BHANWAR LAL KHATIK,BHILWARA vs. ITO, WARD-1, BHILWARA

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR

BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 924/Jodh/2024 (Assessment Year 2014-15) Bhanwar Lal Khatik ITO, Bhilwara 10-A-28, RC Vyas Colony, Bhilwara, Rajashan, 311001 PAN:ACAPK9434C Assessee by Shri Amit Kothari, CA (Physical) Revenue by Shri Arvind Kumar Gehlot, Addl. CIT-DR (Virtual) Date of Hearing 03 / 06 / 2026. Date of Pronouncement 30 / 06 / 2026.

ORDER DR. MITHA LAL MEENA, A.M.: This appeal is filed by assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the NFAC/CIT(A)] dated 10.12.2024 with respect to the assessment years 2014-15 challenging therein sustaining an addition of Rs. 74,42,550/- as unexplained investment under Section 69 of the Income Tax Act, 1961.

2 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) 2. We have heard both the sides, perused the material on record and the impugned order. Admittedly, the proceeding were initiated under Section 148 by issuing a notice under Section 148 based on information received from National Spot Exchange Limited (NSEL) vide letter dated 25.05.2017, where assessee’s name appeared in that information. The AO has passed the assessment order based on information that investment made on the NSEL Exchange amounting to Rs. 74,42,550/- and added to the return of income of the assessee as unexplained under Section 69 of the Act.

6.3 I have gone through the grounds of appeal, statement of facts. assessment order and the submissions of the appellant. It is argued by the appellant that the AO did not verify loan agreement, ledger account with NBFC, confirmation letter of due loan amount, my payment, nature of working submitted by me. The submissions and the documents filed by the appellant have been verified. It is submitted that each and every contract was 90% financed by Geojit Credit P Ltd and the appellant paid 10% of the contract

3 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) value. However it is seen from the credit whereas In facility agreement with the financer M/s. Geojit Credit P Ltd. that financier has granted / agreed to grant the credit facilities upto a maximum limit of Rs. 4,50,00,000/- provided the amounts receivable by the borrower under the several contacts of sale in respect of which advance are sought are made payable to financier directly either by tendering contract notes for the amounts in accordance with the relative contracts of sale or by executing necessary letters of authority. Nowhere it is mentioned that 90% will born by them and 10% by the appellant. view of the above discussion, it is held that the AO correctly held that the assessee failed to discharge the onus vested on him by not filing necessary explanation of source of investment with sufficient documentary evidence. Therefore, the addition of Rs. 74,42,550/- made by the AO are confirmed u/s. 69 of the Act as the source of which remain unexplained and unsubstantiated. Ground No. 3 and 4 are dismissed.

4 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) Ld. CIT(A) has not considered the facts on validity of the reassessment proceeding that no independent enquiry was made from the assessee or NSEL; that AO did examine whether the alleged income truly escaped assessment and that the AO did not call for material on the basis of NSEL flagged the assessment transaction as suspicious.

1.6. The appellant had entered into a Credit Facility Agreement with GCPL for a sum of Rs.4,50,00,000/-. The finance amount under each transaction was directly disbursed by GCPL to the Broker, M/s Geojit Comtrade Limited (GCL), and after settlement,

5 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) the loan along with interest was repaid by GCL to GCPL directly. No transaction amount was routed through the Assessee's bank account. 1.7. The outstanding loan balance with GCPL on 31.07.2013 (when NSEL Exchange was suspended) stood at Rs.69,04,245/-. The Assessee's personal investment (margin money) paid from his Kotak Mahindra Bank account amounted to only Rs.8,11,918/-. 1.8. It is further seen from the ledger of the assessee in the books of M/s. Geojit Credits Pvt. Ltd. that the assessee has made repayment of loan during the financial year 2013-14 at various dates aggregating to Rs.2,20,20,620/-. In view of the same, assessee's contention that his investment is only limited to Rs.7,44,255/- being 10% of the total purchase value of Rs.74,42,550/- is not correct. The purchase of the contract aggregating to Rs.74,42,550/- is made on behalf of the assessee by his broker Geojit Commotrade Ltd and in view of the above, the same shall be considered as investment made by the assesee. 1.9. In the present case, the Assessee has provided a detailed, cogent, and fully documented explanation demonstrating that: (i) The actual investment by the Assessee from his own funds was limited to 10% margin money of approximately Rs.7,44,255/-; (ii) The balance 90% was financed by GCPL, an RBI-registered NBFC, under a duly executed credit facility agreement for Rs.4,50,00,000/-;

6 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) (iii) GCPL directly disbursed the finance amount to the Broker (GCL) and received repayments directly from GCL money was routed through the Assessee's account; no (iv) The Assessee had repaid loans of Rs.2,20,20,620/- during F.Y. 2013-14 on various dates, demonstrating the genuine and bona fide nature of the borrowing; (v) The entire transaction was a legitimate commodity contract financed by a registered NBFC, and the outstanding amount of Rs.72,66,467/- represents the amount still recoverable from NSEL. 1.10. The Appellant participated in paired contract transactions on the NSEL platform during the Financial Year 2013-14 (Assessment Year 2013- 14). The total outstanding purchase contract value as on 31.07.2013 (when the NSEL Exchange was suspended) stood at Rs. 75,23,640/- 1.11. Of the said total contract value, 90% i.e., Rs. 69,04,245/- was financed directly by GCPL an RBI-registered NBFC. The finance was disbursed directly to M/s. Geojit Comtrade Limited (the broker company) as follows: Date Amount(Rs.) Particulars 17.07.2013 27,46,712/- Paid by GCPL Directly to broker (GCL) 25.07.2013 41,57,533/- Paid by GCPL directly to broker (GCL) Total 69,04,245/- Outstanding on 31.07.2013 1.12 The remaining 10% margin money was paid by the appellant from his own kotak Mahindra bank account, as detailed below:

7 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) Date Amount(Rs.) Bank 25.03.2013 3,00,000/- Kotak Mahindra Bank 28.03.2012 13,100/- Kotak Mahindra Bank 06.04.2013 4,82,818/- Kotak Mahindra Bank 19.06.2016 16,000/- Kotak Mahindra Bank Total 8,11,918/- 1.12. The total amount recoverable from NSEL as on that date was Rs. 72,66,467/- which is approtionable as under: Claimant Amount(Rs.) GCPL (Finance Company-90% share) 64,83,113/- Interest payable to GCPL 55,825/- Bhanwar Lal Khatik (Assessee- Own 10%) 7,27,529/- Total recoverable from NSEL 72,66,467/- 1.13. The outstanding financed amount of Rs. 64,83,113/- due as on 31.03.2014 is owed by the Appellant to GCPL (a RBI-registered NBFC) and will be repaid as and when the same is recovered from NSEL. 1.14. It is categorically submitted that all disbursements and repayments of loan amounts were made directly between GCPL and M/s. Geojit Comtrade Limited (the broker). No finance amount was ever routed through the Appellant's personal bank account. The Appellant's own bank account reflects only the aforesaid 10% margin payments totalling Rs. 8,11,918/-. 1.15. Section 69 of the Act can be invoked only when the Assessee is found to have made investments which are not recorded in the books of account and the Assessee offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory. Both conditions must co-exist.

8 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) 1.16. The legal position is well-settled that the burden of proof under Section 69 rests first upon the Revenue to establish that the assessee has made investments that are (a) not recorded in the books of accounts and (b) not satisfactorily explained. Only thereafter does the onus shift to the assessee. In the present case, both conditions are clearly absent. 1.17. Reference is made to the Bangalore Bench of ITAT in Smt. Amiya Bala Paul v. CIT [2003] 130 Taxman 511 / 262 ITR 407 (SC), wherein the Hon'ble Supreme Court reiterated that the AO must first prove that the assessee has made investments not recorded in the books of account. Mere reference to the DVO report or third-party information is insufficient. In the present case, the Appellant's investment is duly recorded and fully explained with supporting documentation. 1.18. The Madras High Court in CIT v. N. Swamy [1998] 241 ITR 363 (Mad.) held that: 'The burden of showing that the assessee had undisclosed income is on the Revenue, and that burden cannot be discharged by merely relying on statements made by the assessee to a third party in connection with a transaction not directly related to the assessment.' The said ratio directly applies in the facts of the present case. 1.19. The ITAT Delhi in Anova Infracon Private Limited (ITA Nos. for AY 2011-12 and 2012-13) has recently held that additions under Section 69 cannot be sustained where the investment is duly recorded in the books of accounts and supported by explained

9 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) banking transactions. 10% from In the present case, the investment is fully traceable the Appellant's Kotak Mahindra Bank account and 90% from the GCPL loan disbursed directly to the broker. 6. On the other hand the Ld. DR relied on the impugned order.

10 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) 8. In principle, the Section 69 required that the investment must be unexplained, however, in the present case assessee has provided satisfactory explanation with supporting documentary evidences and hence the section has no application as held in the case of S. Madhavi, Hyderabad Vs. ACIT ITA No. 1936/Hyd/2011, ITAT Hyderabad, that when the assessee has explained the source of investment by producing necessary evidence, and the AO had not independently established any contrary material, the addition under Section 69 cannot be sustained.

11 ITA No. 924/Jodh/2024 (Assessment Year 2014-15) Order pronounced on 30 / 06 / 2026 under Rule 34(4) of the Income Tax Appellate Tribunal Rules,1963.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 30 / 06 / 2026. Pritesh Vaishnav PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,