, therefore, loan transactions. The explanation given by the appellant, therefore, loan transactions. The explanation given by the appellant, therefore, does not meet the legal requirements fixed by the apex courts and does not meet the legal requirements fixed by the apex courts and does not meet the legal requirements fixed by the apex courts and mere paperwork cannot ove mere paperwork cannot override the true facts of the case. rride the true facts of the case. 8.2.19 It is also pertinent to note that the Assessing Officer has not 2.19 It is also pertinent to note that the Assessing Officer has not 2.19 It is also pertinent to note that the Assessing Officer has not brought to tax the tax the entire amount of loans or the entire difference in entire amount of loans or the entire difference in balances. Instead, the Assessing Officer has made an addition of balances. Instead, the Assessing Officer has made an addition of balances. Instead, the Assessing Officer has made an addition of only 20 per cent only 20 per cent of the verified difference of Rs. 15,49,75,156/ of the verified difference of Rs. 15,49,75,156/-, which comes to Rs.3,09,95,030/ which comes to Rs.3,09,95,030/-. This shows that, far from being . This shows that, far from being arbitrary or excessive, the Assessing Officer has adopted a fair and arbitrary or excessive, the Assessing Officer has adopted a fair and arbitrary or excessive, the Assessing Officer has adopted a fair and balanced approach by making only a reasonable and moderated balanced approach by making only a reasonable and moderated balanced approach by making only a reasonable and moderated addition, thereby granting the appellant the benefit of doubt to a hereby granting the appellant the benefit of doubt to a hereby granting the appellant the benefit of doubt to a substantial extent. The appellant has not been able to demonstrate substantial extent. The appellant has not been able to demonstrate substantial extent. The appellant has not been able to demonstrate why such a limited disallowance of 20 per cent is either unfair or why such a limited disallowance of 20 per cent is either unfair or why such a limited disallowance of 20 per cent is either unfair or

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excessive, particularly when the foundational facts regarding the excessive, particularly when the foundational facts regarding the excessive, particularly when the foundational facts regarding the lack of clear creditworthiness and genuineness remain unproved. lack of clear creditworthiness and genuineness remain unproved. lack of clear creditworthiness and genuineness remain unproved. No reliable evidence has been produced to show that the impugned No reliable evidence has been produced to show that the impugned No reliable evidence has been produced to show that the impugned loans are in fact genuine and that the funds actually emanated loans are in fact genuine and that the funds actually emanated loans are in fact genuine and that the funds actually emanated from the creditors' own explained sources. from the creditors' own explained sources. 8.2.20 Considering th 8.2.20 Considering the very high loans in comparison to the income e very high loans in comparison to the income of the five creditors, the unclear and layered movement of money in of the five creditors, the unclear and layered movement of money in of the five creditors, the unclear and layered movement of money in their bank accounts, the abnormal and non their bank accounts, the abnormal and non-commercial interest commercial interest pattern, the overall conduct of the parties and the manner in which pattern, the overall conduct of the parties and the manner in which pattern, the overall conduct of the parties and the manner in which the transactions were carried out and also keeping in view the fact ions were carried out and also keeping in view the fact ions were carried out and also keeping in view the fact that the appellant could not give a satisfactory explanation about that the appellant could not give a satisfactory explanation about that the appellant could not give a satisfactory explanation about the real source of funds of the creditors even after filing additional the real source of funds of the creditors even after filing additional the real source of funds of the creditors even after filing additional documents and during the remand proceedings. In view of the documents and during the remand proceedings. In view of the documents and during the remand proceedings. In view of the settled legal position laid down by the Hon'ble Supreme Court and ttled legal position laid down by the Hon'ble Supreme Court and ttled legal position laid down by the Hon'ble Supreme Court and various High Courts, I hold that the appellant has failed to prove various High Courts, I hold that the appellant has failed to prove various High Courts, I hold that the appellant has failed to prove both the financial capacity of the five creditors and the genuineness both the financial capacity of the five creditors and the genuineness both the financial capacity of the five creditors and the genuineness of the loan transactions as required under section 68 o of the loan transactions as required under section 68 o of the loan transactions as required under section 68 of the Income- tax Act, 1961. Therefore, the addition of Rs.3,09,95,030/ tax Act, 1961. Therefore, the addition of Rs.3,09,95,030/ tax Act, 1961. Therefore, the addition of Rs.3,09,95,030/- made by the Assessing Officer under section 68 is upheld and confirmed. the Assessing Officer under section 68 is upheld and confirmed. the Assessing Officer under section 68 is upheld and confirmed. Accordingly, the Grounds of appeal no. 2 is dismissed.” Accordingly, the Grounds of appeal no. 2 is dismissed.” Accordingly, the Grounds of appeal no. 2 is dismissed.” 4. Aggrieved the assessee is in appeal before us by way Aggrieved the assessee is in appeal before us by way Aggrieved the assessee is in appeal before us by way of raising grounds as reproduced above. grounds as reproduced above.

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amount would be reflected on the credit side of the loan amount would be reflected on the credit side of the loan amount would be reflected on the credit side of the loan confirmation letters. However, su confirmation letters. However, such amount would not be reflected ch amount would not be reflected in the tax audit report. This is for the simple reason that the tax in the tax audit report. This is for the simple reason that the tax in the tax audit report. This is for the simple reason that the tax auditor is required to report only the loans taken by the assessee. auditor is required to report only the loans taken by the assessee. auditor is required to report only the loans taken by the assessee.

5.1.1 The ld Counsel explained The ld Counsel explained with an example of M/s. Abhishek with an example of M/s. Abhishek (Prop. Kailash Chandra (Prop. Kailash Chandra Goyal, HUF), whose ledger account is Goyal, HUF), whose ledger account is available on page no. 142 of PB 2, which shows that the aggregate on page no. 142 of PB 2, which shows that the aggregate on page no. 142 of PB 2, which shows that the aggregate amounts received from the party during the entire period is Rs. amounts received from the party during the entire period is Rs. amounts received from the party during the entire period is Rs. 1,54,43,073/- (page no. 144 of PBP 2). However, out of these (page no. 144 of PBP 2). However, out of these (page no. 144 of PBP 2). However, out of these receipts, only Rs. 24,47,500 receipts, only Rs. 24,47,500/- were loans received by the assessee were loans received by the assessee (PBP 145, 146). The ld Counsel explained that p The ld Counsel explained that precisely tho recisely those two amounts i.e. Rs. 1,54,43,073/ amounts i.e. Rs. 1,54,43,073/- and Rs. 24,47,500/ and Rs. 24,47,500/- have been compared by the A.O. based on which he came to the conclusion compared by the A.O. based on which he came to the conclusion compared by the A.O. based on which he came to the conclusion that the figures do not matc that the figures do not match.

5.1.2 Similarly, the figures noted by the A.O. in respect of M/s. K. Similarly, the figures noted by the A.O. in respect of M/s. K. Similarly, the figures noted by the A.O. in respect of M/s. K. Tex (Prop. Anil Rameshwarprasad Goyal) are to be found on page Tex (Prop. Anil Rameshwarprasad Goyal) are to be found on page Tex (Prop. Anil Rameshwarprasad Goyal) are to be found on page nos. 288 to 297 of PB 2 (Rs. 8,17,40,045) and page nos. 298 to 303 nos. 288 to 297 of PB 2 (Rs. 8,17,40,045) and page nos. 298 to 303 nos. 288 to 297 of PB 2 (Rs. 8,17,40,045) and page nos. 298 to 303 of PB 2 (Rs. 2,11,54,000). The of PB 2 (Rs. 2,11,54,000). The ld Counsel explained ld Counsel explained discrepancy in respect of balance parties with the help of similar documents respect of balance parties with the help of similar documen respect of balance parties with the help of similar documen contained in PB nos. 2 and 3. contained in PB nos. 2 and 3.

5.2 Secondly, regarding non furnishing of regarding non furnishing of Bank statements Bank statements of creditors during assessment proceedings, the ld Counsel submitted creditors during assessment proceedings, the ld Counsel submitted that the assessee could he assessee could not furnish the bank statements before the not furnish the bank statements before the

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A.O. due to insufficient opportunity given by the A.O. The bank A.O. due to insufficient opportunity given by the A.O. The bank A.O. due to insufficient opportunity given by the A.O. The bank statements of all the five parties are given before the CIT(A) and the statements of all the five parties are given before the CIT(A) and the statements of all the five parties are given before the CIT(A) and the same are available at page nos. 176, 238, 337 of PB 2 and page same are available at page nos. 176, 238, 337 of PB 2 and page same are available at page nos. 176, 238, 337 of PB 2 and page nos. 437 and 487 of PB 3. It 87 of PB 3. It was submitted before the CIT(A) that submitted before the CIT(A) that the said evidence could not be furnished before the A.O. for the the said evidence could not be furnished before the A.O. for the the said evidence could not be furnished before the A.O. for the following reasons (on page no. 57 of PB 1, para 3.7): following reasons (on page no. 57 of PB 1, para 3.7):

"3.7. The Assessing Officer completed the assessment "3.7. The Assessing Officer completed the assessment "3.7. The Assessing Officer completed the assessment proceedings in utter haste and proceedings in utter haste and without giving sufficient without giving sufficient opportunity of being heard which is evident from the following opportunity of being heard which is evident from the following opportunity of being heard which is evident from the following (a) On 11th December, 2019, the appellants received two (a) On 11th December, 2019, the appellants received two (a) On 11th December, 2019, the appellants received two notices under section 142(1) dated 09.12.2019, requiring them notices under section 142(1) dated 09.12.2019, requiring them notices under section 142(1) dated 09.12.2019, requiring them to file response on 13th December, 2019 that is, to file response on 13th December, 2019 that is, to file response on 13th December, 2019 that is, within 2 days of the service of notices. Further, in one of the said notices, the of the service of notices. Further, in one of the said notices, the of the service of notices. Further, in one of the said notices, the Assessing Officer required the appellants to submit the details Assessing Officer required the appellants to submit the details Assessing Officer required the appellants to submit the details required by notices issued under section 142(1) dated required by notices issued under section 142(1) dated required by notices issued under section 142(1) dated 12.11.2019 and 28.11.2019 refer page nos. 1 to 3 of pape 12.11.2019 and 28.11.2019 refer page nos. 1 to 3 of pape 12.11.2019 and 28.11.2019 refer page nos. 1 to 3 of paper book. However, surprisingly, no such notices or any other book. However, surprisingly, no such notices or any other book. However, surprisingly, no such notices or any other notice or communication in connection with the assessment notice or communication in connection with the assessment notice or communication in connection with the assessment proceedings proceedings proceedings were were were received received received by by by the the the appellants, appellants, appellants, either either either physically, or on the e physically, or on the e-filing portal.

(b) Various details and/or documents required b (b) Various details and/or documents required b (b) Various details and/or documents required by the Assessing Officer were submitted on 12th December, 2019, Assessing Officer were submitted on 12th December, 2019, Assessing Officer were submitted on 12th December, 2019, 17th December, 2019 on e 17th December, 2019 on e-filing portal. However, the e filing portal. However, the e-filing portal was closed before 23rd December, 2019, and since the portal was closed before 23rd December, 2019, and since the portal was closed before 23rd December, 2019, and since the appellants had to file certain more details as required by the appellants had to file certain more details as required by the appellants had to file certain more details as required by the Assessing Officer, and since they could not file the same on g Officer, and since they could not file the same on g Officer, and since they could not file the same on

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portal, portal, portal, they they they through through through their their their Authorised Authorised Authorised Representative Representative Representative approached the Assessing Officer on 24th December, 2019, approached the Assessing Officer on 24th December, 2019, approached the Assessing Officer on 24th December, 2019, with a request to accept the further submissions, which was with a request to accept the further submissions, which was with a request to accept the further submissions, which was acceded to and accepted by the As acceded to and accepted by the Assessing Officer, and the sessing Officer, and the same have also been considered by him in framing the same have also been considered by him in framing the same have also been considered by him in framing the assessment order. assessment order.

(c) Principles of natural justice (c) Principles of natural justice - no show cause notice was no show cause notice was issued by the Assessing Officer before making the impugned issued by the Assessing Officer before making the impugned issued by the Assessing Officer before making the impugned addition; the impugned addition thus, is addition; the impugned addition thus, is bad in law. bad in law.

(d) The Assessing Officer before making the impugned (d) The Assessing Officer before making the impugned (d) The Assessing Officer before making the impugned addition, has not even issued any notice under section 133(6) addition, has not even issued any notice under section 133(6) addition, has not even issued any notice under section 133(6) and/or summons under section 131 to the loan creditors and/or summons under section 131 to the loan creditors and/or summons under section 131 to the loan creditors.

5.2.1 The ld Counsel submitted that ld Counsel submitted that the only basis of making the the only basis of making the impugned addition is that the appellant did not furnish the bank ed addition is that the appellant did not furnish the bank ed addition is that the appellant did not furnish the bank statement of the loan creditors. statement of the loan creditors. He submitted that all the said loan all the said loan creditors are related parties and was not at all difficult for the creditors are related parties and was not at all difficult for the creditors are related parties and was not at all difficult for the assessee to furnish the sam to furnish the same; time was the only constraint. e; time was the only constraint. All the loan creditors are regular taxpayers and have been filing their loan creditors are regular taxpayers and have been filing their loan creditors are regular taxpayers and have been filing their return of income regularly. Further, the relevant bank statements of return of income regularly. Further, the relevant bank statements of return of income regularly. Further, the relevant bank statements of the loan creditors the loan creditors were furnished as additional evidence, for furnished as additional evidence, for admission and subsequent perusal admission and subsequent perusal(refer page nos. 109 refer page nos. 109 to 117, 137 to 161, 185 to 221, 242 to 252 and 264 to 303 of the paper book.) to 161, 185 to 221, 242 to 252 and 264 to 303 of the paper book. to 161, 185 to 221, 242 to 252 and 264 to 303 of the paper book.

5.2.2 The ld Counsel submitted that The ld Counsel submitted that above explanation is self above explanation is self- speaking and needs no further comments. Therefore, it is submitted speaking and needs no further comments. Therefore, it is submitted speaking and needs no further comments. Therefore, it is submitted

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that the assessee was quite justified in filing that the assessee was quite justified in filing the bank statements of the bank statements of the parties before the CIT(A) as additional evidence. In any case, the the parties before the CIT(A) as additional evidence. In any case, the the parties before the CIT(A) as additional evidence. In any case, the A.O. has gone through the above additional evidence and made A.O. has gone through the above additional evidence and made A.O. has gone through the above additional evidence and made several observations in respect of bank account entries. Such several observations in respect of bank account entries. Such several observations in respect of bank account entries. Such observations have been upheld by the CI observations have been upheld by the CIT(A) also. Thus, the T(A) also. Thus, the additional evidence has been duly considered on merits by the additional evidence has been duly considered on merits by the additional evidence has been duly considered on merits by the authorities below. 5.3 Thirdly, regarding comments of ld AO/CIT(A) on credit regarding comments of ld AO/CIT(A) on credit regarding comments of ld AO/CIT(A) on credit worthiness/ income disclosed by the loan creditors in their income disclosed by the loan creditors in their income disclosed by the loan creditors in their returns of income as inadequate returns of income as inadequate compared to the loans granted compared to the loans granted by them, the ld Counsel submitted that , the ld Counsel submitted that the A.O. had the A.O. had considered the returned income of the parties with cumulative amounts the returned income of the parties with cumulative amounts the returned income of the parties with cumulative amounts received by the assessee. All the ledger accounts are running received by the assessee. All the ledger accounts are running received by the assessee. All the ledger accounts are running account wherein the amounts are received a account wherein the amounts are received as well as paid during s well as paid during the year under consideration. The net balances kept on fluctuating consideration. The net balances kept on fluctuating consideration. The net balances kept on fluctuating from debit to credit and vice versa. In tho to credit and vice versa. In those circumstances, the A.O. se circumstances, the A.O. ought to have compared the returned income with the peak credit ought to have compared the returned income with the peak credit ought to have compared the returned income with the peak credit amounts. He explained with an He explained with an example, in respect of M/s. mple, in respect of M/s. Abhishek, the total income of Rs. 11.05 lacks is to be compared Abhishek, the total income of Rs. 11.05 lacks is to be compared Abhishek, the total income of Rs. 11.05 lacks is to be compared with the peak credit balance of Rs. 16.75 lacs (as on 06.01.2017 with the peak credit balance of Rs. 16.75 lacs (as on 06.01.2017 with the peak credit balance of Rs. 16.75 lacs (as on 06.01.2017 (page no. 145 of PB 2) and not with cumulative amounts received (page no. 145 of PB 2) and not with cumulative amounts received (page no. 145 of PB 2) and not with cumulative amounts received during the year. In the similar manner during the year. In the similar manner, he explained that he explained that the peak amounts received from other parties are much lower than the amounts received from other parties are much lower than the amounts received from other parties are much lower than the figures of cumulative receipts adopted by the A.O. for comparison. figures of cumulative receipts adopted by the A.O. for comparison. figures of cumulative receipts adopted by the A.O. for comparison.

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5.3.1 He further submitted that a He further submitted that apart from incorrect comparison incorrect comparison, the returned income of the current the returned income of the current year is not the sole criteria for year is not the sole criteria for determining the capacity of a party. The loan can be given out of the determining the capacity of a party. The loan can be given out of the determining the capacity of a party. The loan can be given out of the past wealth as well as from other sources and not necessarily out of past wealth as well as from other sources and not necessarily ou past wealth as well as from other sources and not necessarily ou the current year's income. the current year's income. Most importantly, the comparison with Most importantly, the comparison with the current year's income would be relevant to draw an inference, in income would be relevant to draw an inference, in income would be relevant to draw an inference, in a case where the other direct evidence are not available. In the a case where the other direct evidence are not available. In the a case where the other direct evidence are not available. In the present case, the assessee has submitted the loan confirmations, present case, the assessee has submitted the loan confirmations, present case, the assessee has submitted the loan confirmations, PAN, computation of income, financials, tax audit report, PAN, computation of income, financials, tax audit report, PAN, computation of income, financials, tax audit report, acknowledgement of return of income and the bank statements. f return of income and the bank statements. f return of income and the bank statements. Once, the complete set of documents have been given, there is no Once, the complete set of documents have been given, there is no Once, the complete set of documents have been given, there is no need of inference to be drawn from just one figure of current year's need of inference to be drawn from just one figure of current year's need of inference to be drawn from just one figure of current year's income. An inference is to be drawn only when direct evidence are income. An inference is to be drawn only when direct evidence are income. An inference is to be drawn only when direct evidence are not available. Further, the inference could not be drawn without e. Further, the inference could not be drawn without e. Further, the inference could not be drawn without making complete enquiry. The A.O., neither during the assessment making complete enquiry. The A.O., neither during the assessment making complete enquiry. The A.O., neither during the assessment proceedings nor during the remand proceedings, has caused any proceedings nor during the remand proceedings, has caused any proceedings nor during the remand proceedings, has caused any inquiry by calling the parties and, hence, drawing inference inquiry by calling the parties and, hence, drawing inference inquiry by calling the parties and, hence, drawing inference amounts to substituting the direct enquiry, which is impermissible. tituting the direct enquiry, which is impermissible. tituting the direct enquiry, which is impermissible.

5.4 The ld Counsel submitted that The ld Counsel submitted that during the course of the during the course of the hearing before the CIT(A), the CIT(A) called for the remand report, hearing before the CIT(A), the CIT(A) called for the remand report, hearing before the CIT(A), the CIT(A) called for the remand report, and the same was submitted by the A.O. (page no. 59 of PBP 1). In and the same was submitted by the A.O. (page no. 59 of PBP 1). In and the same was submitted by the A.O. (page no. 59 of PBP 1). In report, the A.O. raised several new objections A.O. raised several new objections that too the remand report, the without granting any opportunity of hearing to the assessee. He without granting any opportunity of hearing to the assessee. without granting any opportunity of hearing to the assessee.

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submitted that the CIT(A) has merely reiterated the objections of the the CIT(A) has merely reiterated the objections of the the CIT(A) has merely reiterated the objections of the remand report and confirmed the addition. remand report and confirmed the addition.

5.4.1 Ld Counsel for the assessee submitted that Ld Counsel for the assessee submitted that Ld Counsel for the assessee submitted that the objections raised by the A.O. in the remand report, are broadly same as the raised by the A.O. in the remand report, are broadly same as the raised by the A.O. in the remand report, are broadly same as the objections raised by the CIT(A). objections raised by the CIT(A). He submitted that some of the that some of the objections raised in the remand report objections raised in the remand report were nothing, but repetition nothing, but repetition of objections raised in the assessment order. f objections raised in the assessment order.

5.4.2 Ld Counsel referred to Ld Counsel referred to para 12 of the remand report remand report of ld AO (page no. 64 of PB 1), (page no. 64 of PB 1), and submitted that the A.O. objected the the A.O. objected the stand of the assessee that the le stand of the assessee that the ledger account of loan parties are ger account of loan parties are running account. In this regard, it is submitted that a bare perusal nt. In this regard, it is submitted that a bare perusal nt. In this regard, it is submitted that a bare perusal of the ledger accounts would show that tho ger accounts would show that those are running account se are running account in nature. Further, the A.O. has also raised doubt about the in nature. Further, the A.O. has also raised doubt about the in nature. Further, the A.O. has also raised doubt about the amounts given as a loan to these parties as being shown in the tax amounts given as a loan to these parties as being shown in the tax amounts given as a loan to these parties as being shown in the tax audit report of these parties. It is submitted that the amounts eport of these parties. It is submitted that the amounts eport of these parties. It is submitted that the amounts received by these parties from assessee has been duly shown by received by these parties from assessee has been duly shown by received by these parties from assessee has been duly shown by these parties in their tax audit report. As and by way of an example, these parties in their tax audit report. As and by way of an example, these parties in their tax audit report. As and by way of an example, ld Counsel referred to ld Counsel referred to page no. 162 to 170 of PB 2, which is tax page no. 162 to 170 of PB 2, which is tax audit report of M/s. Abhishek. On page no. 171, loan received by audit report of M/s. Abhishek. On page no. 171, loan received by audit report of M/s. Abhishek. On page no. 171, loan received by M/s. Abhishek from assessee amounting to Rs. 1,54,39,000/- has M/s. Abhishek from assessee amounting to Rs. 1,54,39,000/ M/s. Abhishek from assessee amounting to Rs. 1,54,39,000/ been fully shown. This is matching with the total amount shown in been fully shown. This is matching with the total amount shown in been fully shown. This is matching with the total amount shown in the confirmation letter at page no. 142 to 144 of PB 2. The the confirmation letter at page no. 142 to 144 of PB 2. The the confirmation letter at page no. 142 to 144 of PB 2. The difference of Rs. 4,073/ fference of Rs. 4,073/-, which has been pointed out by the A.O. in , which has been pointed out by the A.O. in paragraph no. 13 of the remand report is on account of the entry for paragraph no. 13 of the remand report is on account of the entry for paragraph no. 13 of the remand report is on account of the entry for

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TDS reflected on page no. 144 of PB 2. TDS reflected on page no. 144 of PB 2. The ld Counsel The ld Counsel submitted that there is no such 'stark inconsistency' as alleged by the A.O. in that there is no such 'stark inconsistency' as alleged b that there is no such 'stark inconsistency' as alleged b para 13 of the remand report in the figures reported by the assessee para 13 of the remand report in the figures reported by the assessee para 13 of the remand report in the figures reported by the assessee and loan parties. In the said paragraph, the A.O. has reproduced and loan parties. In the said paragraph, the A.O. has reproduced and loan parties. In the said paragraph, the A.O. has reproduced snapshots of tax audit report/confirmation of parties and pointed snapshots of tax audit report/confirmation of parties and pointed snapshots of tax audit report/confirmation of parties and pointed out the inconsistencies on the similar lin out the inconsistencies on the similar line. It was was submitted that the figures of amounts received by the loan parties from the the figures of amounts received by the loan parties from the the figures of amounts received by the loan parties from the assessee and reported by them in their tax audit reports in each assessee and reported by them in their tax audit reports in each assessee and reported by them in their tax audit reports in each case matches fully and there is no inconsistency. case matches fully and there is no inconsistency.

5.4.3 The ld Counsel referred to The ld Counsel referred to Para IV on page no. 9 IV on page no. 9 of the remand report (page no. 67 of PB 1), report (page no. 67 of PB 1), wherein the A.O. alleged layering and the A.O. alleged layering and rotation of funds amongst various sister concerns. The counsel rotation of funds amongst various sister concerns. rotation of funds amongst various sister concerns. referred to three examples of alleged rotation of funds three examples of alleged rotation of funds three examples of alleged rotation of funds given by the AO , which are as under: , which are as under:

(i) On 26.09.2016, the assessee has made payment to M/s. ) On 26.09.2016, the assessee has made payment to M/s. ) On 26.09.2016, the assessee has made payment to M/s. Abhishek, who has in turn made the payment to M/s. Abhishek, who has in turn made the payment to M/s. Abhishek, who has in turn made the payment to M/s. Shubham on the same day. Shubham on the same day.

(ii) On 05.12.2016, the assessee has made payment to M/s. (ii) On 05.12.2016, the assessee has made payment to M/s. (ii) On 05.12.2016, the assessee has made payment to M/s. Kishanlal & Sons, who has in turn made the payment to Mr. Kishanlal & Sons, who has in turn made the payment to Mr. Kishanlal & Sons, who has in turn made the payment to Mr. Kishanlal Bansal. Bansal.

(iii) On 24.09.2016, the assessee has made payment to M/s. (iii) On 24.09.2016, the assessee has made payment to M/s. (iii) On 24.09.2016, the assessee has made payment to M/s. K. Tex, who has in turn made the payment to M/s. Shubham. K. Tex, who has in turn made the payment to M/s. Shubham. K. Tex, who has in turn made the payment to M/s. Shubham.

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5.4.4 In respect of the above transactions, In respect of the above transactions, the ld Counsel submitted the ld Counsel submitted that those were routing transactions of transfer of funds routing transactions of transfer of funds routing transactions of transfer of funds amongst the sister concerns. Tho the sister concerns. Those were through banking transactions and through banking transactions and completely legitimate. The transactions completely legitimate. The transactions were undertaken for undertaken for settlement of inter se accounts settlement of inter se accounts and for business exigencies. Tho and for business exigencies. Those transactions could not be said to be layering of the funds. All sister transactions could not be said to be layering of the funds. transactions could not be said to be layering of the funds. concerns are filing the returns of income and they are assessed to concerns are filing the returns of income and they are assessed to concerns are filing the returns of income and they are assessed to tax. All bank accounts are disclosed to Income tax. All bank accounts are disclosed to Income-tax Department. tax Department. There was no involvement of any accommodation entry provider, no involvement of any accommodation entry provider, no involvement of any accommodation entry provider, shell company or dubious entity. In any case, none of the above shell company or dubious entity. In any case, none o shell company or dubious entity. In any case, none o transactions referred by the A.O. invokes loans received by the transactions referred by the A.O. invokes loans received by the transactions referred by the A.O. invokes loans received by the assessee. In fact, these are payments made by the assessee. assessee. In fact, these are payments made by the assessee. assessee. In fact, these are payments made by the assessee.

5.4.5 The ld Counsel submitted that The ld Counsel submitted that the A.O., while making the A.O., while making such baseless allegations, completely brushed aside certain vital such baseless allegations, completely brushed aside certain v such baseless allegations, completely brushed aside certain v facts which are as under: facts which are as under:

(i) The assessee firm was incorporated on 01.04.2016 and it i) The assessee firm was incorporated on 01.04.2016 and it i) The assessee firm was incorporated on 01.04.2016 and it has eighteen partners, who are related to each other (page no. has eighteen partners, who are related to each other (page no. has eighteen partners, who are related to each other (page no. 126 of PB 1). The firm was incorporated to reorganise the 126 of PB 1). The firm was incorporated to reorganise the 126 of PB 1). The firm was incorporated to reorganise the family business. This being the first year o family business. This being the first year of the business and f the business and since the erstwhile entities of the group discontinued the since the erstwhile entities of the group discontinued the since the erstwhile entities of the group discontinued the existing business, there was a need of transfer of funds existing business, there was a need of transfer of funds existing business, there was a need of transfer of funds amongst the group entities. amongst the group entities. (ii) The transactions amongst the group entities are through (ii) The transactions amongst the group entities are through (ii) The transactions amongst the group entities are through cheque, fully accounted and reported to the Income cheque, fully accounted and reported to the Income cheque, fully accounted and reported to the Income-tax Department. The group entities had followed a consistent Department. The group entities had followed a consistent Department. The group entities had followed a consistent practice of paying as well as charging interest on the practice of paying as well as charging interest on the practice of paying as well as charging interest on the outstanding daily balances. outstanding daily balances. Such interest has also been Such interest has also been reported to the Income reported to the Income-tax Department which has been tax Department which has been

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taxed/allowed as a deduction without any objection by the taxed/allowed as a deduction without any objection by the taxed/allowed as a deduction without any objection by the officers of the Department including the A.O. officers of the Department including the A.O. 5.4.6 Further, the ld Counsel submitted that t Further, the ld Counsel submitted that the observations of the he observations of the A.O. in the same para, that the total interest paid to these five O. in the same para, that the total interest paid to these five O. in the same para, that the total interest paid to these five parties is Rs 4,34,000/ parties is Rs 4,34,000/- which comes to 0.005% yield is not only which comes to 0.005% yield is not only factually incorrect but is shocking. The A.O. has ignored the fact factually incorrect but is shocking. The A.O. has ignored the fact factually incorrect but is shocking. The A.O. has ignored the fact that the interest expenses of Rs. 4,34,000/ that the interest expenses of Rs. 4,34,000/- (the correct fi (the correct figure is Rs. 4,15,560/-) is net amount as stated hereinabove, the interest is ) is net amount as stated hereinabove, the interest is ) is net amount as stated hereinabove, the interest is charged or paid depending upon the daily balance. It is reiterated charged or paid depending upon the daily balance. It is reiterated charged or paid depending upon the daily balance. It is reiterated that the assessee has followed uniform method of charging/paying that the assessee has followed uniform method of charging/paying that the assessee has followed uniform method of charging/paying interest @ 12% p.a. on the outstanding balances interest @ 12% p.a. on the outstanding balances. 5.4.7 He submitted that t He submitted that thus, none of the objections of the A.O. in hus, none of the objections of the A.O. in the remand report has any substance. the remand report has any substance. 5.4.8 The ld Counsel further submitted that t The ld Counsel further submitted that the CIT(A), apart from he CIT(A), apart from adopting the objections contained in the remand report, has also adopting the objections contained in the remand report, has also adopting the objections contained in the remand report, has also observed in para 8.2.16 on page no. 81 that the assessee has 8.2.16 on page no. 81 that the assessee has 8.2.16 on page no. 81 that the assessee has admitted the delay in furnishing the replies during the assessment admitted the delay in furnishing the replies during the assessment admitted the delay in furnishing the replies during the assessment proceedings. In this regard, the assessee would like to clarify that proceedings. In this regard, the assessee would like to clarify that proceedings. In this regard, the assessee would like to clarify that the assessee has never admitted any delay nor there was, in fact, the assessee has never admitted any delay nor there was, in fact, the assessee has never admitted any delay nor there was, in fact, any delay.

5.5 Lastly, the ld Counsel Lastly, the ld Counsel submitted that the a he act of making addition on account of difference between the figures as per loan addition on account of difference between the figures as per loan addition on account of difference between the figures as per loan confirmation letters and tax audit report is wholly unknown to the confirmation letters and tax audit report is wholly unknown to the confirmation letters and tax audit report is wholly unknown to the law. Further, making addition of 20% of such difference u/s. 68 of law. Further, making addition of 20% of such difference u/s. law. Further, making addition of 20% of such difference u/s.

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the Act only demonstrates the complete lack of awareness of legal the Act only demonstrates the complete lack of awareness of legal the Act only demonstrates the complete lack of awareness of legal provision on the part of officers of the Department. It would be provision on the part of officers of the Department. It would be provision on the part of officers of the Department. It would be relevant to note that the A.O. has completed the assessment relevant to note that the A.O. has completed the assessment relevant to note that the A.O. has completed the assessment without issuing any show cause notice to the assessee. Further, no without issuing any show cause notice to the assessee. Furt without issuing any show cause notice to the assessee. Furt opportunity of hearing was granted by the A.O. before sending the opportunity of hearing was granted by the A.O. before sending the opportunity of hearing was granted by the A.O. before sending the remand report to the CIT(A). Needless to add that the assessee has remand report to the CIT(A). Needless to add that the assessee has remand report to the CIT(A). Needless to add that the assessee has been put to severe avoidable hardship due to such action on the been put to severe avoidable hardship due to such action on the been put to severe avoidable hardship due to such action on the part of the Department. part of the Department.

5.6 The ld counsel for asse ld counsel for assessee also relied upon the submissions upon the submissions filed before the CIT(A), the copy of which has been placed at page filed before the CIT(A), the copy of which has been placed at page filed before the CIT(A), the copy of which has been placed at page no. 77 of PB 1.

6.1 The primary basis for the impugned addition is the alleged The primary basis for the impugned addition is the alleged The primary basis for the impugned addition is the alleged 'inconsistency' in figures. However, the Ld. Counsel for the Assessee 'inconsistency' in figures. However, the Ld. Counsel for the Assessee 'inconsistency' in figures. However, the Ld. Counsel for the Assessee has has has successfully successfully demonstrated successfully demonstrated demonstrated that that that this this this discrepancy discrepancy discrepancy is is is a a a

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mathematical mirage. The Tax Audit mathematical mirage. The Tax Audit Report correctly captures only Report correctly captures only the de novo loans received during the year, whereas the ledger loans received during the year, whereas the ledger loans received during the year, whereas the ledger confirmations reflect a 'running account', ons reflect a 'running account', inclusive of repayments of inclusive of repayments of earlier advances made by the assessee to these related parties. earlier advances made by the assessee to these related parties. earlier advances made by the assessee to these related parties.

Upon a granular examination of the ledger of M/s. Abhishek M/s. Abhishek, 6.2 Upon a granular examinat we find that the AO conflated gross credit entries (including we find that the AO conflated gross credit entries (including we find that the AO conflated gross credit entries (including repayments to the assessee) with fresh loan infusions. In our repayments to the assessee) with fresh loan infusions. repayments to the assessee) with fresh loan infusions. opinion an addition under Section 68 cannot be sustained on a an addition under Section 68 cannot be sustained on a an addition under Section 68 cannot be sustained on a misunderstanding of accounting ent misunderstanding of accounting entries. Once the credits are ries. Once the credits are identified as repayments of the assessee's own funds previously identified as repayments of the assessee's own funds previously identified as repayments of the assessee's own funds previously advanced, they lose the character of "unexplained credits." advanced, they lose the character of "unexplained credits." advanced, they lose the character of "unexplained credits."

6.3 A perusal of the Assessment Order reveals a fundamental legal A perusal of the Assessment Order reveals a fundamental legal A perusal of the Assessment Order reveals a fundamental legal infirmity. The AO accepted the identity infirmity. The AO accepted the identity, creditworthiness, and , creditworthiness, and genuineness of eleven out of sixteen lenders. Even regarding the five genuineness of eleven out of sixteen lenders. Even regarding the five genuineness of eleven out of sixteen lenders. Even regarding the five disputed lenders, the AO accepted the disputed lenders, the AO accepted the portion of loans reported in of loans reported in the Tax Audit Report but treated 20% of the 'differential' amount as the Tax Audit Report but treated 20% of the 'differential' amount as the Tax Audit Report but treated 20% of the 'differential' amount as unexplained. In our opinio In our opinion, such an approach is legally untenable legally untenable and logically inconsistent. The doctrine of and logically inconsistent. The doctrine of approbate and reprobate approbate and reprobate applies here: the Revenue cannot, in the same breath, accept the applies here: the Revenue cannot, in the same breath, accept the applies here: the Revenue cannot, in the same breath, accept the creditworthiness of a lender for a part of the credit and reject it for creditworthiness of a lender for a part of the credit and reject it for creditworthiness of a lender for a part of the credit and reject it for the remainder, especially when the source of all credits is the same der, especially when the source of all credits is the same der, especially when the source of all credits is the same banking channel and the same financial profile. banking channel and the same financial profile.

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6.4 Furthermore, the adoption of a Furthermore, the adoption of a 20% ad-hoc rate hoc rate for an addition under Section 68 is wholly alien to the scheme of the Act. addition under Section 68 is wholly alien to the scheme of the Act. addition under Section 68 is wholly alien to the scheme of the Act. Section 68 is a "binar tion 68 is a "binary" provision, either the credit is explained or it either the credit is explained or it is not. There is no statutory middle ground for 'moderated' or is not. There is no statutory middle ground for 'moderated' or is not. There is no statutory middle ground for 'moderated' or 'proportionate' additions based on suspicion. 'proportionate' additions based on suspicion.

6.5 The Ld. CIT(A) heavily relied upon the "doctrine of human The Ld. CIT(A) heavily relied upon the "doctrine of human The Ld. CIT(A) heavily relied upon the "doctrine of human probabilities" as enunciated in probabilities" as enunciated in Sumati Dayal v. CIT Dayal v. CIT(supra). While the importance of surrounding circumstances is undeniable, this the importance of surrounding circumstances is undeniable, this the importance of surrounding circumstances is undeniable, this doctrine cannot be used to bypass direct documentary evidence. doctrine cannot be used to bypass direct documentary evidence. doctrine cannot be used to bypass direct documentary evidence. The assessee has furnished: The assessee has furnished: (i) Confirmations and PAN details; Confirmations and PAN details; (ii) Income Tax Returns and Audited Fi Income Tax Returns and Audited Financial Statements; nancial Statements; and (iii) Complete bank trails demonstrating movement through Complete bank trails demonstrating movement through Complete bank trails demonstrating movement through regular banking channels. regular banking channels.

6.6 The Revenue's allegation of "layering" ignores the undisputed The Revenue's allegation of "layering" ignores the undisputed The Revenue's allegation of "layering" ignores the undisputed fact that these are transactions within a family fact that these are transactions within a family-controlled group controlled group during a year of business reorganization. In the absence of any business reorganization. In the absence of any business reorganization. In the absence of any evidence suggesting that the funds originated from a source other evidence suggesting that the funds originated from a source other evidence suggesting that the funds originated from a source other than the declared group entities, or that they represented the than the declared group entities, or that they represented the than the declared group entities, or that they represented the assessee's assessee's assessee's own own own unaccounted unaccounted unaccounted money, money, money, the the the "test "test "test of of of human human human probabilities" probabilities" actually actually favors fa vors the the assessee. assessee. In In a a family family reorganization, the fluid movement of capital between sister reorganization, the fluid movement of capital between sister reorganization, the fluid movement of capital between sister concerns is a matter of commercial expediency, not a cloak for tax concerns is a matter of commercial expediency, not a cloak for tax concerns is a matter of commercial expediency, not a cloak for tax evasion.

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6.7 In light of the fact that the Revenue has not brought on record In light of the fact that the Revenue has not brought on record In light of the fact that the Revenue has not brought on record any evidence to rebu any evidence to rebut the direct documentary proof filed by the t the direct documentary proof filed by the assessee, and considering that the "discrepancies" noted by the AO assessee, and considering that the "discrepancies" noted by the AO assessee, and considering that the "discrepancies" noted by the AO were merely reconciliation differences in running accounts, the were merely reconciliation differences in running accounts, the were merely reconciliation differences in running accounts, the addition lacks both factual and legal foundation. The lower addition lacks both factual and legal foundation. The lower addition lacks both factual and legal foundation. The lower authorities failed to appreciate that the appreciate that the onus of proof onus of proof shifted back to the Revenue once the assessee produced the lenders' audited to the Revenue once the assessee produced the lenders' audited to the Revenue once the assessee produced the lenders' audited books and bank statements. books and bank statements.

6.8 We don’t find no merit in the selective and ad no merit in the selective and ad no merit in the selective and ad-hoc approach adopted by the Assessing Officer, and co adopted by the Assessing Officer, and concurred with b ncurred with by the Ld. CIT(A). We hold that the requirements of Section 68 stand fully e hold that the requirements of Section 68 stand fully e hold that the requirements of Section 68 stand fully satisfied by the assessee. satisfied by the assessee. Consequent to the above reasoning, the Consequent to the above reasoning, the impugned addition of impugned addition of ₹3,09,95,030/- is hereby deleted deleted. The order of the Ld. CIT(A) is set aside. the Ld. CIT(A) is set aside.

6.9 The grounds of The grounds of appeal of the assessee are accordingly appeal of the assessee are accordingly allowed.

Order pronounced in the open Court on ounced in the open Court on 15 15/05/2026. Sd/- - Sd/- (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 15/05/2026 Rahul Sharma, Sr. P.S.

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

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