WALTON CONSTRUCTIONS PRIVATE LIMITED,MUMBAI vs. CIRCLE 3(3)(1), MUMBAI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER)

ITA No. 8403/MUM/2025 Assessment Year: 2018-19

Walton Constructions Private Deputy Commissioner of Income Limited, 284, Narshi, Natha, Tax, Circle 3(3)(1), Aayakar Vs. Street Bhat, Bhazar, Mumbai – Bhawan, Mumbai – 400009, 400009, Maharashtra . Maharashtra. PAN NO. AAACW 9088 R Appellant Respondent

Assessee by : Shri Neeraj Mangla (Virtually Appeared). Revenue by : Shri Arun Kanti Datta, (CIT. DR)

: 05/05/2026 Date of Hearing Date of pronouncement : 18/05/2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 15.10.2025, passed by the learned Commissioner of Income-Tax (Appeals) - National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for the Assessment Year (in short ‘A.Y’) 2018-19, raising following grounds:

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“1. That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act as well as That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act as well as That the order passed by Ld. AO u/s 143(3) r.w.s. 263 of the Act as well as appellate order passed by Ld. CIT(A) is bad in law and are passed in appellate order passed by Ld. CIT(A) is bad in law and are passed in appellate order passed by Ld. CIT(A) is bad in law and are passed in contravention of prevailing law as well as facts of the case, therefore liable to be contravention of prevailing law as well as facts of the case, therefore liable t contravention of prevailing law as well as facts of the case, therefore liable t annulled. 2. That the assessment order passed by Ld. JAO is illegal and not tenable under That the assessment order passed by Ld. JAO is illegal and not tenable under That the assessment order passed by Ld. JAO is illegal and not tenable under the law due to completion of assessment proceedings in contravention of the law due to completion of assessment proceedings in contravention of the law due to completion of assessment proceedings in contravention of provisions of Sec. 144B of the Act. provisions of Sec. 144B of the Act. 3. That the Ld. AO grossly erred in law and in facts That the Ld. AO grossly erred in law and in facts of the case in invoking of the case in invoking provisions of Sec. 41(1) of the Act and making additions of Rs. 23.03.18.917/- to provisions of Sec. 41(1) of the Act and making additions of Rs. 23.03.18.917/ provisions of Sec. 41(1) of the Act and making additions of Rs. 23.03.18.917/ the income of assessee company. the income of assessee company. 4. That the Ld. AO grossly erred in law and in facts of the case in assessing Short grossly erred in law and in facts of the case in assessing Short grossly erred in law and in facts of the case in assessing Short Term Loans and Advances (given) of Term Loans and Advances (given) of Rs. 29,90,00,271/-as unexplained cash as unexplained cash credits under Section 68 of the Act despite the fact that none of the amounts were credits under Section 68 of the Act despite the fact that none of the amounts were credits under Section 68 of the Act despite the fact that none of the amounts were advanced during the year under consideration. advanced during the year under consideration. 5. That in the facts and circumstances of the case necessary costs to cover That in the facts and circumstances of the case necessary costs to cover That in the facts and circumstances of the case necessary costs to cover expenses shall be allowed to assessee.” litigation expenses shall be allowed to assessee. 2. Briefly stated, facts of the case are that the assessee filed return Briefly stated, facts of the case are that the assessee filed return Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 31.10.2018 declaring e year under consideration on 31.10.2018 declaring e year under consideration on 31.10.2018 declaring total income at Rs.NIL. The return was selected for scrutiny and total income at Rs.NIL. The return was selected for total income at Rs.NIL. The return was selected for order under section 1 section 143(3) read with section 143(3)(B) 43(3) read with section 143(3)(B) of Income tax Act, 1961( in short the Act) Act, 1961( in short the Act) was passed on 18.10.2021 by accepting was passed on 18.10.2021 by accepting the return of income. income.

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sheet of the assessee sheet of the assessee-company. The learned PCIT particularly company. The learned PCIT particularly noticed the following discrepancies and omissions requiring following discrepancies and omissions requiring following discrepancies and omissions requiring examination by the Assessing Officer: examination by the Assessing Officer:

(i) The assessee had reflected an amount of Rs.29,90,00,271/- under the (i) The assessee had reflected an amount of Rs.29,90,00,271/ (i) The assessee had reflected an amount of Rs.29,90,00,271/ head “Other Current Liabilities” as “Sundry Creditors/Advances” as on head “Other Current Liabilities” as “Sundry Creditors/Advances” as on head “Other Current Liabilities” as “Sundry Creditors/Advances” as on 31.03.2018, which remained 31.03.2018, which remained unchanged from the immediately preceding unchanged from the immediately preceding year. The learned PCIT observed that despite specific requisition made by year. The learned PCIT observed that despite specific requisition made by year. The learned PCIT observed that despite specific requisition made by the Assessing Officer vide notice issued under Section 142(1) of the Act the Assessing Officer vide notice issued under Section 142(1) of the Act the Assessing Officer vide notice issued under Section 142(1) of the Act dated 30.01.2021, the assessee failed to furnish complete details of such dated 30.01.2021, the assessee failed to furnish complete details of dated 30.01.2021, the assessee failed to furnish complete details of sundry creditors and advances, including particulars of the parties from sundry creditors and advances, including particulars of the parties from sundry creditors and advances, including particulars of the parties from whom the advances had allegedly been received. whom the advances had allegedly been received.

(ii) The assessee had further disclosed “Short (ii) The assessee had further disclosed “Short-term Loans & Advances” term Loans & Advances” amounting amounting to to Rs.23,03,45,215/-, Rs.23,03,45,215/ , which which included included “Sundry “Sundry Loans/Advances recoverable in cash or in kind” reflected in Note No.10 /Advances recoverable in cash or in kind” reflected in Note No.10 /Advances recoverable in cash or in kind” reflected in Note No.10 to the financial statements. The learned PCIT observed that although to the financial statements. The learned PCIT observed that although to the financial statements. The learned PCIT observed that although substantial amounts were reflected under the said head, the assessee substantial amounts were reflected under the said head, the assessee substantial amounts were reflected under the said head, the assessee had failed to furnish details of the parties to whom such loans or had failed to furnish details of the parties to whom had failed to furnish details of the parties to whom advances had been extended, despite the same having been specifically advances had been extended, despite the same having been specifically advances had been extended, despite the same having been specifically called for during assessment proceedings. called for during assessment proceedings.

3.1 The record further reveals that despite issuance of statutory The record further reveals that despite issuance of statutory The record further reveals that despite issuance of statutory notices and opportunities afforded during revisional proceedings, notices and opportunities afforded during revisional proceedin notices and opportunities afforded during revisional proceedin the assessee failed to furnish any substantive response or the assessee failed to furnish any substantive response or the assessee failed to furnish any substantive response or documentary explanation before the learned PCIT. Consequently, documentary explanation before the learned PCIT. Consequently, documentary explanation before the learned PCIT. Consequently, the learned PCIT proceeded ex parte qua the assessee and, upon the learned PCIT proceeded ex parte qua the assessee and, upon the learned PCIT proceeded ex parte qua the assessee and, upon consideration of the material available on record, came to the consideration of the material available on record, came to the consideration of the material available on record, came to the

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conclusion that the assessment order dated 18.10.2021 was lusion that the assessment order dated 18.10.2021 was lusion that the assessment order dated 18.10.2021 was erroneous insofar as it was prejudicial to the interests of the erroneous insofar as it was prejudicial to the interests of the erroneous insofar as it was prejudicial to the interests of the Revenue. 3.2 The learned PCIT observed that substantial funds appeared to The learned PCIT observed that substantial funds appeared to The learned PCIT observed that substantial funds appeared to have been deployed by the assessee in the form of loans, advances have been deployed by the assessee in the form of loans, advanc have been deployed by the assessee in the form of loans, advanc and investments without any corresponding income generation or and investments without any corresponding income generation or and investments without any corresponding income generation or apparent commercial return. The learned PCIT further noted that apparent commercial return. The learned PCIT further noted that apparent commercial return. The learned PCIT further noted that no material had been brought on record to establish the identity of no material had been brought on record to establish the identity of no material had been brought on record to establish the identity of the creditors, their creditworthiness or the genuineness of the the creditors, their creditworthiness or the genuineness o the creditors, their creditworthiness or the genuineness o transactions. According to the learned PCIT, the absence of any transactions. According to the learned PCIT, the absence of any transactions. According to the learned PCIT, the absence of any meaningful enquiry by the Assessing Officer into the nature and meaningful enquiry by the Assessing Officer into the nature and meaningful enquiry by the Assessing Officer into the nature and source of such liabilities and advances constituted a serious lapse source of such liabilities and advances constituted a serious lapse source of such liabilities and advances constituted a serious lapse rendering the assessment order unsustainable in law. rendering the assessment order unsustainable in law. rendering the assessment order unsustainable in law. The learned PCIT also observed that the assessee had neither The learned PCIT also observed that the assessee had neither The learned PCIT also observed that the assessee had neither furnished party-wise break wise break-up of the loans and advances as on up of the loans and advances as on 31.03.2017 and 31.03.2018 nor clarified whether there were 31.03.2017 and 31.03.2018 nor clarified whether there were 31.03.2017 and 31.03.2018 nor clarified whether there were repayments, fresh borrowings or any movement in the accounts repayments, fresh borrowings or any movement in the accounts repayments, fresh borrowings or any movement in the accounts during the relevant period. It was further noted that certain levant period. It was further noted that certain levant period. It was further noted that certain advances had allegedly been extended without charging interest, advances had allegedly been extended without charging interest, advances had allegedly been extended without charging interest, thereby warranting deeper scrutiny regarding their commercial thereby warranting deeper scrutiny regarding their commercial thereby warranting deeper scrutiny regarding their commercial expediency and possible non expediency and possible non-accounting of income.

3.3 In the aforesaid factual b In the aforesaid factual backdrop, the learned PCIT held that ackdrop, the learned PCIT held that the Assessing Officer had failed to conduct the enquiries which were the Assessing Officer had failed to conduct the enquiries which were the Assessing Officer had failed to conduct the enquiries which were prima facie warranted from the material available on record and prima facie warranted from the material available on record and prima facie warranted from the material available on record and

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ought to have examined the applicability of Sections 68 and 41(1) of ought to have examined the applicability of Sections 68 and 41(1) of ought to have examined the applicability of Sections 68 and 41(1) of the Act. The learned PCIT, therefore, set aside the assessment order ed PCIT, therefore, set aside the assessment order ed PCIT, therefore, set aside the assessment order passed under Section 143(3) of the Act and directed the Assessing passed under Section 143(3) of the Act and directed the Assessing passed under Section 143(3) of the Act and directed the Assessing Officer to frame the assessment de novo after carrying out detailed Officer to frame the assessment de novo after carrying out detailed Officer to frame the assessment de novo after carrying out detailed verification and enquiry in respect of the unsecured loans, sundry verification and enquiry in respect of the unsecured loans, sundry verification and enquiry in respect of the unsecured loans, sundry creditors, loans and advances/investments in accordance with law. itors, loans and advances/investments in accordance with law. itors, loans and advances/investments in accordance with law.

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Sanmay Trading Pvt Ltd 17,86,620 17,86,620 AANCS8490A 17,86,620 Abjayoni Trading Pvt Ltd -2,02,908 2,02,908 AAJCA2177N -2,02,908 25,00,000 25,00,000 AABCP4155F Aadhaar Ventures India 25,00,000 Limited Avance Technologies Ltd 5,82,00,000 5,82,00,000 AAECA5763B 5,82,00,000 Emporis Projects Ltd 16,00,000 16,00,000 AABCN0273G 16,00,000 Empower Industries India Ltd 2,60,00,000 2,60,00,000 AAACH3967N 2,60,00,000 Interworld Digital Limited 3,50,00,000 3,50,00,000 AAACI2221G 3,50,00,000 L N Polyster Ltd- Share Appli. 1,75,00,000 1,75,00,000 AAACL4102B 1,75,00,000 Prabhav Industries Ltd. 4,75,12,500 4,75,12,500 AAACE4247Q 4,75,12,500 1,10,00,000 1,10,00,000 AACCS8246B Secunderabad Health Care 1,10,00,000 Limited Shri Ganesh Spinners Ltd 1,75,00,000 1,75,00,000 AACCS4221Q 1,75,00,000 Visesh Infotecnics Limited 1,00,000 1,00,000 AAACV4805B 1,00,000 Audit Fees Payable Audit Fees Payable 5,000 5000.00 5000.00 5,000 Grand Total 29,90,00,271 29,90,00,271 29,90,00,271 5.1 Similarly, the assessee also provided Similarly, the assessee also provided details of short details of short-term loans and advances having details as under: dvances having details as under:

Particulars Opening Transactions Closing Pan No. Balance Balance Debit Credit Sundry Loans / Advances, Recoverable in Cash or in Kind Recoverable in Cash or in Kind Aristo Media & Entertainment Pvt. Aristo Media & Entertainment Pvt. 10,90,23,287 10,90,23,287 AAICA2155K Ltd Gateway Textile Traders Pvt. Ltd. Gateway Textile Traders Pvt. Ltd. 3,89,40,000 3,89,40,000 AADCG6087D Moss Traders Pvt. Ltd. 63,000 63,000 AAFCM1942F On Time Trading Pvt Ltd 4,39,00,000 4,39,00,000 Parkway Properties Pvt Ltd 42,630 42,630 AAECP2893B Persistent Commodities Tradelink Persistent Commodities Tradelink 2,70,00,000 2,70,00,000 Pvt Ltd Wellman Tradelink Pvt. Ltd. 1,13,50,000 1,13,50,000 AAACW8534C Tds Receivable TDS Receivable A.Y. 2011-12 6,378 6,378 TDS Receivable 19,920 19,920 Grand Total 23,03,02,585 42,630 - 23,03,45,215 5.2 The assessee did not provide any further confirmation of the The assessee did not provide any further confirmation of the The assessee did not provide any further confirmation of the sundry creditors, the the age of the credit, purpose of the sundry credit, age of the credit, purpose of the sundry credit, etc., along with their confirmations. Similarly, in respect of the etc., along with their confirmations. Similarly, in respect of the etc., along with their confirmations. Similarly, in respect of the

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short-term loans and advances also, no ledger accounts term loans and advances also, no ledger accounts term loans and advances also, no ledger accounts so as to examine any loan statements but no such details examine any loan statements but no such details were furnished were furnished by the assessee. The additions so made by the ld AO came to be The additions so made by the ld AO came to be The additions so made by the ld AO came to be affirmed by the Ld. CIT(A), principally on the reasoning that despite affirmed by the Ld. CIT(A), principally on the reasoning that desp affirmed by the Ld. CIT(A), principally on the reasoning that desp adequate opportunities, the assessee failed to substantiate the adequate opportunities, the assessee failed to substantiate the adequate opportunities, the assessee failed to substantiate the nature, source and genuineness of the transactions by producing nature, source and genuineness of the transactions by producing nature, source and genuineness of the transactions by producing confirmations, ledger accounts and other supporting documentary confirmations, ledger accounts and other supporting documentary confirmations, ledger accounts and other supporting documentary evidences. The relevant findings of the learned The relevant findings of the learned The relevant findings of the learned CIT(A) are reproduced as under: :

“6.2 Since, the assessee company had shown in the Balance Sheet, under Other “6.2 Since, the assessee company had shown in the Balance Sheet, under Other “6.2 Since, the assessee company had shown in the Balance Sheet, under Other Current Liabilities' Rs.29,90,00,271/ Current Liabilities' Rs.29,90,00,271/- being 'Sundry Creditors/Advances' (as per being 'Sundry Creditors/Advances' (as per Note No.5 annexed to the financial statements) as on 31.03.2018 which was the Note No.5 annexed to the financial statements) as on 31.03.2018 which was the Note No.5 annexed to the financial statements) as on 31.03.2018 which was the same as on 31.03.2017. Further, assessee had also shown 'Short-term Loans & same as on 31.03.2017. Further, assessee had also shown 'Short same as on 31.03.2017. Further, assessee had also shown 'Short Advances' at Rs.23,03,45,215/ Advances' at Rs.23,03,45,215/-, which included 'Sundry Loans/Advances , which included 'Sundry Loans/Advances recoverable in cash or in kind' (as per Note No.10 annexed to the Financial recoverable in cash or in kind' (as per Note No.10 annexed to the Financial recoverable in cash or in kind' (as per Note No.10 annexed to the Financial Statements). The same stood at Rs. Statements). The same stood at Rs.23,03,18,917/- as on 31.03.2018 which was as on 31.03.2018 which was at Rs.23,02,76,287/ at Rs.23,02,76,287/- as on 31.03.2017 thereby showing an increase of as on 31.03.2017 thereby showing an increase of Rs.42,630/- during the year under consideration. Thereafter, the case was during the year under consideration. Thereafter, the case was during the year under consideration. Thereafter, the case was selected for review and during the revision proceedings. During the assessment selected for review and during the revision proceedings. During the ass selected for review and during the revision proceedings. During the ass proceedings u/s 143(3) r.w.s 263 of the Act, the AO observed that the assessee proceedings u/s 143(3) r.w.s 263 of the Act, the AO observed that the assessee proceedings u/s 143(3) r.w.s 263 of the Act, the AO observed that the assessee submitted its reply vide letter dt. 28.03.2024. The reply of the assessee was submitted its reply vide letter dt. 28.03.2024. The reply of the assessee was submitted its reply vide letter dt. 28.03.2024. The reply of the assessee was considered by the AO but not found to be acceptable as the Assessee did not considered by the AO but not found to be acceptable as the Assessee did not considered by the AO but not found to be acceptable as the Assessee did not submit any documentary evidences to substantiate its nature of the transactions mentary evidences to substantiate its nature of the transactions mentary evidences to substantiate its nature of the transactions being Sundry Creditors. Therefore, after considering the facts and in the absence being Sundry Creditors. Therefore, after considering the facts and in the absence being Sundry Creditors. Therefore, after considering the facts and in the absence of the documentary evidences, an addition on account of cessation of liability u/s of the documentary evidences, an addition on account of cessation of liability u/s of the documentary evidences, an addition on account of cessation of liability u/s 41 of the Act, to the tune 41 of the Act, to the tune of Rs.23,03,18,917/- was made by the AO and treated was made by the AO and treated the same as deemed income of the assessee for the year under consideration. the same as deemed income of the assessee for the year under consideration. the same as deemed income of the assessee for the year under consideration. Further, the AO also observed that the assessee had shown total Short term Further, the AO also observed that the assessee had shown total Short term Further, the AO also observed that the assessee had shown total Short term Loans & Advances to the tune of Rs.29,90,00,271/ Loans & Advances to the tune of Rs.29,90,00,271/- but also did not submit any t also did not submit any details during the course of the proceedings. Since, the Assessee was not submit details during the course of the proceedings. Since, the Assessee was not submit details during the course of the proceedings. Since, the Assessee was not submit any documentary evidences to substantiate its nature of the transactions being any documentary evidences to substantiate its nature of the transactions being any documentary evidences to substantiate its nature of the transactions being Short term Loans & Advances to the tune of Rs.29,90,00,271. Therefore, after Short term Loans & Advances to the tune of Rs.29,90,00,271. Therefore, Short term Loans & Advances to the tune of Rs.29,90,00,271. Therefore, considering the facts and in the absence of the documentary evidences, another considering the facts and in the absence of the documentary evidences, another considering the facts and in the absence of the documentary evidences, another addition on account of Short term Loans & Advances to the tune of addition on account of Short term Loans & Advances to the tune of addition on account of Short term Loans & Advances to the tune of Rs.29,90,00,271/- was made by the AO and treated the same as unexplained was made by the AO and treated the same as unexplained was made by the AO and treated the same as unexplained cash credit u/s 68 of the Act, cash credit u/s 68 of the Act, for the year under consideration. for the year under consideration.

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6.3 The following case laws are emphasized here: 6.3 The following case laws are emphasized here:- Section 68 of the IT Act, 1961 states that: Section 68 of the IT Act, 1961 states that: "Where any sum is found credited in the books of an assessee maintained for any "Where any sum is found credited in the books of an assessee maintained for any "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and previous year, and the assessee offers no explanation about the nature and previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the source thereof or the explanation offered by him is not, in the opinion of the source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, sat Assessing Officer, satisfactory, the sum so credited may be charged to income isfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which Provided that where the assessee is a company (not being a company in which Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share the public are substantially interested), and the sum so credited consists of share the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by application money, share capital, share premium or any such amount by application money, share capital, share premium or any such amount by whatever name called, any whatever name called, any explanation offered by such assessee explanation offered by such assessee-company shall be deemed to be not satisfactory, unless be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the (a) the person, being a resident in whose name such credit is recorded in the (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of books of such company also offers an explanation about the nature and source of books of such company also offers an explanation about the nature and source of such sum so credited; and h sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been (b) such explanation in the opinion of the Assessing Officer aforesaid has been (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory." found to be satisfactory." The Section is meant to curb generation of unaccounted money and it is in The Section is meant to curb generation of unaccounted money and it is in The Section is meant to curb generation of unaccounted money and it is in clarificatory nature. That means the assessing off clarificatory nature. That means the assessing officer can add a lump sum as of icer can add a lump sum as of income from undisclosed sources. income from undisclosed sources. The Income Tax Act, subsequently, inserted two key provisions vide Finance Act, The Income Tax Act, subsequently, inserted two key provisions vide Finance Act, The Income Tax Act, subsequently, inserted two key provisions vide Finance Act, 2012 (which will be dealt in later part). Further, Section 68 of the present Act is 2012 (which will be dealt in later part). Further, Section 68 of the present Act is 2012 (which will be dealt in later part). Further, Section 68 of the present Act is statutorily authorized an A statutorily authorized an Assessing Officer to assess the unexplained cash credit ssessing Officer to assess the unexplained cash credit as ‘Income and add back to the total income of an assessee accordingly’. as ‘Income and add back to the total income of an assessee accordingly’. as ‘Income and add back to the total income of an assessee accordingly’. The third ingredient says that if the assessee offers no proper, reasonable and The third ingredient says that if the assessee offers no proper, reasonable and The third ingredient says that if the assessee offers no proper, reasonable and acceptable explanation as regards the sums fou acceptable explanation as regards the sums found credited in Books of accounts nd credited in Books of accounts maintained by him in the previous year. For instance, "Gift...By" as stated above, maintained by him in the previous year. For instance, "Gift...By" as stated above, maintained by him in the previous year. For instance, "Gift...By" as stated above, will be taken as absence of satisfactory explanation by the assessee. will be taken as absence of satisfactory explanation by the assessee. will be taken as absence of satisfactory explanation by the assessee. It is clear from the language of the section, it is the assessee, alone who is to offer It is clear from the language of the section, it is the assessee, al It is clear from the language of the section, it is the assessee, al the explanation, whether initially or subsequently. the explanation, whether initially or subsequently. The section enacts a golden rule of evidence which is not in dispute, i.e. the onus The section enacts a golden rule of evidence which is not in dispute, i.e. the onus The section enacts a golden rule of evidence which is not in dispute, i.e. the onus is on the assessee to explain any sum found credited in his books of account. is on the assessee to explain any sum found credited in his books of account. is on the assessee to explain any sum found credited in his books of account. With respect of credits and investments, the Hon’ble Calcutta High Court in CIT edits and investments, the Hon’ble Calcutta High Court in CIT edits and investments, the Hon’ble Calcutta High Court in CIT vs. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995]82 Taxman 31, laid vs. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995]82 Taxman 31, laid vs. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995]82 Taxman 31, laid down that an assessee is expected to establish down that an assessee is expected to establish-  Identity of creditors Identity of creditors

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 Capacity of creditors to advance money Capacity of creditors to advance money  Genuineness of transaction ness of transaction Many judgments are in favor of the revenue. Few of them are Many judgments are in favor of the revenue. Few of them are- - Bhullan Mal Gupta(HUF) Vs Commission of Income Tax. Supreme court of India Bhullan Mal Gupta(HUF) Vs Commission of Income Tax. Supreme court of India Bhullan Mal Gupta(HUF) Vs Commission of Income Tax. Supreme court of India [2021] 125 taxmann.com 104(SC) [2021] 125 taxmann.com 104(SC) ii) The Hon'ble Apex Court in the case of Sumati Dayal vs CIT 214 ITR 801 (SC), ii) The Hon'ble Apex Court in the case of Sumati Dayal vs CIT 214 ITR ii) The Hon'ble Apex Court in the case of Sumati Dayal vs CIT 214 ITR are worth noting: "This, in our opinion, is a superficial approach to the problem. The matter has to "This, in our opinion, is a superficial approach to the problem. The matter has to "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement be considered in the light of human probabilities. The Chairman of the Settlement be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket Commission has emphasized that the appellant did possess the w Commission has emphasized that the appellant did possess the w which was surrendered to the Race Club and in return a crossed cheque was which was surrendered to the Race Club and in return a crossed cheque was which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstances, because if the appellant had obtained. It is, in our view, a neutral circumstances, because if the appellant had obtained. It is, in our view, a neutral circumstances, because if the appellant had purchased the winning ticket after the event she would be having the winning purchased the winning ticket after the event she would be having the winning purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by with her which she could surrender to the Race Club. The observation by with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that "fraudulent sale of winning the Chairman of the Settlement Commission that "fraudulent sale of winning the Chairman of the Settlement Commission that "fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice" ignores the ticket is not an usual practice but is very much of an unusual practice" ignores the ticket is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice th prevalent malpractice that was noticed by the District Taxes Enquiry Committee at was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the and the recommendations made by the said Committee which led to the and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act, 1972 whereby the exemption from tax amendment of the Act by the Finance Act, 1972 whereby the exemption from tax amendment of the Act by the Finance Act, 1972 whereby the exemption from tax that was available in respect of winnings from lotteries that was available in respect of winnings from lotteries, crossword puzzles, , crossword puzzles, races, etc., was withdrawn. Similarly the observation by the Chairman that if it is races, etc., was withdrawn. Similarly the observation by the Chairman that if it is races, etc., was withdrawn. Similarly the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleged that these tickets were obtained through fraudulent means, it is upon the alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of alleger to prove that it is so, ignores the reality. The transaction alleger to prove that it is so, ignores the reality. The transaction winning ticket takes place in secret and direct evidence about such purchase winning ticket takes place in secret and direct evidence about such purchase winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn would be rarely available. An inference about such a purchase has to be drawn would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the on the basis of the circumstances available on the record. Having regard to the on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other duct of the appellant as disclosed in her sworn statement as well as other duct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning material on the record an inference could reasonably be drawn that the winning material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable tickets were purchased by the appellant after the event. We are, therefore, unable tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, iew of the Chairman in his dissenting opinion. In our opinion, iew of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the majority opinion after considering surrounding circumstances and applying the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim the test of human probabilities has rightly concluded that the appellant's claim the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning about the amount being her winning from races is not genuine. It cannot be said from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has that the explanation offered by the appellant in respect of the said amounts has that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are been rejected unreasonably and that the finding that the said amounts are been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based income of the appellant from other sources is not based on evidence.” on evidence.” iii) In the case of Commissioner of Income iii) In the case of Commissioner of Income-tax vs. Durga Prasad More 82 ITR540 tax vs. Durga Prasad More 82 ITR540 (SC), the Hon'ble SC observed as under: (SC), the Hon'ble SC observed as under: "...It is true that an apparent must be considered real until it is shown that there "...It is true that an apparent must be considered real until it is shown that there "...It is true that an apparent must be considered real until it is shown that there are reasons to believe that the app are reasons to believe that the apparent is not the real party who relies on a arent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be recital in a deed has to establish the truth of those recitals, otherwise it will be recital in a deed has to establish the truth of those recitals, otherwise it will be

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very easy to make self very easy to make self-serving statements in documents either executed or taken serving statements in documents either executed or taken by a party and rely on those recitals. If all t by a party and rely on those recitals. If all that an assessee who wants to evade hat an assessee who wants to evade tax is to have some recitals made in a document either executed by him or tax is to have some recitals made in a document either executed by him or tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little executed in his favour then the door will be left wide open to evade tax. A little executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the probing was sufficient in the present case to show that the appa probing was sufficient in the present case to show that the appa real. The taxing authorities were not required to put on blinkers while looking at real. The taxing authorities were not required to put on blinkers while looking at real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the the documents produced before them. They were entitled to look into the the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those surrounding circumstances to find out the reality of the recitals made in those surrounding circumstances to find out the reality of the recitals made in those documents." iv) The Calcutta High Court in the case of CIT Vs. L.N. Dalmia in 207 ITR 89 has iv) The Calcutta High Court in the case of CIT Vs. L.N. Dalmia in 207 ITR 89 has iv) The Calcutta High Court in the case of CIT Vs. L.N. Dalmia in 207 ITR 89 has held that for determining whether a transaction is sham or illusory or a device or held that for determining whether a transaction is sham or illusory or a device or held that for determining whether a transaction is sham or illusory or a device or aruse, the income tax authorities are entitled to penetrate the veil covering it and aruse, the income tax authorities are entitled to penetrate the veil covering it a aruse, the income tax authorities are entitled to penetrate the veil covering it a ascertain the truth. According to the court the authorities are entitled to look into ascertain the truth. According to the court the authorities are entitled to look into ascertain the truth. According to the court the authorities are entitled to look into the surrounding circumstances to find out the reality and truth. the surrounding circumstances to find out the reality and truth. the surrounding circumstances to find out the reality and truth. v) In the case of Sunil Sidhartha Vs. CIT 156 ITR 507 the Supreme Court has held v) In the case of Sunil Sidhartha Vs. CIT 156 ITR 507 the Supreme Court has held v) In the case of Sunil Sidhartha Vs. CIT 156 ITR 507 the Supreme Court has held that it was open to that it was open to the income tax authorities to go behind a transaction and the income tax authorities to go behind a transaction and examine whether the transaction was genuine or not. examine whether the transaction was genuine or not. vi) The Hon'ble Supreme Court in the famous case of Mc Dowell in 154 ITR 148 vi) The Hon'ble Supreme Court in the famous case of Mc Dowell in 154 ITR 148 vi) The Hon'ble Supreme Court in the famous case of Mc Dowell in 154 ITR 148 has held that avoidance of tax through colorable device was not permissible. has held that avoidance of tax through colorable device was not perm has held that avoidance of tax through colorable device was not perm vii) The Punjab Haryana High Court in the case of Mittal Belting and Machinery vii) The Punjab Haryana High Court in the case of Mittal Belting and Machinery vii) The Punjab Haryana High Court in the case of Mittal Belting and Machinery stores Vs. CIT in 253 ITR 341 has held that if on the examination of evidence, it is stores Vs. CIT in 253 ITR 341 has held that if on the examination of evidence, it is stores Vs. CIT in 253 ITR 341 has held that if on the examination of evidence, it is found that there was no genuine transaction between the parties a pure paper found that there was no genuine transaction between the parties a pure paper found that there was no genuine transaction between the parties a pure paper transaction could not have entitled the assessee to claim benefit under the law. ction could not have entitled the assessee to claim benefit under the law. ction could not have entitled the assessee to claim benefit under the law. Merely on the basis of paper transaction the same does not become genuine. Merely on the basis of paper transaction the same does not become genuine. Merely on the basis of paper transaction the same does not become genuine. viii) The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (1988) 172 ITR viii) The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (1988) 172 ITR viii) The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (1988) 172 ITR 250, highlighted the fact 250, highlighted the fact that the principle of evidence law are not to be ignored that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding by the authorities, but at the same time, human probability has to be the guiding by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by principle, since the AO is not fettered, by technical rules of evidence, as held by principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) case of Dhakeshwari Cotton Mills v CIT (1954) 261 ITR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) 261 ITR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) 261 ITR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) held that what was meant saying that Evidence Act did not apply to the held that what was meant saying that Evidence Act did not apply to the held that what was meant saying that Evidence Act did not apply to the proceedings under Income proceedings under Income-tax Act, 1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable, but that did not mean that contained in the Evidence Act was not applicable, but that did not mean that contained in the Evidence Act was not applicable, but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence when the taxing authorities were desirous of invoking the principles of Evidence when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was Act, in proceedings before them, they were prevented from doing so. It was Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence further held by the Hon'ble Apex Court that all that Section 110 of the Evidence further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving viz, where a person was found in possessing of anything, the onus of proving viz, where a person was found in possessing of anything, the onus of proving that he was not its that he was not its owner, was on that person. Thus, this principle could be owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was attracted to a set of circumstances that satisfies its conditions and was attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings Reference is drawn towards the decision of applicable to taxing proceedings Reference is drawn towards the decision of applicable to taxing proceedings Reference is drawn towards the decision of

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Honble ITAT Delhi in the case of Hersh Win Chadh Honble ITAT Delhi in the case of Hersh Win Chadha vs. DDIT (ITAT Delhi), where a vs. DDIT (ITAT Delhi), where the tribunal held....... the tribunal held....... i). Tax liability in cases of suspicious transactions has to be assessed on the i). Tax liability in cases of suspicious transactions has to be assessed on the i). Tax liability in cases of suspicious transactions has to be assessed on the basis of the material available on record, surrounding circumstances, human basis of the material available on record, surrounding circumstances, human basis of the material available on record, surrounding circumstances, human conduct and preponderance of conduct and preponderance of probabilities; ii) Rules of evidence do not govern income tax proceedings and the AO is not ii) Rules of evidence do not govern income tax proceedings and the AO is not ii) Rules of evidence do not govern income tax proceedings and the AO is not fettered or bound by technical rules contained in the Indian Evidence Act and is fettered or bound by technical rules contained in the Indian Evidence Act and is fettered or bound by technical rules contained in the Indian Evidence Act and is entitled to act on material which may not be accepted as evidence in a court of entitled to act on material which may not be accepted as evidence in a court of entitled to act on material which may not be accepted as evidence in a court of law; (iii) In clandestine transactions, it is impossible to have direct evidence or (iii) In clandestine transactions, it is impossible to have direct evidence or (iii) In clandestine transactions, it is impossible to have direct evidence or demonstrative proof of every move and when the assessee is not forthcoming demonstrative proof of every move and when the assessee is not forthcoming demonstrative proof of every move and when the assessee is not forthcoming with proper facts and chooses to be elusive and evasive, the AO has no choice but with proper facts and chooses to be elusive and evasive, the AO has no choice but with proper facts and chooses to be elusive and evasive, the AO has no choice but to take recourse to estimate. The only caveat is that it should be reasonable and to estimate. The only caveat is that it should be reasonable and to estimate. The only caveat is that it should be reasonable and based on material available on record. It should not be perverse or based merely based on material available on record. It should not be perverse or based merely based on material available on record. It should not be perverse or based merely on conjectures. iv) It was very difficult to get information and documents and to examine iv) It was very difficult to get information and documents and to examine iv) It was very difficult to get information and documents and to examine concerned links due to the premeditated surreptitious cover up of transactions ue to the premeditated surreptitious cover up of transactions ue to the premeditated surreptitious cover up of transactions and smokescreen corporate jugglery; and smokescreen corporate jugglery; v) There is no presumption in law that the AO is supposed to discharge an v) There is no presumption in law that the AO is supposed to discharge an v) There is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to impossible burden to assess the tax liability by direct evidence only and to impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. He can assess on sh the evasion beyond doubt as in criminal proceedings. He can assess on sh the evasion beyond doubt as in criminal proceedings. He can assess on consideration of material available on record, surrounding circumstances, human consideration of material available on record, surrounding circumstances, human consideration of material available on record, surrounding circumstances, human conduct, conduct, conduct, preponderance preponderance preponderance of of of probabilities probabilities probabilities and and and nature nature nature of of of incriminating incriminating incriminating Information/evidence available on r Information/evidence available on record; ix) In the case of CIT v. B. M. Kharway (1969) 72 ITR 603 (SC), in which the ix) In the case of CIT v. B. M. Kharway (1969) 72 ITR 603 (SC), in which the ix) In the case of CIT v. B. M. Kharway (1969) 72 ITR 603 (SC), in which the Hon'ble Supreme Court held that: Hon'ble Supreme Court held that:- "The taxing authority is entitled and is indeed bound to determine the true legal "The taxing authority is entitled and is indeed bound to determine the true legal "The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a transaction. If the parties relation resulting from a transaction. If the parties have chosen to conceal by a have chosen to conceal by a device the legal relation, it is open to the taxing authorities to unravel the device device the legal relation, it is open to the taxing authorities to unravel the device device the legal relation, it is open to the taxing authorities to unravel the device and to determine the true character of the relationship. But the legal effect of a and to determine the true character of the relationship. But the legal effect of a and to determine the true character of the relationship. But the legal effect of a transaction cannot be displaced by probing into the 'substance of the transaction cannot be displaced by probing into the 'substa transaction cannot be displaced by probing into the 'substa transaction." x) In Jiyajeerao Cotton Mills Ltd. v. CIT & EPT (1958) 34 ITR 888, this court x) In Jiyajeerao Cotton Mills Ltd. v. CIT & EPT (1958) 34 ITR 888, this court x) In Jiyajeerao Cotton Mills Ltd. v. CIT & EPT (1958) 34 ITR 888, this court observed (p. 897): "Every person is entitled to so arrange his affairs as to avoid taxation but the "Every person is entitled to so arrange his affairs as to avoid taxation but the "Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham arrangement must be real and genuine and not a sham or make or make-believe." xi) Dinesh Kumar Jain v. Principal Commissioner of Income xi) Dinesh Kumar Jain v. Principal Commissioner of Income-tax, New Delhi [2018] tax, New Delhi [2018] 97 taxmann.com 113 (Delhi) 97 taxmann.com 113 (Delhi)

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Section 68 of the Income tax Act, 1961 Section 68 of the Income tax Act, 1961 - Cash credit (Bank deposits) Cash credit (Bank deposits) – Assessment year 2011 Assessment year 2011-12 - During year, assessee deposited c During year, assessee deposited certain amount in his bank account - Assessee submitted that he had an overdraft facility and Assessee submitted that he had an overdraft facility and withdrew certain amount of cash from his bank account for construction of a withdrew certain amount of cash from his bank account for construction of a withdrew certain amount of cash from his bank account for construction of a building and surplus money, when not required, was re building and surplus money, when not required, was re-deposited in same bank deposited in same bank account - Assessing Officer asked for details of construction project report Assessing Officer asked for details of construction project report - Assessing Officer asked for details of construction project report However, assessee failed to provide any details of cost of construction incurred However, assessee failed to provide any details of cost of construction incurred However, assessee failed to provide any details of cost of construction incurred by him . Even no bills of purchase of construction material or any payment to by him . Even no bills of purchase of construction material or any payment to by him . Even no bills of purchase of construction material or any payment to contractor was produced contractor was produced - Assessee had no evidence at all to explain as to how sessee had no evidence at all to explain as to how much amount was incurred in construction of property much amount was incurred in construction of property - Assessee failed to justify Assessee failed to justify substantial cash withdrawals for meeting cost of construction and re-deposited substantial cash withdrawals for meeting cost of construction and re substantial cash withdrawals for meeting cost of construction and re when money was not required when money was not required - Assessee had conveniently claimed that entire onveniently claimed that entire construction expenditure was incurred without bank transaction or bill, vouchers, construction expenditure was incurred without bank transaction or bill, vouchers, construction expenditure was incurred without bank transaction or bill, vouchers, etc. but this was not plausible etc. but this was not plausible - Whether, on facts, Assessing Officer was justified Whether, on facts, Assessing Officer was justified in treating sum re-deposited as unexplained cash credit a deposited as unexplained cash credit a deposited as unexplained cash credit and making addition under section 68 - Held, yes [Paras 6, 7 and 9][in favour of revenue] Held, yes [Paras 6, 7 and 9][in favour of revenue] Held, yes [Paras 6, 7 and 9][in favour of revenue] c. Prime facie onus is always on the assessee to prove the cash credit entry found c. Prime facie onus is always on the assessee to prove the cash credit entry found c. Prime facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan in the books of account of the assessee. In land mark cases like Kale Khan in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT(1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT [1977] 107 Hanif v CIT(1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT [1977] 107 Hanif v CIT(1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT [1977] 107 ITR (SC) it has been held that the law is well settled that the onus of proving the ITR (SC) it has been held that the law is well settled that the onus of proving the ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. source of a sum of money found to have been received by an assessee, is on him. source of a sum of money found to have been received by an assessee, is on him. Where the nature and sourc Where the nature and source thereof cannot be explained satisfactorily, it is open e thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee, and no further burden to the revenue to hold that it is the income of the assessee, and no further burden to the revenue to hold that it is the income of the assessee, and no further burden is on the revenue to show that the income is from any particular source. is on the revenue to show that the income is from any particular source. is on the revenue to show that the income is from any particular source. d. In fact, the principle of onus, that the assessee is required to establish of the d. In fact, the principle of onus, that the assessee is required to establish of the d. In fact, the principle of onus, that the assessee is required to establish of the transaction and establish the creditworthiness of the donor, has been reiterated transaction and establish the creditworthiness of the donor, has been reiterated transaction and establish the creditworthiness of the donor, has been reiterated even in a recent decision of Hon. Delhi High court in the case of CIT vs Oasis even in a recent decision of Hon. Delhi High court in the case of CIT vs Oasis even in a recent decision of Hon. Delhi High court in the case of CIT vs Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by the es Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by the es Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by the Hon. Court that "The initial onus is upon the assessee to establish three things Hon. Court that "The initial onus is upon the assessee to establish three things Hon. Court that "The initial onus is upon the assessee to establish three things necessary to obviate the mischief of section 68. Those are: necessary to obviate the mischief of section 68. Those are: 1. Identity of the investors; 1. Identity of the investors; 2. their creditworthiness/investments; and reditworthiness/investments; and 3. Genuineness of the transaction. 3. Genuineness of the transaction. Only when these three ingredients are established prica facie, the department is Only when these three ingredients are established prica facie, the department is Only when these three ingredients are established prica facie, the department is required to undertake further exercise. required to undertake further exercise. e. Further, in the case of Kamal Motors v. CIT [2003] 131 Taxman 155 (Raj.). It e. Further, in the case of Kamal Motors v. CIT [2003] 131 Taxman 15 e. Further, in the case of Kamal Motors v. CIT [2003] 131 Taxman 15 was held that the responsibility is on the assessee to discharge the onus that the was held that the responsibility is on the assessee to discharge the onus that the was held that the responsibility is on the assessee to discharge the onus that the cash creditor is a man of means to allow the cash credit. cash creditor is a man of means to allow the cash credit.

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f. If any sum is found credited in the books of account of an assessee, the onus is f. If any sum is found credited in the books of account of an assessee, the onus is f. If any sum is found credited in the books of account of an assessee, the onus is on him to explain the said entry. The principle embodied in section 68 in only a the said entry. The principle embodied in section 68 in only a the said entry. The principle embodied in section 68 in only a statutory recognition of what was always understood to be the law based upon statutory recognition of what was always understood to be the law based upon statutory recognition of what was always understood to be the law based upon the rule that the burden of proof is on the taxpayer to prove the genuineness of the rule that the burden of proof is on the taxpayer to prove the genuineness of the rule that the burden of proof is on the taxpayer to prove the genuineness of borrowings since the relevant facts borrowings since the relevant facts are exclusively within his knowledge. Even are exclusively within his knowledge. Even before the enactment of section 68, this rule of evidence was applicable vide Kale before the enactment of section 68, this rule of evidence was applicable vide Kale before the enactment of section 68, this rule of evidence was applicable vide Kale Khan Mohammed Hanif v. CIT (1963) 50 ITR 1 (SC). Section Khan Mohammed Hanif v. CIT (1963) 50 ITR 1 (SC). Section- -68 does not absolve the responsibility of the Assessing Officer to prove the responsibility of the Assessing Officer to prove that the cash credits constitute that the cash credits constitute the income of the assessee. the income of the assessee. 6.4 The last ground is general in nature and des not need adjudication. 6.4 The last ground is general in nature and des not need adjudication. 6.4 The last ground is general in nature and des not need adjudication. 6.5 The appellant assessee was accorded sufficient and ample opportunity to 6.5 The appellant assessee was accorded sufficient and ample opportunity to 6.5 The appellant assessee was accorded sufficient and ample opportunity to explain the nature of the transactions being explain the nature of the transactions being ‘Sundry Creditors’ and ‘Short term ‘Sundry Creditors’ and ‘Short term Loans & Advances’, however, the Assessee did not submit any documentary Loans & Advances’, however, the Assessee did not submit any documentary Loans & Advances’, however, the Assessee did not submit any documentary evidences to substantiate its. Therefore, after considering the facts and in the evidences to substantiate its. Therefore, after considering the facts and in the evidences to substantiate its. Therefore, after considering the facts and in the absence of the documentary evidences, additions on account of cessation of absence of the documentary evidences, additions on account of cessa absence of the documentary evidences, additions on account of cessa liability u/s 41 of the Act, to the tune of Rs.23,03,18,917/ liability u/s 41 of the Act, to the tune of Rs.23,03,18,917/- and total Short term Loans & Advances to the tune of Rs.29,90,00,271/ Loans & Advances to the tune of Rs.29,90,00,271/- were made by the AO. In this were made by the AO. In this condition, the addition made by AO are factually and legally correct are upheld condition, the addition made by AO are factually and legally correct are upheld condition, the addition made by AO are factually and legally correct are upheld and the plea of the appellant on this issue are dismissed being devoid of any e plea of the appellant on this issue are dismissed being devoid of any e plea of the appellant on this issue are dismissed being devoid of any merits” 6. We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the We have heard the rival submissions and carefully perused the material available on record, including the paper book ( pages 1- material available on record, including the paper book ( pages 1 material available on record, including the paper book ( pages 1 178) filed on behalf of the assessee. The lear 178) filed on behalf of the assessee. The learned counsel for the ned counsel for the assessee drew our attention to the balance sheet and the schedules assessee drew our attention to the balance sheet and the schedules assessee drew our attention to the balance sheet and the schedules reflecting the impugned sundry creditors as well as short-term reflecting the impugned sundry creditors as well as short reflecting the impugned sundry creditors as well as short loans and advances. loans and advances.

6.1 Insofar as the addition made under Section 41(1) of the Act is Insofar as the addition made under Section 41(1) of the Act is Insofar as the addition made under Section 41(1) of the Act is concerned, we find that the foundational requirement for invoking that the foundational requirement for invoking that the foundational requirement for invoking the said provision is the existence of remission or cessation of a the said provision is the existence of remission or cessation of a the said provision is the existence of remission or cessation of a trading liability. Mere continuance of an outstanding liability in the trading liability. Mere continuance of an outstanding liability in the trading liability. Mere continuance of an outstanding liability in the books of account, by itself, does not automatically justify invocation books of account, by itself, does not automatically justify invocation books of account, by itself, does not automatically justify invocation

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of Section 41(1) unless it is demonstrated that the liability has of Section 41(1) unless it is demonstrated that the liability has of Section 41(1) unless it is demonstrated that the liability has ceased to exist in law or in fact. ceased to exist in law or in fact.

6.2 In the present case, the lower authorities have proceeded on In the present case, the lower authorities have proceeded on In the present case, the lower authorities have proceeded on the premise that the assessee failed to furnish adequate details the premise that the assessee failed to furnish adequate details the premise that the assessee failed to furnish adequate details enabling verification as enabling verification as to whether the liabilities reflected under the to whether the liabilities reflected under the head “sundry creditors” represented subsisting and enforceable head “sundry creditors” represented subsisting and enforceable head “sundry creditors” represented subsisting and enforceable liabilities or had ceased to remain payable. The legal proposition liabilities or had ceased to remain payable. The legal proposition liabilities or had ceased to remain payable. The legal proposition governing Section 41(1) is well settled and admits of no ambiguity; governing Section 41(1) is well settled and admits of no ambiguity; governing Section 41(1) is well settled and admits of no ambiguity; however, determination of its applicability necessarily requires etermination of its applicability necessarily requires etermination of its applicability necessarily requires factual factual factual verification verification verification regarding regarding regarding the the the continuing continuing continuing existence existence existence and and and enforceability of the liabilities in question. enforceability of the liabilities in question.

6.3 Since the requisite factual verification has admittedly not been Since the requisite factual verification has admittedly not been Since the requisite factual verification has admittedly not been undertaken owing to undertaken owing to non-furnishing of complete particulars by the furnishing of complete particulars by the assessee, we are of the considered view that the matter requires assessee, we are of the considered view that the matter requires assessee, we are of the considered view that the matter requires fresh examination at the level of the Assessing Officer. Accordingly, fresh examination at the level of the Assessing Officer. Accordingly, fresh examination at the level of the Assessing Officer. Accordingly, the addition made under Section 41(1) is set aside and the issue is the addition made under Section 41(1) is set aside and the issue is the addition made under Section 41(1) is set aside and the issue is restored to the file of the Assessing Officer with a direction to the d to the file of the Assessing Officer with a direction to the d to the file of the Assessing Officer with a direction to the assessee to furnish complete details, confirmations and supporting assessee to furnish complete details, confirmations and supporting assessee to furnish complete details, confirmations and supporting evidences demonstrating that the liabilities reflected as sundry evidences demonstrating that the liabilities reflected as sundry evidences demonstrating that the liabilities reflected as sundry creditors were genuine, subsisting and payable as on the relevant creditors were genuine, subsisting and payable as on the rele creditors were genuine, subsisting and payable as on the rele date. The Assessing Officer shall thereafter adjudicate the issue date. The Assessing Officer shall thereafter adjudicate the issue date. The Assessing Officer shall thereafter adjudicate the issue afresh afresh afresh in in in accordance accordance accordance with with with law law law after after after affording affording affording reasonable reasonable reasonable opportunity of hearing to the assessee. opportunity of hearing to the assessee.

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7.1 In the present c In the present case, although the assessee furnished a broad ase, although the assessee furnished a broad statement reflecting the names and balances of the parties, the statement reflecting the names and balances of the parties, the statement reflecting the names and balances of the parties, the authorities below have recorded that complete ledger accounts, authorities below have recorded that complete ledger accounts, authorities below have recorded that complete ledger accounts, confirmations and transaction confirmations and transaction-wise supporting evidences were not wise supporting evidences were not produced for verifi produced for verification. In the absence of proper factual cation. In the absence of proper factual examination of the transactions appearing during the year, the examination of the transactions appearing during the year, the examination of the transactions appearing during the year, the issue cannot be conclusively adjudicated. issue cannot be conclusively adjudicated.

7.2 We, therefore, deem it appropriate to restore this issue also to We, therefore, deem it appropriate to restore this issue also to We, therefore, deem it appropriate to restore this issue also to the file of the Assessing Officer for fre the file of the Assessing Officer for fresh verification. The assessee sh verification. The assessee shall furnish complete ledger accounts, confirmations and all shall furnish complete ledger accounts, confirmations and all shall furnish complete ledger accounts, confirmations and all relevant documentary evidences in support of the transactions relevant documentary evidences in support of the transactions relevant documentary evidences in support of the transactions relating to the impugned loans and advances. The Assessing Officer relating to the impugned loans and advances. The Assessing Officer relating to the impugned loans and advances. The Assessing Officer shall thereafter decide the issue a shall thereafter decide the issue afresh in accordance with law after fresh in accordance with law after granting adequate opportunity of hearing to the assessee. The granting adequate opportunity of hearing to the assessee granting adequate opportunity of hearing to the assessee assessee is directed to extend full cooperation during the remand assessee is directed to extend full cooperation during the remand assessee is directed to extend full cooperation during the remand

Walton Constructions Private Limited, Walton Constructions Private Limited 16 ITA No. 8403/MUM/2025

proceedings and furnish all requisite details without seeking proceedings and furnish all requisite details without seeking proceedings and furnish all requisite details without seeking unnecessary adjournments. unnecessary adjournments.

Order pronounced in the open Court on ounced in the open Court on 18/05/2026. /05/2026. Sd/- Sd/ Sd/- (RAHUL CHAUDHARY RAHUL CHAUDHARY) (OM PRAKASH OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated:18/05/2026 M. Ranganath Vittal , Sr. P.S. M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai