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Facts
The assessee declared Nil income for AY 2016-17. The AO added unsecured loans totaling Rs 1,90,08,000 as income from undisclosed sources, which was upheld by the CIT(A). The assessee provided documents to prove the identity, creditworthiness, and genuineness of the lenders.
Held
The Tribunal held that the assessee had discharged its onus by providing all requisite documents. Since the revenue failed to discharge the shifted onus to prove otherwise, no adverse inference could be drawn. The addition was deleted.
Key Issues
Whether the addition of unsecured loans as income from undisclosed sources is justified when the assessee has provided sufficient documentary evidence and the revenue has failed to discharge its onus.
Sections Cited
143(3), 68, 234A, 234B, 46A
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2016-17, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 22.07.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 17.12.2018 by the Assessing Officer, ITO, Ward-3, Rohtak (hereinafter referred to as ‘ld. AO’).
The assessee has raised the following grounds of appeal before us:-
“1. That on the facts and circumstances of the case and the provision of law, that the Ld. CIT(A) has failed to appreciate the facts that the impugned assessment order passed u/s 143(3) of the Income Tax Act is illegal, bad in law and without jurisdiction and time barred.
2. That on the facts and circumstances of the case and the provision of law, the CIT(A) has failed to appreciate the fact that the Ld. AO has erred in making the additions on those issues which were not the part of the reasons of the limited scrutiny which is in violation of the CBDT instructions and thus the impugned assessment made requires to be quashed.
That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has erred in not considering the application filed under rule 46A along with supporting documents.
4. That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 1,90,08,000/- on account of loan received during the year by treating the same as income earned from undisclosed sources.
5. That on the facts and the circumstances of the case and the provisions of the law, the Ld. CIT(A) has erred in forming an incorrect opinion without confronting the same and in using the same adversely without providing the reasonable opportunity of defending, which inaction of the CIT(A) makes the first appeal proceedings and consequential order as null and void.
6. That on the facts and circumstances of the case and the provision of the law, the Ld. CIT(A) has failed to appreciate that the Ld AO has erred in ignoring the explanation given, evidences and material placed an d available on record. The same have not been properly considered and judicially interpreted and the same do not justify the addition made with preset mind of the Ld AO and his order is based on surmises, conjectures and suspicion.
7. That on the facts and the circumstances of the case the Ld. CIT(A) has failed to appreciate that the learned assessing officer has erred in charging interest u/s 234A and 234B is illegal and without prejudice it is excessive.
8. That the appellant craves leave to reserve to itself the right to add, alter, amend, vary, modify and/or withdraw any ground(s) of appeal at or before the time of hearing.” 3. The assessee has also raised the following additional ground before us:-
“That on the facts and circumstances of the case and the provision of law, the addition made on account of loan of Rs 1,90,08,000 as income from undisclosed source is also illegal and bad in law as in the current year even the production has not commenced and thus there cannot be any income from undisclosed sources in the hands of appellant firm.”
This additional ground goes to the root of the matter and being a legal issue and the facts relevant for its adjudication are already on record, we deem it fit to admit the said additional ground and take up the same for adjudication along with the regular grounds.
We have heard the rival submissions and perused the materials available on record. The return of income for the assessment year 2016- 17 was filed by the Assessee firm on 5-9-2016 declaring total income of Rs Nil. The Learned AO noted that the Assessee was in receipt of unsecured loans from certain parties and the balance of such unsecured loans as on 31-03-2016 is as under:- 1. Ankur Bansal - Rs 50,00,000 2. Karan Bansal - Rs 39,40,000 3. Vandana Bansal - Rs 10,80,000 4. Avhinav Leasing Finance – Rs 11,00,000 5. Jolly Plastic Industries - Rs 2,00,000 6. AGS Overseas - Rs 62,15,000 7. R B Automotives - Rs. 7,73,000 8. Unique Décor - Rs 7,00,000 Total - Rs 1,90,08,000
The Learned AO directed the Assessee to prove the three necessary ingredients of Section 68 of the Act in respect of aforesaid loan creditors. The Assessee duly furnished the requisite documents before the Learned AO. On perusal of the documents filed by the Assessee, the Learned AO noted that amount of unsecured loans were received by the Assessee from the family members and close concerns. Ultimately, the Learned AO noted that the parties from whom unsecured loans were received by the Assessee, do not have sufficient income to prove the Page | 3 source of credit and credit worthiness to advance unsecured loans to the Assessee and by doubting the credit worthiness of those parties, the Learned AO proceeded to treat the unsecured loans lying as on 31-03- 2016 as unproved and added the same as income from undisclosed sources in the assessment. This action of the Learned AO was upheld by the Learned CITA.
We find that the Assessee had furnished the following documents before the Learned AO to prove the three necessary ingredients of Section 68 of the Act viz. identity of the lenders, creditworthiness of the lenders and genuineness of transactions:-
a) Ledger account of lenders and Confirmation of balance from the lenders b) Bank Statements of the lenders c) ITR acknowledgement of Assessment Year 2016-17 of the lenders d) PAN of the lenders The aforesaid documents are enclosed in Pages 127 to 165 of the Paper Book. By filing the aforesaid documents, the Assessee had proved the three necessary ingredients of Section 68 of the Act and hence the primary onus that is cast on the Assessee stands discharged and onus thereafter shifts to the side of the revenue to prove the contrary. The Learned AO after the receipt of the aforesaid documents did not chose to make any enquiry on his own. Without resorting to make any further inquiries on the documents submitted by the Assessee, no adverse inference could be drawn on the Assessee herein by the Learned AO. The Assessee had also enclosed the Tax Audit Report of Assessment Year 2017-18 (immediately succeeding assessment year) to prove that certain loans were even repaid by the Assessee to the lenders and that they have a running account with the said lenders. None of these documents were sought to be disproved by the revenue by bringing in contrary evidences. Moreover, we find that the revenue had sought to add the closing balance of unsecured loans as on 31.3.2016 as income from undisclosed sources for which there is absolutely no support from the provisions of the Act.
In view of the aforesaid observations, we have no hesitation to delete the addition of Rs 1,90,08,000 in the facts and circumstances of the instant case on merits as Assessee had duly discharged its onus by filing all the requisite documents that are available at his end. The onus that got shifted to the revenue had not been discharged by the revenue. Hence no adverse inference could be drawn on the Assessee herein.
Since the addition is deleted on merits, the adjudication of other factual and legal grounds become academic in nature and hence they are left open.
In the result, the appeal of the Assessee is allowed.
Order pronounced in the open court on 11/03/2026.