CHERUKURI SURESH BABU,PALKOL vs. INCOME TAX OFFICER, WARD-1, PALKOL

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ITA 736/VIZ/2025Status: DisposedITAT Visakhapatnam12 June 2026AY 2018-199 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that new documentary evidence, including affidavits, was filed before it. To ensure proper satisfaction regarding the genuineness of the loans, the matter was remanded back to the AO for fresh adjudication and examination of loan creditors.

What were the facts?

The assessee, a doctor, declared a total income of Rs. 9,28,800. During assessment, the Assessing Officer (AO) added Rs. 25,50,000 as unexplained unsecured loans. The assessee provided loan confirmations, PAN cards, and bank statements, but the AO remained unsatisfied.

What were the issues?

Whether the assessee discharged the onus to prove the identity, genuineness, and creditworthiness of the lenders for unsecured loans, and if additional evidence requires re-examination by the AO.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH,

Before: SHRI UDAYAN DAS GUPTA, HON’BLE & SHRI OMKARESHWAR CHIDARA, HON’BLE

For Respondent: Dr. Aparna Villuri, Sr AR

आदेश / ORDER

PER UDAYAN DAS GUPTA, JUDICIAL MEMBER: This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] passed under section 250 of Income Tax Act, 1961 [hereinafter in short “the Act”] dated 30.09.2025 which has emanated from the order of the Ld. Assessing Officer [hereinafter in short “Ld.AO”] dated 08.03.2021 passed under section 143(3) r.w.s 143(3A) & 143(3B) of the Act.

2.

The grounds of appeal taken by the assessee in Form No. 36 are as follows: -

“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.25,50,000 made by the assessing officer u/s 68 of the Act towards unexplained unsecured loans. 3. Any other ground that may be urged at the time of appeal hearing.”

3.

Brief facts emerging from records are that, the assessee is a Doctor (medical practitioner) has filed his return of income declaring a total income of Rs.9,28,800/-, which was selected for scrutiny under CASS and in course of assessment proceedings the assessee was asked to explain the unsecured loans obtained during the year amounting to Rs.25.50 lakhs as evident from the Tax Audit Report in Form No. 3CD. In course of assessment proceedings, the assessee has furnished the copy of the ledger accounts, confirmation and the PAN cards of the lenders along with copies of bank statements , in support of his loan transactions which were all effected through proper banking channels. The AO being unsatisfied with the explanation furnished by the assessee regarding its insufficiency, the assessment was completed on a total income of Rs.34.78 lakhs [including the addition of unsecured loans amounting to Rs.25,50,000/- under section 68 of the Act].

4.

The matter carried in first appeal has been dismissed by the Ld. CIT(A) after consideration the written submissions filed in course of appellate proceeding by observing as follows: - “5. Decision: In the present case, the Assessing Officer (AO) has examined the unsecured loans amounting to Rs.25,50,000 received by the assessee during the year under scrutiny from three individuals, namely Dr. PNV Bhaskar (Rs.8 Lakhs), K. Satyanarayna Raju (Rs.7 Lakhs), and Manthena Srinivasa Raju (Rs.10.50 Lakhs). Despite repeated opportunities, the assessee has failed to furnish critical evidences such as Income Tax Returns (ITR), balance sheets, capital accounts, or any other financial documents of the lenders to establish their creditworthiness. Further, no additional evidence has been submitted by the assessee as per Form No. 35. 2. The AO has rightly observed that mere production of bank statements reflecting transactions through banking channels or confirmation letters does not suffice to prove the genuineness or creditworthiness of the lenders. For instance, in the case of Dr. PNV Bhaskar, who is a salaried individual earning an average monthly salary of Rs. 73,800, the average yearly bank balance never exceeded Rs. 4 lakhs. It is against human probability that a salaried individual with such earnings could extend an interest-free loan of Rs. 8 Lakhs without affecting his financial stability. Similarly, the assessee has not provided any bank statements or financial documents for Shri K Satyanarayn Raju to justify the loan amount of Rs. 7 Lakhs. 3. With respect to the third lender, Shri Manthena Srinivasa Raju, the assessee claimed that out of the total loan amount of Rs. 10,00,000 received from him, Rs. 4,00,000 represented rent for leasing agricultural land. However, the assessee failed to produce any documentary evidence to prove ownership of the land or validity of such lease agreements. Moreover, no ITR or balance sheets of Shri Manthena Srinivasa Raju have been furnished to establish his creditworthiness. 4. The Hon'ble Supreme Court and various High Courts have consistently held that under Section 68 of the Income Tax Act, the onus lies squarely on the assessee to establish the identity, genuineness, and creditworthiness of the creditors when unexplained cash credits appear in the books. Mere bank statements or confirmation letters do not satisfy this burden. The principle laid down in landmark judgments such as CIT vs. Durga Prasad More (72 ITR 807 SC), Govinda Rajulu Mudaliar, and Oceanic Products Exporting Company vs. CIT (241 ITR 497 Kerala) emphasize that the explanation must be satisfactory and supported by positive material evidence: 5. Considering the above, the addition made by the AO treating the unsecured loans of Rs. 25,50,000 as unexplained cash credit under Section 68 of the Income Tax Act is justifiable and warranted. The assessee's failure to discharge the onus of proving the source and nature of these credits leaves no alternative but to confirm the addition.”

5.

Now the assessee is before the Tribunal on the grounds contained in the Memorandum of appeal. In course of hearing, the Learned Authorized Representative (for short “Ld.AR”) furnished a paper book containing 81 pages and has submitted an application for admission of additional evidences under Rule 29 of I.T.A T Rules, 1963. The Ld.AR submitted, that the assessee has received loans from three persons ( as friendly loans) free of interest during the year under appeal, namely (a) Shri P.V.N. Bhaskar Rao, loan of an amount of Rs.8,00,000/-, (b) Shri Kundanraju Satyanarayana Raju, loan of an amount of Rs.7,00,000/- and by Shri M. Srinivasa Raju, loan of an amount of Rs.10,50,000/- , totaling to Rs.25,50,000/- all received through banking channels and in support to prove the identity, genuineness and the creditworthiness of the loan creditors, he has furnished confirmations of loans from all the three parties along with their bank statements and ledger account copies as proof of their creditworthiness.

6.

Ld.AR further explained that one of the loan creditors Shri M. Srinivasa Raju is an agriculturist residing at Vempa village and he has stated to be the owner of agricultural lands of Acres 3.5 cents and he has advanced an amount of Rs.10,50,000/- to the assessee out of his agricultural savings and in support of his contention, he has filed copies of identity cards and an affidavit along with copies of bank statements with Union Bank of India Account No.xxxx50321, placed in the Paper Book Page Nos. 38 to 56 , and submitted that an amount of Rs.5,00,000/- has been transferred through bank on 28.06.2017 and further amount of Rs.6,00,000/- has been transferred on 09.02.2018 and further explained that it is evident from his bank statements that various credits are there in his bank all being transfer entries throughout the year and total balance available with the lender on the date of advance as on 28.06.2017 in his bank account was Rs.66.59 lakhs out of which an amount of Rs.5,00,000/- only has been advanced as loan to the assessee , and available balance as on 09.02.2018 in bank was Rs.24.75 lakhs out of which only Rs.6,00,000/- has been advanced as loan to the assessee and all his transactions are supported by income tax returns, and there is no reason to disbelieve the transactions or to doubt the creditworthiness of the lender.

Similarly, Ld.AR took us to Page No. 58 to 63 of the Paper Book where again 7. confirmation of Shri Kundanraju Satyanarayana Raju has been filed where it has been stated that he is also an agriculturist residing in Malikipuram village and has been deriving agricultural income from own land holdings of Acres 20.00 cents and is also a partner in M/s S R Sea Foods ( PFAS ) and on the request of the assessee he has advanced a loan of Rs.7,00,000/- free of interest, in support of which he has filed his identity, along with copies of bank statements of the firm and his affidavit confirming the transfer of loan amount of Rs.7,00,000/- by cheque from his partnership concern through ICICI bank Account No. xxxx2543. The Ld.AR further took us through the bank statements placed in Paper Book Page No. 62 and submitted that on the date of advancing the loan the total bank balances as per bank statements was Rs.18.06 lakhs out of which Rs.7,00,000/- has been advanced as loan.

Similarly, referring to Page No. 64 to 72 of the Paper Book, the Ld AR pointed 8. out that Shri P.V.N. Bhaskar Rao , the other loan lender is a Government employee ( doctor ) who has advanced an amount of Rs.8,00,000/- to the assessee through banking channel and as it is evident from his bank statements , he had an amount of Rs.6.76 lakhs as opening balances in bank at the beginning of the year as on 01.04.2017 and after credits of salary in the bank , over the months , there was sufficient balances in his account to have advanced an amount of Rs.8,00,000/- as loan on 17.07.02017 , in support of which the lender has filed an affidavit which is filed as part of this Paper Book.

Referring to all the above documents, Ld.AR of the assessee submitted that 9. there was never any dispute about identity of the loan lenders and the genuineness of the transactions which has flown from respective bank accounts , it is only the creditworthiness of the lenders which were doubted by the lower authorities , has been proved from the respective bank statements which are also supported by confirmations and income tax returns from the lenders and respective sworn affidavits. He further pointed out that in course of assessment proceedings copies of bank statements of all the loan lenders were filed but the same has not been given any cognizance by the Ld.AO in course of assessment proceedings.

He further submitted that regarding the identity of the creditors there is no 10. dispute and regarding the capacity of creditors to advance loan is fully established from the bank statements itself where the balances available with each of the creditors all throughout the year is more than sufficient to advance the loans that they have given to the assessee. He submitted that in case of any doubts regarding the documentary evidences submitted it was incumbent on the part of the Ld.AO to have caused enquiry by summoning the parties and the Ld.AO was not justified in simply refusing to admit the evidences filed before him or in other words to simply brush aside documentary evidences without gathering any material in rebuttal. As such Ld.AR prays for deletion of the addition on the ground that the burden of proof that lie upon the assessee stands discharged and now the onus is shifted on the revenue to bring something in rebuttal of the same, which the Ld.AO has not done.

Ld. Departmental Representative (hereinafter in short “Ld. DR”) relied on the 11. order of the Ld. CIT(A) but submitted that examination of the loan lenders is required in this case, considering the fact that the affidavits of all the three lenders are being filed now before the Tribunal which is a fresh evidences on record and if the said affidavits been filed at the assessment stage , the AO would have caused an enquiry by examining the parties and only then he could have arrived at a reasonable satisfaction regarding the genuineness of the transactions. As such, Ld. DR prayed that the matter may be remanded back to the file of Ld.AO for examination of the loan lenders on the basis of documentary evidences submitted by each one of them, and the Ld AR has also accepted to the said proposal.

We have heard the rival submissions and considered the materials on record 12. and we find that the documentary evidences have been filed first time before the Hon’ble Tribunal regarding the affidavits and other submissions contained in the Paper Book consisting of acknowledgement of Income tax records of the loan lenders, which needs verification by the AO and as such, in the interest of justice, we are of the opinion that these documentary evidences need to be examined by the Ld.AO to arrive at a proper satisfaction regarding the genuineness of the loans and the AO will also be entitled to examine the loan creditors on the strength of their affidavits filed. As such, we remand the matter back to the file of Ld.AO for fresh adjudication for considering all documentary evidences and after conducting necessary verification and examining of the loan creditors to his satisfaction and the assessee is also directed to file all necessary papers and documentary evidences in support of his claim and to fully cooperate in assessment proceedings.

We have not expressed any opinion on merits. 13.

In the result, appeal of the assessee is allowed for statistical purposes. 14.

Order pronounced in the open court on 12.06.2026. Sd/- Sd/- OMKARESHWAR CHIDARA UDAYAN DAS GUPTA ACCOUNTANT MEMBER JUDICIAL MEMBER Visakhapatnam Dated: 12.06.2026 Giridhar, Sr.PS Copy to: CHERUKURI SURESH BABU, D.NO.31-3-52, SUKHEEBHAVA NURSING 1 HOME, KANCHERLA VARI STREET, PALAKOL-534260, ANDHRA PRADESH INCOME TAX OFFICER, WARD-1, ITO, AAYAKAR BHAVAN, DODDIPATLA 2 ROAD, PALAKOL-534260, ANDHRA PRADESH

3 THE PCIT / CIT, 4 THE D.R., ITAT, VISAKHAPATNAM BENCH 5 GUARD FILE

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