PINKY CREATION,SURAT vs. ITO, WARD-2(2)(1), SURAT

Brief facts of the case are that the assessee firm is engaged in the business of Art Silk Cloth. The assessee filed its return of income on 28.09.2012, declaring total income of Rs.11,37,825/-. The return was selected for scrutiny assessment and assessment order was passed u/s. 143(3) on 06.12.2014, assessing total income at Rs.12,51,720/-. Thereafter the case was reopened by issuing notice u/s. 148 of the Act and reassessment order determining the total income at Rs.32,97,279/- by making following additions: (i) Rs.20,00,110/- u/s 68 by treating the genuine unsecured loan taken from Veshnawy Vyapaar and Wipro Supplier P. Ltd. as unexplained cash credit and

Aggrieved by the reassessment order, the assessee filed appeal before the Addl./JCIT(A) who uphold the addition made by the A.O. by relying upon various decisions of Hon’ble Supreme Court and High Court and dismissed the appeal filed by the assessee.

Aggrieved against the appellate order, the assessee is in further appeal before us assessee in ITA No. 1473/SRT/2025 for AY 2012-13 raising the following Grounds of Appeal: 1) That on the facts and in the circumstances of the case as well as in law, id ADDL JCIT (A) has erred in upholding the validity of re-opening of the case of appellant uls 147/148 of the I. T. Act, 1961 (the Act), whereas the entire proceeding carried out u/s 147/148 and the assessment order passed uls 147 r.w.s 143(3) of the Act are unjustified, invalid, bad in law and beyond the law. Appellant prays for quashing the same.

The Grounds of appeal raised by the assessee in ITA No. 1474/SRT/2025 for AY 2013-14 are as follows: “(1) That on the facts and in the circumstances of the case as well as in law, ld ADDL/JCIT (A) has erred in upholding the validity of re-opening of the case of appellant u/s 147/148 of the I.T. Act, 1961 (the Act), whereas the entire proceeding carried out u/s 147/148 and the assessment order passed u/s 147 r.w.s. 143(3) of the Act are unjustified, invalid, bad in law and beyond the law. Appellant prays for quashing the same (2) That on the facts and circumstances of the case as well as in law, ld. ADDL/JCIT (A) has erred in upholding the addition of Rs.10,00,000/- u/s 68 of the Act by wrongly holding the genuine and duly proved unsecured loan received by the appellant as unexplained cash credit. Addition so made and sustained is grossly wrong and unjustified on facts as well as in law and is contrary to the settled law laid down in various case laws relied upon by the appellant but not considered / followed by ld. ADDL/ JCIT (A). Appellant prays for deleting this wrong and unjustified addition. (3) That on the facts and circumstances of the case as well as in law, ld. ADDL/JCIT (A) has erred in upholding the disallowance of interest paid of Rs.58,521/- on above unsecured loan. (4) That the ld. CIT (A) has also erred in upholding the interest charged u/s 234B of the Act in respect of above wrong and unjustified additions. (5) Appellant craves leave to add, alter, delete or modify any ground of appeal.

The Ld. Counsel for the assessee submitted that the JCIT(A) sustained the addition of Rs.20,00,110/- under section 68 of the Act by wrongly holding the genuine and duly proved unsecured loans received by the appellant as unexplained cash credits. Addition so made and sustained is grossly wrong and unjustified on facts as well as in law and is contrary to the settled law laid down in various case laws. With regard to the disallowance of interest, Ld. JCIT(A) uphold the addition made by the AO. The Ld. Counsel submitted a paper book containing 126 pages including various case laws. The Ld. Counsel placed copies of ‘reason recorded’ for re-opening the case as communicated dated 01.05.2019, questionnaire issued by the AO, details and evidences of unsecured loans received, Tax Audit Report filed along with details of unsecured loans received during year, relevant information, materials and statements etc. The Ld. Counsel submitted that all requisite documents were filed before AO as well as Ld. JCIT(A). The Ld. Counsel relied upon the decisions of Hon’ble Supreme Court and High Courts in cases of (i) ITO vs. Kayathwal Estate (P.) Ltd., 139 taxmann.com 317 (SC), (ii) ACIT vs. SABH Infrastructure Ltd., 159 taxmann.com 184 (SC), (iii) CIT vs. Orissa Corporation (P.) Ltd., 186 taxmann.com 1163 (SC), (iv) SABH Infrastructure Ltd. vs. ACIT, 99 taxmann.com 4096 (Del.), (v) CIT vs. Ranchhod Jivabhai Nakhava, 21 taxmmann.com 159 (Guj.), (vi) PCIT vs. Ambe Tradecrop (P.) Ltd., 145 taxmann.com 697 (Guj.).

The Ld. Sr. DR for the Revenue supported the orders passed by the lower authorities.

We have heard rival submissions of both parties and perused the material available on record. The Jurisdictional High Court of Gujarat in the case of PCIT vs. Ambe Tradecorp (P.) Ltd. (supra) held that where assessee took loan from two parties and assessee had furnished requisite material showing identity of loan givers and that assessee was not beneficiary as loan was repaid in subsequent year, no addition u/s 68 could be made on account of such loan. The Jurisdictional High Court of Gujarat in case of CIT vs. Ayachi Chandrasekhar Narsangji, 42 taxmann.com 251 (Guj.), wherein it was held that a department had accepted repayment of loan for subsequent year, no addition was to be made on account of cash credit. In the light of above judgements cited supra, the additions made by the AO are not sustainable in law. The Ld. Sr. DR for the Revenue unable to controvert any adverse findings.

Respectfully following the judgment of Hon’ble Jurisdictional High Court, we are of the considered opinion that additions made by the lower authorities are not sustainable in law. Therefore, the additions are hereby deleted and the appeal filed by the assessee is hereby allowed.

In the result, the appeals filed by the Assessee in ITA Nos.1473 & 1474/SRT/2025 for AYs 2012-13 & 2013-14 are allowed.