VEERA PERIANNAN SUBRAMANIAM RADHAKRISHNAN,ERODE vs. ACIT, CIRCLE-2,, ERODE

आदेश / O R D E R PER MANU KUMAR GIRI, JM:

This appeal filed by the assessee is directed against the order passed by the National Faceless Appeal Centre (NFAC), Delhi dated 08.07.2025 for the Assessment Year 2017-18. 2. Brief facts of the case are that the assessee is an individual engaged in the retail business of food and starch products in the name and style of “Sree Mangalmoorthi Starch Industries”. The

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 2 :: assessee filed return of income for Assessment Year 2017-18 on 29.10.2017 declaring total income of Rs.13,37,640/-.The case was selected for scrutiny under CASS for verification of unsecured loans. Notice u/s. 143(2) of the Income Tax Act, 1961 was issued and assessment u/s. 143(3) was completed on 21.12.2019 assessing total income at Rs.2,05,01,764/- after making addition of Rs.1,91,64,124/- u/s. 68 of the Act treating unsecured loans as unexplained cash credits.During assessment proceedings, the Assessing Officer observed that the assessee had disclosed unsecured loans amounting to Rs.1,91,64,124/- in the balance sheet.The Assessing Officer called upon the assessee to furnish details of opening and closing balances, purpose of loans, interest details, PAN details of lenders and confirmations and supporting evidence. According to the Assessing Officer, certain creditors had not filed returns of income and PAN details of some lenders were either unavailable or invalid and also creditworthiness of lenders was not established. The Assessing Officer held that the assessee failed to discharge the burden cast u/s. 68 of the Act regarding identity, genuineness and creditworthiness of the creditors and accordingly treated the entire sum of Rs.1,91,64,124/- as unexplained cash credit u/s. 68. 3. Aggrieved by the assessment order, the assessee preferred appeal before the NFAC/CIT(A).The ld.CIT(A), after examining the ledger accounts and materials filed during appellate proceedings, observed that the Assessing Officer had considered the closing balances of unsecured loans as fresh loans received during the year. The ld. CIT(A) found that, except loan transactions pertaining to M/s. Moorthy Textile, most of the balances represented opening balances brought forward from earlier years.The ld. CIT(A) deleted

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 3 :: the addition of Rs.1,91,64,124/- made by the Assessing Officer. However, invoking powers of enhancement u/s. 251(2) of the Act, the ld. CIT(A) treated fresh loans received from M/s. Moorthy Textile amounting to Rs.1,07,15,871/- as unexplained cash credit u/s. 68 and also disallowed interest expenditure of Rs.3,56,817/- relating thereto, thereby enhancing income by Rs.1,10,72,688/-.The ld. CIT(A) examined the ledger accounts, balance sheet and confirmation details furnished by the assessee. The ld. CIT(A) found thatin respect of 10 creditors, the balances represented brought forward opening balances from earlier years and the Assessing Officer erroneously treated closing balances as fresh credits during the relevant previous year. Fresh loan during the year was substantially only from M/s. Moorthy Textile. Accordingly, the ld. CIT(A) deleted the addition of Rs.1,91,64,124/- made by the Assessing Officer.However, the ld. CIT(A) observed that the assessee failed to furnish PAN, income tax return, bank statement and confirmation duly signed by M/s. Moorthy Textile. He also note that the assessee failed to establish identity and creditworthiness of the creditor and genuineness of transaction. Accordingly, the ld. CIT(A) enhanced the assessment by adding Rs.1,07,15,871/- u/s. 68 and disallowing interest expenditure of Rs.3,56,817/-. Total enhancement made was Rs.1,10,72,688/-. Aggrieved by the enhancement made by the ld. CIT(A), the assessee is in appeal before the Tribunal. 4.The ld. Authorised Representative for the assessee submitted that the assessee had furnished extensive documentary evidence before the Assessing Officer as well as before the CIT(A), including return of income, financial statements, tax audit report in Form 3CB- 3CD,replies to notices u/s. 142(1),group summary of sundry

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 4 :: creditors and debtors, bank statements, break-up of unsecured loans, cash book, ledger accounts, loan confirmations, VAT returns, details of repayments, written submissions before appellate authority. The assessee submitted that all loans were received through banking channels and substantial repayments were also made through banking channels. It was submitted that the learned CIT(A) erred in invoking enhancement powers u/s. 251(2) of the Act beyond permissible jurisdiction. The ld. AR submitted that the issue relating to unsecured loans had already been examined during scrutiny assessment and therefore enhancement amounted to review of the assessment order. It was further submitted that the assessee had subsequently filed complete documentary evidences relating to M/s. Moorthy Textile before the Tribunal including confirmations, ledger accounts and related financial documents forming part of the paper book index placed on record. The assessee contended that adequate opportunity was not granted before enhancement and principles of natural justice were violated. The assessee prayed that the matter may be restored to the Assessing Officer for fresh examination of all evidences filed before the Tribunal. 5. The ld. DR supported the order of the ld. CIT(A). It was submitted that the assessee failed to furnish essential evidences such as PAN, ITR, bank statement and confirmation of M/s. Moorthy Textile before the CIT(A). The assessee failed to establish identity and creditworthiness of the lender therefore, the ld. CIT(A) rightly exercised enhancement powers u/s. 251(2) of the Act. However, the ld. DR fairly submitted that if additional evidences have now been filed before the Tribunal, the matter may be restored to the Assessing Officer for proper verification.

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 5 :: 6. We have heard rival submissions and perused the materials available on record including the paper book filed by the assessee. Paper book filed by the assessee is as under:

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 6 ::

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 7 :: From the records, it is observed that the ld.CIT(A) has categorically recorded that the Assessing Officer wrongly treated opening balances as fresh loans received during the year and consequently deleted the addition of Rs.1,91,64,124/-.However, in respect of loans received from M/s. Moorthy Textile amounting to Rs.1,07,15,871/- and related interest expenditure of Rs.3,56,817/-, enhancement was made on the ground that the assessee failed to furnish adequate documentary evidence. Before us, the assessee has filed extensive materials as reflected in the paper book index including confirmations, ledger accounts, bank statements, unsecured loan details, related party loan details, written submissions, confirmation of accounts and loan ledgers and supporting financial documents. The assessee has also contended that substantial repayments were made in subsequent years through banking channels and relevant evidences have been placed on record. Considering the entirety of facts and circumstances of the case, and in the interest of substantial justice, we are of the considered opinion that the entire issue relating to unsecured loans from M/s. Moorthy Textile and consequential interest expenditure requires fresh examination by the Assessing Officer in light of the complete materials now filed before the Tribunal.Accordingly, we set aside the impugned appellate order on the issue of enhancement and restore the matter to the file of the Assessing Officer with a direction to examine afresh all documents and evidences filed before the Tribunal as per the paper book index and decide the issue in accordance with law after providing adequate opportunity of hearing to the assessee. The assessee is also directed to cooperate and furnish all necessary documents as may be called for by the Assessing Officer. We make it clear that we have not expressed any

ITA No.2229/Chny/2025 (AYs: 2017-18) Veera Periannan Subramaniam Radhakrishnan Vs ACIT-2 :: 8 :: opinion on merits of the addition and all issues are left open for adjudication. 7. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open court on 12th day of May, 2026 at Chennai. Sd/- Sd/- (प�ावती एस) (मनु कुमार िग#र) (PADMAVATHY S) (MANU KUMAR GIRI) लेखा सद#या/ACCOUNTANT MEMBER $या�यक सद#य/JUDICIAL MEMBER

चे$नई/Chennai, &दनांक/Dated: 12th May, 2026. SNDP आदेश क� ��त'ल(प अ)े(षत/Copy to: 1. अपीलाथ�/Appellant/Assessee 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF