DCIT, ALIGARH vs. LIQUOR STREET, ALIGARH

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA(DB) BENCH, AGRA BEFORE: M BALAGANESH, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 619/Agr/2025 Assessment Year: 2020-21 DCIT, Aayakar Bhawan, Vs. Liquor Street, 3/13, Panchwati, Aligarh-202001 Janakpuri, Aligarh-202001 PAN :AAHFL5526B (Appellant) (Respondent) Assessee by Shri Deepak Singh, Adv. Department by Shri Shailendra Srivastava, Sr DR Date of hearing 19.03.2026 Date of pronouncement 19.05.2026 ORDER

PER: SUNIL KUMAR SINGH, JM. This appeal has been preferred against the impugned order dated 14.10.2025 passed in Appeal no. NFAC/2019-20/10193780 by the Ld. Commissioner of Income tax, (NFAC) Delhi, [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment year A.Y. 2020-21, wherein learned CIT(A) has allowed assessee’s appeal. 2. The brief facts under appeal state that respondent assessee e-filed its return of income for A.Y. 2020-21 on 04.11.2020, declaring total income of Rs. 90,06,820/-. The case was selected for scrutiny under CASS for the reason “claim of large value refund, large squared up loans during the year and low income from TCS receipts liquor.” Statutory notices u/s. 143(2) and

ITA No. 619/Agr/2025

142(1) were issued and served upon the assessee. The assessee filed requisite details on ITBA Portal in response thereof. After considering assessee’s response, the assessing officer observed that the assessee had taken unsecured loans of Rs. 2.23 crores during the year under consideration out of this loan, a sum of Rs. 1,00,00,000/- was taken from one Mr. Radhey Shyam Saraswat. The assessee was asked to prove the identity and credit-worthiness of the lender and genuineness of the transactions. Assessing officer also issued notice u/s. 133(6) of the Act to the lender. After considering replies filed by the assessee and the lender, the assessing officer concluded that the credit-worthiness of the lender and genuineness of the transaction could not be proved and treated the unsecured loan of Rs. 1,00,00,000/- as unexplained and added the same in the hands of the assessee u/s. 68 of the Act as unexplained cash credit vide assessment order dated 26.09.2022 passed u/s. 143(3) r.w.s. 144B of the Act. 3. Assessee filed an appeal before ld CIT(A), who allowed assessee’s appeal and deleted the addition of Rs. 1,00,00,000/- made by the assessing officer u/s. 68 of the Act as unexplained cash credit in the hands of the assessee. 4. Revenue has filed this second appeal on the following grounds: “1. That the CIT(A) has erred in law on facts in deleting the addition made by the AO without appreciating the fact that Assessee was asked to establish the source of the transaction, Identity and creditworthiness and 2 | P a g e

ITA No. 619/Agr/2025

genuineness of the transaction, but he did not reply to this query. Assessee has not proved the source and nature of the transaction. In view of the above the loan amount of Rs. 1,00,00,000/- remains unexplained and was added to the income of the Assessee u/s 68 of the Income Tax Act, 1961. 2. That the CIT(A) has erred in law on facts in deleting the addition made by the AO without appreciating the fact that on perusal of previous ITRs of the lender it is found that the Gross Total Income of the lender for the last 10 AYs cumulatively was only Rs. 64.25 Lakhs, he did not have the creditworthiness of giving loan of Rs. 1 Crore to the Assessee. Hence the Assessing Officer has correctly added to the income of the Assessee u/s.68 of the Income Tax Act, 1961. 3. That the order of the CIT(A) being erroneous in law and on facts in deleting the addition made by the AO and that the order of the Assessing officer be restored.” 5. Perused the records and heard Ld. Sr DR for the appellant revenue and ld representative for the assessee. 6. The main point for determination under appeal is as to whether ld CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by the assessing officer, ignoring the fact that neither the assessee could establish the genuineness of transactions nor could establish the credit-worthiness of lender? 7. Ld Sr DR for the appellant revenue has submitted that the assessee neither proved the source and nature of the transaction in respect of the unsecured loan of Rs. 1,00,00,000/- nor proved the credit-worthiness of the lender Radhey Shyam Saraswat whose cumulative income for last 10 A.Ys. was Rs. 64.25 crores only. Ld Sr DR, thus, supports the assessment order and prays to allow revenue’s appeal.

3 | P a g e

ITA No. 619/Agr/2025

ITA No. 619/Agr/2025

required to substantiate the loan transaction, viz., ledger account copy of the loan, confirmation of the Lender, his bank account statements, his ITR, and bank account statements of the appellant. It is also not in dispute that the provisions of section 68 of the Act underwent a change wef 01.04.2023 by way of insertion of a proviso therein requiring the borrower assessee to also offer an explanation about the nature and source of credit into the books of the lender of the loan to the satisfaction of the AO. In other words, on and from AY 2023-24 onwards, any assessee borrowing any sum of money as loan, will have to not only explain the source of loan so taken, he will have to also explain to the satisfaction of the AO, the nature and source of money given as loan in the books of such a borrower also. Therefore, wef 01.04.2023, the law has undergone a significant change. However, for the AY under consideration, as per the then existing provisions of section 68 of the Act, the appellant had discharged the primary onus which was casted upon it, that is, to prove the source of loan taken by him by furnishing all the basic documents required for the purpose. The appellant has relied on the decision of the Hon'ble High Court of Gujarat in this regard in the case of CIT Vs Rohini Builders [2002] 256 ITR 360 (Guj) wherein it was held as under: Held “ Thus it is clear that the assessee had discharged the initial onus which lays on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders wherever readily available. It has also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source as held by the Bombay High Court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723. The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques." and decision of the Hon'ble High Court of Gauhati in the case of Nemi Chand Kothari Vs CIT & Anr. [2003] 264 ITR 254 (Gauhati) wherein it was held as under: Held “16. What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors arid prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other 5 | P a g e

ITA No. 619/Agr/2025

words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 105 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the assessee to show the source(s) of his creditor nor is it the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must then, the interpretation of Section 68has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income-tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the assessee." 5.3.2 It is further noted that the appellant took the loan during the year under consideration and repaid it to the Lender during the succeeding two AYs as under: 09.02.2021 25,00,000 RTGS, Canara Bank Loan repaid 07.08.2021 40,00,000 RTGS, Canara Bank Loan repaid 04.09.2021 35,00,000 RTGS, Canara Bank Loan repaid In this regard, the Hon'ble High Court of Gujarat has ruled in favour of the assesses in the following decisions: (a) Principal Commissioner of Income-tax v. Ambe Tradecorp (P.) Ltd. [2022] 145 taxmann.com 27 (Gujarat) - In this case it was 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 under section 68 could be made on account of such loan. 6 | P a g e

ITA No. 619/Agr/2025

(b) Commissioner of Income-tax, Rajkot-l v. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat) -In this case it was held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. 5.3.3 From the above, as the appellant seems to have discharged the onus casted upon it in terms of the then existing provisions of section 68 of the Act to explain the source of the loans taken by it from the Lender and further, since the same were repaid by the appellant during subsequent two FYs, I am inclined to accept that addition u/s 68 of the Act was not warranted in this case. Accordingly, the ground raised by the appellant is allowed.”

ITA No. 619/Agr/2025

Gauhati High Court’s decision in Nemi Chand Kothari(supra) as noted hereinabove. The respondent assessee has fully discharged his burden by submitting required documents like ledger account, confirmation of the lender alongwith his bank account statements and ITRs and assessee’s bank statements etc. We do not find error of law or fact in the impugned order passed by ld CIT(A). The aforesaid point is accordingly determined in negative against the appellant revenue and in favour of the respondent assessee. The revenue’s appeal is liable to be dismissed. 11. In the result, the revenue’s appeal is dismissed. Impugned order dated 14.10.2025 is sustained.

Order pronounced on 19.05.2026

Sd/- Sd/- (M BALAGANESH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 19.05.2026