VEENA KIRAN JAIN,COIMBATORE vs. DEPUTY COMMISSIONER OF INCOME TAX, COIMBATORE

The assessee, on ground Nos. 2 and 3, challenges the action of the ld. CIT(A) in confirming the addition made by the AO on account of unexplained cash under section 68 of the Income Tax Act, 1961 (for

The brief facts of the case are that the assessee, who is an individual, filed a return of income declaring a total income of Rs. 27,67,410/-. The said return was processed under section 143(1) of the Act. Thereafter, the case of the assessee was selected for complete scrutiny for issues related to unsecured loans and ICDC compliance and adjustment. The AO issued notice under section 143(2) and 142(1) of the Act seeking details, in response to which the assessee filed details electronically along with submissions, which is evident from para No. 2 of the assessment order. According to the AO, the assessee received a loan from Kirthi Kumar (HUF) on 14.11.2017 amounting to Rs. 6,00,000/-, and on examination of details, it was observed that the assessee received the said loan from the account of Anita K. Jain, wherein a deposit was made on 13.11.2017, just one day before giving the loan to the assessee. After examination of details as submitted by the assessee, the AO doubted the receipt of the loan from Kirthi Kumar (HUF) on 14.11.2017 for the reason that the assessee received such loan from the bank account of Anita K. Jain, wherein a cash deposit was made on 13.11.2017, just one day prior to giving the loan to the assessee. The AO held that the assessee failed to furnish justification in respect of the cash deposit and the loan received by Kirthi Kumar (HUF) through Anita K. Jain. Likewise, he made an addition in respect of Kirthi Kumar (HUF), Babulal Mehta, Dimple, Bhagyawati, and Kirthi Kumar to the extent of Rs. 1,77,00,000. Aggrieved by the said order of the AO, the assessee preferred an appeal before the

The ld. A.R., Mr. G. S. Prasanth, C.A., submits that the assessee furnished the evidence relating to the loans obtained from each of the parties mentioned in the assessment order before the AO as well as the ld. CIT(A). The said details are reflected in Annexure-1, and he has drawn our attention to the acknowledgement dated 15.03.2022 issued by the respondent Revenue in the e-proceedings response acknowledgement. He submits that the respondent Revenue issued a notice calling for details, fixing the due date for submissions as 28.03.2022, and the assessee filed all such details on 15.03.2022, by referring to serial Nos. 1 to 10 of the said acknowledgement. He further argued that the AO and ld. CIT(A) erred in treating an amount of Rs. 6,00,000/- and Rs. 27,00,000/-, totaling Rs. 33,00,000/-, as unexplained cash credit under section 68 of the Act without appreciating the submissions made and documents furnished during the assessment and first appellate proceedings. He submits that Mr. Kirthi Kumar had passed away on 13.08.2017 and his entire estate devolved upon his wife, i.e., Ms. Anita K. Jain. After the demise of late Mr. Kirthi Kumar, the proprietorship concern by the name M/s Rajguru Aluminium stood transferred to Ms. Anita K. Jain, and the loan amount was advanced to the assessee by Ms. Anita K. Jain through proper banking channels. The ld. A.R. referred to the copy of the death certificate at page number 89 and the bank statement of Ms. Anita K. Jain

He vehemently argued that though the pre-existence of balances was before the ld. CIT(A), no consideration was given by the ld. CIT(A) in respect of such pre-existing balances in the bank account. He argued that the statement of the ld. CIT(A) at page No. 26 of the impugned order is incorrect in stating that there was an immediate cash deposit before issuing the cheque for the loan. Further, he referred to bank statements for the consideration of Ms. Anita K. Jain to show the receipt of funds from the sale of plant and machinery of M/s Rajguru Aluminium, which was thereafter utilized for advancing loans to the assessee. Further, during the course of hearing, he drew our attention to page Nos. 91 to 93 to show that the said transactions are reflected in the bank statement. He argued vehemently that all the evidences relating to the loan of Rs. 33,00,000/- (Rs. 6,00,000/- + Rs. 27,00,000/-) on 14.11.2017 and 06.10.2017, respectively, stand duly substantiated and cannot be treated as unexplained cash credit under section 68 of the Act, as the same were received through banking channels from an identifiable, creditworthy lender. Likewise, the ld. CIT(A) and AO made additions in respect of other lenders also for the same reasons, similar to M/s Kirthi Kumar (HUF). Thus, he prayed to delete the additions made under section 68 of the Act and allow ground Nos. 2 and 3.

Ld. Ms. Gouthami Manivasagam, Addl. CIT, submits that the AO found the exact amount of loan as a cash deposit in the bank statement

We have heard both the parties and perused the material available on record. On perusal of the copy of Annexure-1, it is noted that the e-proceedings response acknowledgement dated 15.03.2022 clearly shows that all evidences in respect of loan amounts were furnished by all the lenders before the first appellate authority for consideration. On examination of the said acknowledgement in S. Nos. 1 to 10, it shows that the documents relating to all the lenders were before the ld. CIT(A) during the first appellate proceedings. Further, in the e-proceedings response acknowledgement dated 15.05.2022, the assessee furnished the details of other lenders along with additional documents online, stating that the assessee is ready to furnish any other information for the early disposal of the appeal. Thus, it clearly shows that all evidences relating to the lenders in giving the loan to the assessee were before the AO as well as the ld. CIT(A). Therefore, the arguments of the ld. D.R. in claiming to remand the matter to the AO are rejected, taking into consideration that all evidences are already on record before the AO and ld. CIT(A) for consideration. We

Now, we shall deal with the case of the lender by name Kirthi Kumar (HUF) to an extent of Rs. 33,00,000/-. The case of the AO is that cash was deposited in the account of the legal heir of Kirthi Kumar (HUF) on 13.11.2017, whereas the loan of such amount was given to the assessee on 14.11.2017, which is evident from Para No. 4(i) of the AO. The case of the ld. CIT(A) is that the assessee failed to discharge the statutory burden under Section 68 of the Act to prove creditworthiness and genuineness of transactions in respect of the unsecured loans, which

Further, the bank statement of Ms. Anita K. Jain, placed at pages 91 to 93 of the paper book, shows a transfer to Shri Mehta Syndicate on 14.11.2017. It also shows cash deposits on 13.11.2017. However, it is important to note that as on 04.11.2017, there was already a balance of Rs.34,54,995/- in her account, which is more than the loan amount. This indicates that she had sufficient funds even before the cash deposits. This evidence was available before the AO and the CIT(A), but it was not properly considered. The conclusion that the cash deposit on the previous day indicates an accommodation entry is not justified in the present case.

With reference to the addition of Rs.1,50,000/- in respect of Mr. Kiran Kumar (HUF), we find that the ld. CIT(A) confirmed the addition made by the AO by making the same observation that the cash deposit of Rs.1,50,000/- was made in the lender’s bank account one day prior to the cash deposit. We note that the AO asked the assessee to furnish the details in respect of the said cash deposit with reference to the identity of the lender, the genuineness of the transaction and the creditworthiness of the lender. The assessee filed the return of income of the said lender along with the computation statement, which is at pages 48 to 50 of the paper book. Further, the loan confirmation letter received from M/s Kiran Kumar (HUF) and the bank statement which are at pages 54 and 55 of the paper book. Further, the cash book along with the balance sheet of Kiran Kumar (HUF) is at pages 51 to 53 of the paper book. On perusal of the above said evidences, we note that the cash deposit was duly sourced from the lender’s own funds and was deposited during the course of the business process. Further, it is also noted that Kiran Kumar (HUF) charged interest at the rate of 12% per annum on the said loan and tax was also deducted at source on such transaction. Therefore, the order of the ld. CIT(A), in observing that the mere statement of the cash book and the evidences mentioned above are not sufficient to explain the cash deposit, and, therefore, the order of the ld. CIT(A) in confirming the addition without taking into consideration the material evidence as

Further, with reference to the addition of Rs.50,00,000/- with reference to Mr. Hansraj M. Mutha, we note that the assessee availed of a loan of Rs.50,00,000/- from Mr. Hansraj M. Mutha on 30.08.2017 through the banking channel and the same was repaid on 12.02.2018. The documents supporting the receipt and repayment of the loan are duly reflected in the bank statement of the lender. Thus, the observation of the ld. CIT(A) that the genuineness of the transaction and the creditworthiness of the lender were not established is contrary to the facts and circumstances of the case. Therefore, we are of the considered opinion that no addition could be made merely on the basis of conjectures and surmises. Thus, the order of the ld. CIT(A) is not justified and is set aside. The addition made by the AO, which was confirmed by the ld. CIT(A), is deleted.

With reference to the addition of Rs.43,00,000/-, we note that Babulal Mehta, proprietor of Swastik International, offered a sum of Rs.43,00,000/- as advance to M/s Rajguru Aluminium out of his own funds. We note that the said Babulal Mehta instructed the assessee to make payment to M/s Rajguru Aluminium for Rs.7,00,000/- on his behalf, totaling to Rs.43,00,000/-, which clearly establishes that the proprietor of M/s Rajguru Aluminium was liable to repay the said loan of Rs.43,00,000/- to Babulal Mehta. We find that the said transactions are clearly evident in the bank statements of Swastik International and Shree Mehta Syndicate. We find that, to establish the genuineness of the loan

With reference to the addition of Rs.5,00,000/- on account of loan from Dimpal, the addition of Rs.1,50,000/- on account of Bhagawati Devi,

With reference to the additional grounds in respect of loans treating the same as gifts as per Section 56(2)(x) of the Act, we note that Mr. Kiran Kumar is the husband of the assessee, Mrs. Anita K. Jain is the sister-in-law, Ms. Dimpal is the husband's sister, Mrs. Bhagawati Devi is the mother-in-law and Babulal Mehta is the father-in-law. Therefore, in our opinion, such receipts from relatives cannot be subjected to addition under Section 68 of the Act as unexplained cash credits. The ld. AR relied on the order of the Calcutta Tribunal in the case of Mira Bibi in ITA No.727/KOL/2025 dated 20.01.2026, wherein it was held that the gifts

With reference to the addition of Rs.2,85,000/- on account of agricultural income, it is noted that the assessee is the owner of agricultural land measuring 2.99 acres situated in Solavampalayam Village, Coimbatore, which was leased out to Mr. Magalingam N. for a period of one year commencing from 01.04.2017, which is at page No.137 of the paper book. The said Mr. Magalingam N. agreed to pay Rs.2,85,000/- as lease rent in accordance with the letter, which is at page No.138 of the paper book. We find that the assessee filed the sale deed dated 20.02.2018, which is at pages 158 to 160 of the paper book, which clearly establishes the ownership of the assessee over the said agricultural land. The AO and the ld. CIT(A), in our opinion, arbitrarily doubted the claim of agricultural income, which, in our opinion, is not justified, having regard to the evidence of the sale deed, lease letter, etc., proving the ownership of the land as well as the receipt of lease rent. Therefore, the addition made by the AO, which was confirmed by the ld. CIT(A), is not justified and is deleted. Thus, the order of the ld. CIT(A) is set aside and the grounds raised by the assessee are allowed.