SANTOSH DEVI JAIN,BALOTRA vs. ITO , BALOTRA

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ITA 974/JODH/2025Status: DisposedITAT Jodhpur21 May 2026AY 2022-2310 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the lower authorities erred in treating loan repayments as unexplained receipts under Section 68 without properly considering the evidence provided by the assessee. The Tribunal also noted a violation of natural justice due to the lack of an effective opportunity for hearing.

What were the facts?

The assessee challenged an addition of Rs. 53,31,403/- for alleged unexplained bank deposits. The assessee argued that these were repayments of loans and advances, supported by confirmations and bank statements, and that the lower authorities failed to appreciate this evidence.

What were the issues?

Whether loan repayments deposited in the bank account constitute unexplained income under Section 68 when supported by credible evidence, and whether the assessment order is invalid due to a lack of effective opportunity for hearing.

Which sections of the Income-tax Act were involved?

Section 68,Section 144B,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR

For Appellant: Shri Amit Kothari, CA (Virtual), Smt. Ayushi Sharma. JCIT-DR (Virtual)

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. 794/Jodh/2025 (Assessment Year – 2022-23) Santosh Devi Jain Income Tax Officer Kesharimal Mahendra Kumar, Balotra Jhuni Dhan-344002 PAN No. ABRFS 4252 Q Assessee by Shri Amit Kothari, CA (Virtual) Smt. Ayushi Sharma. JCIT-DR (Virtual) Revenue by Date of Hearing 07 / 05 / 2026. Date of Pronouncement 21/ 05 / 2026. ORDER DR. MITHA LAL MEENA, A.M.: This appeal by assessee is filed against the order of National Faceless Appeal Centre [hereinafter referred to NFAC/CIT(A)] dated 09.10.2025 with respect to Assessment Year 2022-23 challenging therein validity of assessment order and in addition of Rs. 53,31,403/- for alleged unexplained deposit in the bank account.

2.

At the outset, the Ld. Counsel for the assessee has submitted that the order passed by the Ld. CIT(A) is bad in law as the addition sustaining is totally unjustified by not appreciating the facts of the case on record. The AR argued that

2 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 the impugned order was perverse to the facts on record as the Ld. CIT(A) has not considered and appreciated the details submitted by the appellant before the AO and in the first appellate proceedings. The order is, therefore, invalid and is contrary to the provisions of law. In support, he placed reliance on the judgment of Hon’ble Bombay High Court in the case of Lakshmi Bhattarcharya Vs. National Faceless Assessment Centre [2022] 140 taxmann.com 27 (Bom.), where it was held held that failure to provide an effective opportunity of hearing as mandated u/s 144B renders the assessment order invalid and liable to be quashed. Similarly, the Hon’ble Delhi High Court in Sanjay Aggarwal Vs. NFAC [2022] 444 ITR 161 (Del.), quashed assessment orders passed without granting effective opportunity of personal hearing through video conferencing, holding that such orders are in violation of the mandatory procedure prescribed u/s 144B.

3.

In merits of the case, the Ld. AR has explained that the appellant has given various loans and advances and that repayment of these advances were received during the year itself. However, the AO merely observing that assessee has not satisfactorily explained and accordingly made an addition of Rs. 53,31,403/-. The Ld. CIT(A) has rejected the appeal of the assessee merely endorsing the finding of the AO.

3 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 4. The appellant submitted details before the lower authorities regarding the repayment of advances given. It was submitted that the addition made were in violation of the principles of natural justice. Repayment of loan given cannot be treated as undisclosed income. The details of additions made and reply of the assessee are summarized in tabular form as under:

Name of Party and PAN Amount Received Details submitted Prakash Textiles AAIPC5569] 39,50,000 Pages 19: Reply submitted to AO in response to notice. p. 21: Notice u/s 133(6) issued by AO to debtor. p. 25. Acknowledgement of return & Computation. p. 29: Financial Statements. p. 33: Account confirmation. There is opening loan given 40,20,627/-. No loan given during the year. Only repayment received. Interest received Rs. 2,12,666/- duly accepted. p.35: Bank Statement AS Creations 10,00,000 р. 41 Account Confirmation. ADNPJ6930E Advance given on 18.9.2021 and repaid on 1.10.21, for 12 days. Interest received Rs. 3,846/-. Nitex Textile Mills 2,00,000 p. 42: Account Confirmation p. 43: Copy of Bank statement Rs. 5 lakhs was given on 3.9.21 which was repaid Rs. 3 lakhs on 25.10.21 & Rs. 2 lakhs on 12.11.21. Interest Rs. 9,900/- received shown as income. Cash Deposit in bank 17,000 From Cash Balance on 13.9.2021 Transfer from own BUCB Bank 11,000 From Cash Balance on 17.6.2021 a/c Addition for Interest Income 1,42,403 р. 4 Details of Interest received. p. 2 Computation of total income.

4 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 Interest from : a. Tansukhraj Harsh Kumar HUF Rs. 44,640/- b. Nitex Textiles Mills Rs. 9,900. c. Subham Creations. Rs. 22,260/- d. Vankal Silk Mills. Rs. 54,603/- e. Transfer from BUCB Bank Rs.11,000/- on 17.2.2022 Total 53,31,403/-

5.

The Ld. AR contended that the Ld. CIT(A) erred 'in treating the amounts received in the bank account on account of repayment/return of loans advanced from various parties as 'unexplained receipts' under Section 68 of the Act. All borrowers confirmed their outstanding loan balances through written confirmations, which were duly submitted. The Ld. CIT(A) failed to consider these confirmations while passing the impugned order. The Ld. AR referred to the judgment of CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67 (Bom.), that where the assessee's explanation is credible and corroborated by the counter party, and the AO does not bring contrary material, addition under Section 68 is not justified. Reliance is also placed on Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC), wherein the Supreme Court held that the AO cannot make additions mechanically without discharging his duty to verify the explanation submitted by the assessee. In

5 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC), the Hon'ble Supreme Court held that where the assessee satisfactorily explains the credit entries in his accounts, the AO has no jurisdiction to treat the same as income from undisclosed sources. The Court observed that the AO must make a proper enquiry before rejecting the explanation, and mere non- verification or non-satisfaction cannot substitute for a legally reasoned rejection. Similarly, in Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), the Supreme Court reiterated that whether an explanation is satisfactory must be judged in the light of the materials on record. The Court disapproved of a mechanical rejection of explanation, emphasizing that the AO must consider all material, documentary and oral, placed before him. In the present case, the Ld. AO has not assigned a single reason as to why the balance confirmations, bank statements, interest workings, and third-party replies are unacceptable. Thus, the order is completely silent on this aspect. The Hon'ble Gujarat High Court, in CIT v. Midas Paper Board Products (P) Ltd. [2016] 76 taxmann.com 131 (Guj.), held that when the assessee submits confirmations from the parties supported by PAN details and bank statements, the AO cannot make an addition under Section 68 without bringing any material on record to controvert or disprove such evidence. The AO's duty is not merely to accept or

6 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 reject the explanation must enquire and reach a reasoned conclusion. The Hon'ble Supreme Court, in the judgment of Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC), held that, the assessee is required to explain the nature and source of a credit in his books of accounts, and if the assessee has discharged this burden with proper evidence, the AO cannot simply reject such explanation without any counter-material. In CIT v. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 (SC), it was held that once the assessee proves the identity of the creditor, genuineness of the transaction, and the creditworthiness of the creditor, the AO cannot treat the same as unexplained credit under Section 68 of the Act. Thus, all three conditions have been amply satisfied in the present case through confirmations, PANs of parties, and bank statements.

6.

The Ld. AR contended that the Id. CIT(A) has erred in sustaining the charging of tax u/s 115BBE in relation to the addition made on account of alleged unexplained purchases as the section 115BBE of the Act is a machinery provision to levy tax on income and it cannot enlarge the ambit of Section 68, 69 etc. of the Act to create a deeming fiction to tax any sum already credited / offered as income.

7.

The Ld. DR relied on the impugned order.

7 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 8. We have heard both the sides perused the material on record, impugned order and case law cited before us. Admittedly, we find that the appellant assessee has given loans and advances and repayment against these advances were received by the assessee during the year under consideration. The Ld. CIT(A) has observed that the addition made for repayment of advances because the assesse has failed to produce any credible evidence to establish that she indeed had the financial capacity and means to give such substantial loans in the earlier years or even in the year under consideration. The ld. CIT(A) has noted that on critical and objective examination of these evidences reveals several severe infirmities and discrepancies that cast doubt on the genuineness of the entire transaction and the explanation offered by the appellant. It is noted that the additions have been made and confirmed by the Ld. CIT(A) without granting effective opportunity of personal hearing through video conferencing which holds that assessment order is in violation of mandatory procedure prescribed u/ 144B of the Act. On similar facts, the Hon’ble Delhi High Court in the case of Sanjay Aggarwal Vs. NFAC (supra) has quashed assessment orders passed without granting effective opportunity of personal hearing through video conferencing.

8 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 9. It is seen that the disputed amount received in the bank account of the assessee are on account of receipts which are treated by the Ld. CIT(A) as unexplained receipts u/s 68 of the Act without assigning specific reasons how these repayment receipts were unexplained by bringing any material evidence on record and ignoring the confirmations filed by the appellant in support of the receipts of the loan on repayment and interest thereon from M/s Prakash Textiles, AS Creations and Nitex Textile Mills and their details filed with reference to cash deposit in bank, transfer from own BUCB Bank account and interest income as per the details tabulated here above.

10.

In our view, the decision in confirming addition u/s 68 of the Act of the Ld. CIT(A) brushing aside the confirmations filed by the appellant and the assesee’s explanation duly supported with credible and corroborated evidence by counter party confirmation is illegal. Our view gets support by the judgment delivered by the Hon’ble Bombay High Court in the case of CIT Vs. Bhaichand H. Gandhi (supra) and by the judgment of Hon’ble Apex Court in the case of Roshan Di Hatti Vs. CIT (supra) where it was held that AO cannot make additions mechanically without discharging his duty to verify the explanation submitted by the assessee. In the case of CIT Vs. Orissa Corporation (P) (Ltd.) (supra), the Hon’ble Apex Court has

9 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 held that once assessee proves the identity of the creditor, genuineness of the transaction, and the creditworthiness of the creditor, the AO cannot treat the same as unexplained credit u/s 68 of the Act. In the present case, the appellant assessee has amply satisfied all the three conditions through confirmation, PANs of parties, and bank statements which remained unrebutted by the Department.

11.

We, therefore, hold the decision of the Ld. CIT(A) is perverse to the facts on record and in confirming additions made by the Ld. AO.

12.

In the above view, we accept the grievance of the assessee as genuine and as such the addition of Rs. 53,31,403/- is deleted.

14.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 21/05/2026.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 21/05/2026. Nimisha Sr. PS True Copy

10 ITA No. 974/Jodh/2025 Asst. Year: 2022-23 Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File BY ORDER,

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