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Facts
The appeals by two assessees for AY 2010-11 relate to additions made by the AO on account of unproved loans and deemed dividends, which were partly confirmed by the CIT(A).
Held
The Tribunal held that for ITA No.1792/PUN/2019, the addition of Rs. 12,50,000/- u/s.68 was uncalled for as the assessee had discharged the primary onus. For ITA No.1799/PUN/2019, the addition of Rs. 15,40,000/- u/s.68 was also uncalled for as the lender had sufficient funds and declared income. Other grounds were not pressed.
Key Issues
Whether the additions made under Section 68 of the Income Tax Act for loans received from related parties were justified, considering the explanation of the nature and source of funds.
Sections Cited
68, 2(2)(e), 143(3)
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD & MS. ASTHA CHANDRA
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeals by two different but connected assessees relate to A.Y. 2010-11 and are directed against the separate orders both dated 28.08.2019 arising out of the respective Assessment orders. For the sake of convenience, we proceed to dispose of these appeals by this consolidated order. and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani : 2. From perusal of Form No.36, we notice that the amount disputed in the appeal is mentioned in Column 7(c) raising the following issues :
“1. Addition of Rs.12,50,000.00 made u/s.68 of the I. T. Act 1961 on account of unproved loans received from M/s. Jay Mahrashtra Consumer Pvt. Ltd.
2. Addition of Rs.6,70,740.00 made being deemed dividend u/s.2(2)(e) of the I.T. Act 1961 from M/s. Apeksha Impex Pvt. Ltd.
3. Addition of Rs.1,00,000.00 on account of household expenses.”
2.1 Whereas Column No.10 provides the grounds of appeal raised by the assessee and the same read as under :
‘1. The learned C.I.T. [A] has erred in confirming the addition of Rs. 12,50,000 on account of unproved loan from Jay Maharashtra Consumers Pvt Ltd. The said addition being patently illegal, arbitrary and perverse may please be deleted. 2. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”
During the course of hearing, when ld. Counsel for the assessee was confronted with this situation about grounds of appeal mentioned in Column No.7(c) and Column No.10, he made a request for not pressing disputed amount mentioned in Sl.No.2 and 3 of Column No.7(c). Accordingly, the said ground are dismissed as ‘not pressed’.
4. The only effective issue assailed in the instant appeal is whether ld.CIT(A) erred in confirming the addition made by AO u/s.68 of the Act for the loan of Rs.12,50,000/- received from Jai Maharashtra Consumer Private Limited (in short ‘JMCPL’). and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani
5. Ld. Counsel for the assessee submitted assessee is having transactions with JMCPL for past many years. Opening credit balance from JMCPL stood at Rs.60,64,394/- and the transactions carried out during the year are through banking channel and duly explained. Therefore, no addition made u/s.68 of the Act deserves to be made.
On the other hand, ld. Departmental Representative vehemently argued supporting the orders of the lower authorities.
We have considered the rival submissions and perused the record placed before us. The only issue for our consideration is whether under the given facts section 68 can be invoked for the unsecured loan of Rs.12,50,000/- received by the assessee from JMCPL. We notice that the assessee is having regular transactions with the alleged creditor and there is opening balance of Rs.60,64,394/-. Further, the transaction during the year was duly explained by the assessee giving following details :
Date Cheque No. Amount Amount Source of payment DR CR 1-Apr-2019 Op. Balance 6064394 02/05/2009 15181 600000 JMC Pvt. Ltd. paid this amount out sale proceeds of Machinery received from M/s. S.A. Traders vide Ch.No.162735 dt.18/02/2009 06/08/2009 329447 650000 This amount paid out of unsecured loan received from JMC Pvt. Ltd. vide Ch.No.015181 dt.02/05/2009 for Rs.600000/- & out of salary received from Indiabulls Industrial Infrastructure Ltd. on 11/06/2009 for Rs.71888.66, on 30/06/2009 for and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani
Rs.7777-/- & on 31/07/2009 for Rs.79538.38
JMC Pvt. Ltd. paid this amount out sale proceeds of Machinery received from M/s. S A Traders vide Ch.No.162735 dt.18/02/2009 for Rs.5.00 lacs & Ch.No.162736 dt.18/02/2009 for Rs.5.00 lacs
13/08/2009 59524 650000 JMC Pvt. Ltd. paid this amount out of Advance received from Kalpvruksha Developers vide Ch.No.119258 dt.07/08/2009 for Rs.5500000/-
07/09/2009 329454 600000 This amount paid out of unsecured loan received from JMC Pvt. Ltd. vide Ch.No.059524 dt.13/08/2009 for Rs.650000/- & refund of Advance received from Gopal G. Patwardhan vide Ch.No.015096 dt.28/08/2009 for Rs.600000/- JMC Pvt. Ltd. paid this amount out of Advance received from Kalpvruksha Developers vide Ch.No.119258 dt.07/08/2009 for Rs.5500000/-
07/10/2009 329461 600000 This amount paid out of refund of advance received from Gopal G. Patwardhan vide Ch.No.015096 dt.28/08/2009 for Rs.600000/- & salary received from Indiabulls Industrial Infrastructure ltd. on 31/08/2009 for Rs.81148/-. and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani
31/03/2010 Cl. Balance 5464394 C/B 7314394 7314394
The above details with specific information about the source of funds as well as the sale proceeds for machinery and other transactions clearly indicate that the Identity, creditworthiness of JMCPL is proved and the genuineness of the transaction is also verifiable. It is also noticed that the assessee holds the Equity shares of JMCPL and therefore is well connected with this concern. Considering the overall facts and circumstances of the case, we find that ld.AO erred in invoking section 68 of the Act as the assessee has discharged primary onus by explaining the nature and source of the alleged sum received from JMCPL. Finding of ld.CIT(A) is reversed and ground of appeal raised by the assessee on this issue is allowed.
In the result, appeal of the assessee is partly allowed.
From perusal of Form No.36, we notice that the amount disputed in the appeal is mentioned in Column 7(c) raising the following issues :
“1. Addition of Rs.98,823.00 made u/s.2(22)(e) of I. T. Act 1961 in respect of loan received from Apeksha Impex Pvt. Ltd. 2. Addition of Rs.15,40,000.00 made u/s. 68 of the I.T. Act 1961 on account of unproved loans received from Sunil Gidwani. 3. Addition on account of notional interest Rs.2,52,000.00. 4. Addition of Rs.1,00,000.00 on account of household expenses.”
10.1 Whereas in Column No.10 provides the grounds of appeal raised by the assessee and the same read as under : and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani
1. The learned C.I.T.[A] has erred in confirming addition of the Rs. 15,40,000.00 made u/s 68 of the I.T. Act 1961 by the learned Assessing Officer on account of unproved loan received from Sunil Gidwani. The said addition being patently illegal, arbitrary, perverse and based on no evidence the same may please be deleted.
The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”
During the course of hearing, when ld. Counsel for the assessee was confronted with this situation about grounds of appeal mentioned in Column No.7(c) and Column No.10, he made a request for not pressing disputed amount mentioned in Sl.No.1, 3 and 4 of Column No.7(c). Accordingly, the said grounds are dismissed as ‘not pressed’.
12. The only effective in this appeal is regarding the addition made u/s.68 of the Act by the ld. AO at Rs.15,40,000/- with the loan received from Sunil K.Gidwani.
13. In the instant appeal, we notice that assessment of the assessee namely Kailash Kanhaiyalal Gidwani through legal heir of Late Kanhaiyalal Vishindas Gidwani for A.Y. 2010-11 was completed on 20.03.2013 u/s.143(3) of the Act. Scrutiny proceedings were carried out after selecting the return of income for A.Y. 2010-11 filed by the assessee on 08.02.2011 declaring income of Rs.1,79,300/- and after validly serving statutory notices the assessment proceedings were carried out. Ld. AO observed that the assessee received loan of Rs.15,40,000/- from Sunil K. Gidwani. Though the submissions were filed before the ld. AO he was not satisfied and made the impugned addition u/s.68 of the Act. and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani
14. Aggrieved assessee preferred appeal before ld.CIT(A) where it is stated that the sources of funds available with Sunil K. Gidwani was from the business of Turmeric trading but ld.CIT(A) had observed that since the Turmeric trading business is unsubstantiated, sources of alleged sum fails the test check of creditworthiness and the impugned addition was confirmed.
Now the assessee is in appeal before this Tribunal.
Ld. Counsel for the assessee submitted that Sunil K.Gidwani had sufficient funds available with him and even the income of Rs.13,19,928/- has been offered to tax by Sunil K. Gidwani for A.Y. 2010-11. Reference was made to the decision of Coordinate Bench in the case of Kailash Kanhaiyalal Gidwani Vs. ACIT for A.Y. 2010-11 in and Sunil Kanhaiyalal Gidwani Vs. ACIT in order dated 02.03.2022 wherein the Turmeric business was found to be disclosed by the assessee and profits declared therein was accepted. It was also submitted that sufficient income was declared by Sunil K. Gidwani and which in itself is a source to explain the alleged sum.
On the other hand, ld. Departmental Representative supported the orders of the lower authorities.
We have considered the rival submissions and perused the record placed before us. Loan of Rs.15,40,000/- received by the assessee from Sunil K. Gidwani has been added by the AO invoking section 68 of the Act. We notice that the assessee is related to Sunil K. Gidwani and they are part of the same family. Sunil K. Gidwani has offered income of Rs.13,19,928/- in the income-tax return for A.Y. 2010-11. As far as the balance sheet and 1799/PUN/2019 Amit. K. Gidwani and Kailash K. Gidwani of Sunil K. Gidwani placed at page 5 of the paper book, we observe that Sunil K. Gidwani had a capital of Rs.41,99,016.34 and other funds in the form of loans and current liabilities which are sufficient to explain the loan given to the assessee. We further observe that Sunil K. Gidwani is regularly assessed to tax, passed through the scrutiny proceedings for the very same assessment year and even the issue that whether Sunil K. Gidwani was carrying on the genuine business of Turmeric trading also reached before this Tribunal and the Tribunal vide order dated 02.03.2022 has decided in favour of the assessee(s), i.e. Kailash K. Gidwani and Sunil K. Gidwani. All these facts collectively demonstrate that the Identity and Creditworthiness of alleged cash creditor and genuineness of the alleged transaction are proved and the same has been duly demonstrated by the assessee with the help of various documents including income- tax return, balance sheet, ledger account and bank statement of Sunil K. Gidwani. Under these given facts and circumstances, we are of the considered view that addition u/s.68 of the Act at Rs.15,40,000/- was uncalled for. Finding of ld.CIT(A) is reversed. Ground of appeal raised by the assessee is allowed.
In the result, appeal of the assessee is partly allowed.
20 To sum up, both the appeals of the respective assessees are partly allowed.
Order pronounced on this 08th day of May, 2025.