NAVDEEP SINGH,NEW DELHI vs. DCIT CIRCLE - 13, GURGAON

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.20,50,000/- on account of unsecured loan received from father by treating it as alleged income of the assessee u/s 68 of the Act and that too by recording incorrect facts findings and without giving adequate opportunity of hearing and without bringing anything contrary on record and by disregarding the submissions, evidences and material placed by the assessee and in violation of principles of natural justice.

That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.20,50,000/- on account of unsecured loan u/s 68, is bad in law and against the facts and circumstances of the case.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of Rs.47,67,783/- u/s 40(a)(ia) and that too by recording incorrect facts findings and without giving adequate opportunity of hearing and without bringing anything contrary on record and by disregarding the submissions, evidences and material placed by the assessee and in violation of principles of natural justice.

That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of Rs.47,67,783/- u/s 40(a)(ia), is bad in law and against the facts and circumstances of the case.

That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.1,25,00,000/- on account of closing stock and that too by recording incorrect facts findings and without giving adequate opportunity of hearing and without bringing anything contrary on record and by disregarding the submissions, evidences and material placed by the assessee and in violation of principles of natural justice. 7. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making addition of Rs.1,25,00,000/- on account of closing stock, is bad in law and against the facts and circumstances of the case.

Briefly, the assessee filed return declaring an income of Rs. 34,97,210/- for A.Y. 2015-16. The assessment was framed by the Assessing Officer [for short, AO] at an income of Rs. 2,28,14,990/- u/s 143(3) of the Act., vide order dated 30.12.2017. In this case, the AO had made three additions on account of section 68 of Rs. 20,50,000/- as unsecured loan from his father namely, Shri Bhompal Singh; section 40a(i) and addition on account of closing stock. With respect to loan from his father, the assessee submitted the bank statement of his father along with the details of land held by him and argued that his father is agriculturist and the said amount is accumulation of agricultural income. The AO, however, rejected the explanation and therefore, he made the addition as unexplained credit u/s 68 of the Act. The AO has not 401/DEL/2021 4. We find from the assessment order that the assessee’s father had 18 acres of land from where the assessee claimed to have procured agricultural income. We further find that the assessee has also furnished the bank statement of his father. The AO has dismissed the explanation on the ground that the assessee’s could not furnish his father’s ITR and disbelieved that the loan was out of accumulation of agricultural activities and that the bank statement had meagre balance. 5. In such factual matrix, we are of the view that the AO has rejected the explanation of the assessee without any cogent evidence. The assessee’s father, having 18 acres of land has the probability of earning substantial agricultural income. The mere fact that the bank statement shows meagre amount does not prove that loan has not come through banking channel. It is also not the case of the AO that cash was deposited in the bank of the father which was extended as loan to the assessee. We therefore, are of the considered view that the assessee has given a satisfactory explanation for the loan received from his father. The said addition is deleted and the ground therefore, is allowed. 6. With respect to the disallowance of expenses u/s 40(a)(i), we find that the only ground for making such addition was that the assessee in its original return, had stated that an expense of Rs. 47,67,783/- was 401/DEL/2021 disallowable u/s 40(a)(i) of the Act. However, the ITR was subsequently revised u/s 139(5) of the Act, wherein the assessee stated that the said disallowance u/s 40(a)(i) was wrong since no such payment of Royalty/Fees for technical services were made. Neither the AO nor the ld DR has controverted the assessee’s stand. The AO has not identified any payment on which TDS was not deducted for which disallowance could be made in accordance with provisions of section 40(a)(i). We therefore, are of the considered view that the addition made u/s 40(a)(i) was invalid and accordingly the AO is directed to delete the said addition. Ground No. 2 is allowed. 7. With respect to the addition on account of closing stock, the assessee explained that the said valuation of stock was also taken in sales hence to avoid double addition, the value of closing stock was reduced in the accounts. Be that as it may, we find that the same is revenue natural exercise as the closing stock of this year would become opening stock for subsequent year. The same is therefore, deleted. This ground of appeal is allowed. 8. In the result, the appeal of the assessee ITA No. 401/DEL/2021 is allowed. Order pronounced in the Open Court on 02-02-2026. (SATBEER SINGH GODARA) ACCOUNTANT MEMBER Dated: 13.03.2026