RAJAN LALCHAND SAHIJWANI ,MUMBAI vs. DCIT-CENTRAL CIRCLE-5(2), MUMBAI, MUMBAI

PDF · subscribers
ITA 8803/MUM/2025Status: DisposedITAT Mumbai30 June 2026AY 2021-229 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the additions were based solely on an employee's statement without corroborative evidence. The lenders' identity, creditworthiness, and genuineness of transactions were established, and funds were sourced from disclosed income and explained receipts.

What were the facts?

The assessee received unsecured loans from family members, which the Assessing Officer (AO) treated as unexplained cash credits. The AO's additions were based on an employee's statement, which the assessee later retracted and claimed was recorded under pressure.

What were the issues?

Whether unsecured loans and interest paid thereon are unexplained cash credits and disallowable, respectively, when based on a retracted statement of an employee.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH MUMBAI

Before: HON’BLE SHRI SANDEEP GOSAIN & HON’BLE BIJAYANANDA PRUSETH

For Respondent: Shri Umashankar Prasad (CIT DR) & Shri
Hearing: 19.05.2026Pronounced: 30.06.2026

PER SANDEEP GOSAIN, JM: These appeals have been filed by the assessee against the orders of the Deputy Commissioner of Income-tax, Circle 5(2), Mumbai vide respective impugned orders dated 30.10.2025 for Assessment Years 2020-21, 2021-22, 2022-23 and 2023-24.

2.

Since all the issues involved in these appeals are common and identical and belong to the same assessee, hence, they have been clubbed, heard together, and a consolidated order is being passed for the sake of convenience and brevity. Firstly, we shall take ITA 8805/MUM/2025 for A.Y. 2023-24 as the lead case, and the facts narrated therein are being considered. The assessee has raised the following grounds of appeal: “Addition on account of unsecured loan received alleged to be unexplained u/s 68:- 1. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of the Id. A.O in relying on the statement of the appellant during the course of search action, despite the fact that such statement were subsequently retracted, for reasons stated in the impugned order or otherwise. 2. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of the Id. A.O in holding that the unsecured loan received by the appellant are non-genuine, for the reasons stated in the impugned order or otherwise. 3. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of the Id. A.O in making addition of Rs. 2,65,000/- u/s 68 on account of unsecured loan received by the appellant from Hryday Sahijwani which were alleged to be unexplained, for reasons stated in the impugned order or otherwise.

3 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

Addition on account of interest paid on loan received alleged to be unexplained expenditure u/s 69C:- 4. On the facts and circumstances of the Appellant's case arid in law, the Id. CIT(A) erred in confirming the action of the Id. A.O in holding that interest paid by the appellant to Smt. Jyoti Sahijwani & Hryday Sahijwani is unexplained, for reasons stated in the impugned order or otherwise. 5. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of the Id. A.O in making addition of Rs. 4,58,620/- (Rs. 4,19,790/- to Smt. Jyoti Sahijwani and Rs. 38,830/- to Hryday Sahijwani) u/s 69C on account of interest paid to Smt. Jyoti Sahijwani which were alleged to be unexplained, for reasons stated in the impugned order or otherwise. 6. The Appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing. The Appellant prays your Honour to direct the Learned Assessing Officer to delete the additions/disallowances made in the impugned order." 2. Ground no. 1 to 3 raised by the assessee for assessment year 2023-24 and the Ground no. 4 to 6 for assessment year 2021-2022, 2022-23 are identical and interrelated and relates to challenging the order of CIT(A) in upholding the addition made by A.O. u/s 68 of the Income-tax Act, therefore, we have decided to adjudicate these grounds through the present consolidated order. 3. We have heard the counsel for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. 4. From the records we notice that assessee being an individual is engaged in transportation business through its proprietary concern, M/s Baska Bombay Carriers and M/s JRS Logistics, and is regularly assessed to tax. A search under section

4 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

132 of the Act, was conducted in the case of M/s Polycab India Limited and its distributors, including Sunrise Group. Since M/s Baska Bombay Carriers was one of the transporters of Polycab India Limited, therefore it was also covered under the said search. During the said search, it was noticed that the concern had availed unsecured loans from various parties. Therefore, statement of one Hitesh Shah, an employee of M/s Baska Bombay Carriers was recorded and the statement of assessee was also recorded. Based on these statements, the AO found that the loans obtained by assessee from its family members were not genuine. Consequently, AO made additions in the case of assessee u/s 68 of the Income-tax Act by holding that the unsecured loans received by the assessee from Smt. Jyoti Sahijwani, wife of the assessee, and Shri Hryday Sahijwani, son of the assessee, were unexplained and that the interest paid thereon was also not allowable. 5. Aggrieved by the additions made by AO, assessee preferred appeal before CIT(A), however, Ld. CIT(A) dismissed the appeal filed by the assessee and upheld the orders passed by the AO. Consequently, now assessee has preferred the present appeal before us on the grounds mentioned hereinabove. 6. After having considered the entire facts of the present case and also taking into consideration the orders passed by the revenue authorities, we found that the additions made by the AO. In the present case are entirely based on the statement of Hitesh Shah and the assessee. We found that no incriminating material

5 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

or documentary evidences were found during the search to establish that the impugned loans represented the assessee’s unaccounted money. Although, AO during the examination of bank accounts of Smt. Jyoti Sahijwani and Hryday Sahijwani had observed that the cash deposits were made therein prior to advancing loans to the assessee. Therefore, AO was of the view that transaction by Jyoti Sahijwani and Hryday Sahijwani lacked creditworthiness and thus the loan received from them represented unexplained cash credit of the assessee. Whereas from the records we found that the said Hitesh Shah on whose statement additions were made was merely an employee responsible for operational activities of the transport business and had no personal knowledge regarding loan transactions or the financial affairs of the lender. Further, the statement of the said Hitesh Shah was nowhere corroborated with any evidence found during the course of search. We also noticed that the assessee never accepted the fact narrated by Hitesh Shah in his statement rather the assessee subsequently retracted his statement and clarify that it had been recorded under pressure and without adequate opportunity to verify the facts. In this regard it is necessary to evaluate the reply given by the assessee on being confronted with statement of Hitesh Shah which is reproduced hereinbelow: “Q.55 As stated by you have gone through the statement of Shri Hitesh Shah, the traffic manager and overall operation head of Baska Bombay Carriers, Annexure 1 to the statement, recorded under section 132(4) of the Income Tax Act, 1961 at Godown No. 23A, Opp. Swan Milis, off T.J. Road, Sewri West, Mumbai-400015.Please go through the

6 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

complete statement of Shri Hitesh Shah and offer your comment. (Deponent is given 30 minutes time to go through the statement) Ans. Sir I have gone through the complete statement of Shri Hitesh Shah, placed on record as Annexure 1 to the statement, who handles complete operation of the business. Sir I do agree with the statement of Shri Hitesh Shah in which he completely explained the business modus of both Baska Bombay Carrier and JRS Logistics with Polycab India Ltd and other entities for transportation business .Sir, I do agree with the explanation given by him regarding the structure and status for JRS Logistics as it was created to meet the needs of Polycab India Ltd. Further as discussed in his statement 1 have gone through all the annexures (From Annexure 1 to Annexure 24 and Annexure P) of Hitesh Shah's statement. Further, I have gone through Q.84 to Q.No.90 of his statement and his responses on these I do not have any explanation but will try to gather the supporting documents then only will able to comment on it. In general, he handles business operation related to transportation business so whatever he has stated is correct to the best of my knowledge.” 7. After having gone through the above statement we noticed that assessee while giving reply has nowhere confirmed the statement of Shri Hitesh Shah regarding question no. 84 to 90, which goes to show that assessee even in assessment proceedings itself did not agree with the explanation provided by Hitesh Shah. Thus, it is clear that assessee has not accepted the statement of Hitesh Shah rather he had mentioned that he shall gather information and then only shall be able to comment on it. 8. We further noticed that Smt. Jyoti Sahijwani earned income from dress-designing activities and offered to tax the same under Section 44AD of the Income-tax Act while Hryday Sahijwani earned income from tuition services etc. and also disclosed the same under section 44AD of the Act. Thus, considering the said fact we found that cash deposits in the bank accounts were sourced from such disclosed income and other explained receipts.

7 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

9.

Therefore, in this way the funds advanced to the assessee were largely sourced from identifiable and explained receipts such as LIC maturity proceeds, mediclaim receipts, rental receipts, HDFC Securities payouts, business receipts, and opening bank balances. In this way, the source of the loans stands explained, and the primary allegation of the AO that the loans were funded through unexplained cash deposits is factually incorrect, considering the material placed on record. 10. Even otherwise assessee has already furnished a detailed chart showing the source of each loan received from Jyoti Sahijwani and Hryday Sahijwani and even on the perusal of the said chart it clearly shows that, in most cases, the funds originated from rental income, securities payouts, and other disclosed receipts and with regard to the cash deposits it was submitted that the corresponding amounts form part of their disclosed business turnover. Thus, considering the totality of the entire factual position as narrated above, we found that the funds advanced to the assessee were derived from duly accounted and disclosed sources. 11. Moreover, AO has not brought on record any incriminating material found during the course of search to support the impugned addition and since the additions in the present case are based solely on the statement of an employee, which, in the absence of any independent corroborative evidence, cannot be accepted as evidence to make additions. Moreover, the AO has not identified or demonstrated any source or mechanism through

8 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

which the assessee allegedly earned the undisclosed income. Therefore, in the absence of such evidence or findings, the additions made by AO are based merely on assumptions and presumptions, which are contrary to the factual position brought on record by the assessee. 12. We also noticed that identity of both the lenders was duly established through their PAN, income-tax returns, and other supporting documents. Creditworthiness was demonstrated through financial records and bank statements showing sufficient availability of funds to advance the loans and the genuineness of the transactions has also not been doubted, as the loans, interest payments, and repayments were all made through regular banking channels and the interest received from the assessee has been duly offered to tax by the lenders in the respective returns of income. Accordingly, assessee has successfully discharged its onus of proving the identity, creditworthiness and genuineness of transactions. Therefore, considering the totality of the facts and circumstances as discussed above we direct the A.O. to delete the additions. Consequently, these grounds raised by the assessee stands allowed. 13. Ground No. 4 to 5 for A.Y. 2023-24 and Ground No. 7-8 for AY. 2020-21, 2021-22 and 2022-23 are interrelated and interconnected and relates to challenging the orders of Ld. CIT(A) in upholding the order of AO for disallowance of interest paid on unsecured loan.

9 ITA No.8802,8803,8804 & 8805/Mum/2025 Rajan Lalchand Sahijwani

14.

Since, we have already deleted the addition made by AO on account of principal loan amount, therefore, the interest disallowed by the AO u/s 69C of the Act being consequential in nature also stands deleted as the loan transaction from the concerned parties have already been treated as genuine while passing the above order. Therefore, these grounds raised by the assessee also stands allowed and AO is directed to delete the additions /disallowance of interest paid on unsecured loan. 15. In the result, appeals of the assessee are accordingly allowed.

Order pronounced in the open court on 30.06.2026.

Sd/- Sd/- (BIJAYANANDA PRUSETH) (SANDEEP GOSAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 30/06/2026 KK, PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. 4. आयकर आयु�(अपील) / Concerned CIT िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण,मु�बई/ DR, ITAT, Mumbai 5. 6. गाड� फाईल / Guard file. आदेशानुसार/BY ORDER, स�ािपत �ित //True Copy//

उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�बई / ITAT, Mumbai

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →