CHIRAG NITIN SHAH,BHAVNAGAR vs. THE ACIT, CIRCLE-1, BHAVNAGAR
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD “B” BENCH
Before: DR. BRR Kumar, Vice President
And Shri Siddhartha Nautiyal, Judicial Member
Chirag Nitin Shah
001 C/o M/s J.
Himatlal And Co.
Iron Market, Khargate,
Bhavnagar-364001,
Gujarat
PAN: AGYPS1005K
(Appellant)
Vs
The ACIT
Circle-1, Bhavnagar
(Respondent)
Assessee Represented: Shri Mehul K. Patel, Advocate
Revenue Represented: Shri Abhijit, Sr.D.R.
Date of hearing
: 15-09-2025
Date of pronouncement : 30-09-2025
आदेश/ORDER
PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 30.05.2025 passed by the Commissioner of Income Tax
(Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19. ITA No: 1398/Ahd/2025
Assessment Year: 2018-19
I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
2. The assessee has raised the following Grounds of Appeal:
(1) That on facts, and in law, the learned NFAC the has grievously erred in confirming addition of Rs.19,83,889/- in respect of loan transaction added u/s 68
of the Act as alleged unexplained cash credit, and taxing the same u/s 115BBE of the Act.
(2) That on facts, and in law, the learned NFAC has grievously erred confirming the addition of Rs.5,18,175/ made as unexplained investment in purchases u/s 69
of the Act, and taxing the same u/s 115BBE of the Act,
(3) The appellant craves leave to add, alter, amend any ground of appeal,
The brief facts of the case are that the assessee is an individual engaged in the business of scrap trading under the name J H Metal & Alloys. The assessee filed his return of income for AY 2018-19 declaring income of Rs.36,16,730. The case was selected for complete scrutiny for verification of large increase in unsecured loans and income from scrap. During the course of assessment, the Assessing Officer examined the unsecured loans and observed that the assessee had taken a loan of Rs.19,83,889 from Chirag Shah HUF. On verification of the ITRs and bank statements of the lender, the AO found that the income declared by the HUF was much lower than the loan amount advanced to the assessee and the bank account reflected immediate inflows from related parties before the loan was forwarded to the assessee. Since the assessee could not substantiate the creditworthiness of the lender or the genuineness of the transaction with supporting evidence, the AO treated the loan as unexplained cash credit under section 68 read with section 115BBE. The AO also examined scrap purchases on the basis of TCS data and found discrepancies with the purchase ledger. Particularly, the Assessing Officer noted that the purchases
I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
amounting to Rs.5,18,175 from M/s. Saumil Impex Pvt. Ltd. were not reflected in the ledger though the name appeared in transportation expenses.
The assessee submitted that the purchases were genuine and filed invoices and confirmations, but the AO held that the same were not reconciled with the original purchase records and accordingly treated the purchases as unexplained investment under section 69 read with section 115BBE of the Act. On this basis, the AO completed the assessment by making additions of Rs.19,83,889 under section 68
and Rs.5,18,175 under section 69 of the Act, computing the total income at Rs.61,39,294, and also initiated penalty proceedings under section 271AAC.
Aggrieved, the assessee filed an appeal before the CIT(A). The assessee contended that complete details of the lender including returns, bank statements and ledgers were filed and that the loan from Chirag Shah HUF was genuine. It was further argued that the purchase from M/s. Saumil Impex Pvt. Ltd. was duly recorded in the books and supported by purchase bills, confirmations, and payment through banking channels. The assessee also challenged the applicability of section 115BBE and initiation of penalty. The CIT(A), after considering the statement of facts, grounds of appeal, written submissions and the assessment records, upheld the findings of the AO. The CIT(Appeals) held that the assessee merely reiterated the submissions made before the AO without producing any new or conclusive evidence to prove the creditworthiness of the lender or to reconcile the disputed purchases. The factual discrepancies pointed out by the AO in the fund flow of the loan
I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
Officer as well as before the CIT(A). These included the confirmation of account and ledger copy of Chirag Shah HUF, copy of its income tax return acknowledgments, bank pass book, Form 26AS, and also the assessee’s own bank statement showing receipt of Rs.15,00,000 and Rs.3,50,000 from the said HUF. The Counsel submitted that the source of the funds in the hands of Chirag Shah
HUF came from M/s J. Himatlal & Co., and to substantiate this, the assessee furnished acknowledgment of return of J. Himatlal &
Co., its bank statement and ledger accounts evidencing transfer of the amount to Chirag Shah HUF. It was contended that these documents cumulatively establish the three essential requirements of section 68 of the Act, namely the identity of the creditor, genuineness of the transaction, and creditworthiness of the creditor. The Counsel submitted that the use of the same bank for the assessee, J. Himatlal & Co. and Chirag Shah HUF explains why the amounts appeared on the same date, and that mere routing of I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
(ITAT Mumbai), to contend that once the assessee discharges its initial burden with documentary evidences, the onus shifts to the department to prove otherwise. Therefore, the Counsel submitted that the proposed addition under section 68 be deleted. With regard to the addition of ₹Rs.,18,175 made under section 69 of the Act as unexplained investment in purchases from M/s Saumil
Impex Pvt. Ltd., the Counsel submitted that the assessee had duly recorded this purchase in the books of account, and complete evidences were filed. These included the original purchase invoice from Saumil Impex, the confirmation ledger of the party, the assessee’s purchase register, the bank statement reflecting payment through banking channel, and also Form 26AS which shows TCS collected on the said purchase. It was pointed out that the payment to Saumil Impex was duly made through cheque as reflected in the bank account, and the corresponding entries were also recorded in the purchase register at pages 57 and 65 of the Paper Book. The Counsel explained that the confusion arose only because the name ‘Saumil Impex’ appeared in the transportation expense ledger, but in fact the purchase of Rs. 5,18,175 was recorded and duly reconciled. The Counsel argued that the assessee had fully discharged his onus by providing confirmations, bank statements, purchase bills, registers, and statutory returns. It I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
26AS, and also his own bank statements showing receipt of the loan. The source of the loan was further explained as being funded from M/s
J.
Himatlal
&
Co., supported by its return acknowledgments, bank statements, and ledgers. The mere fact that the income declared by the lender was comparatively low or that funds were routed through related parties cannot by itself justify treating the loan as unexplained when documentary evidence demonstrates the source and flow of funds. We find guidance in the decision of the Hon’ble Gujarat High Court in CIT v. Patel Ramniklal Hirji (2014) 222 Taxman 15 (Mag.) / 41
taxmann.com 493, wherein it was held that once identity and genuineness are proved, the loan cannot be treated as unexplained
I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
merely due to low income of the lender. Similarly, the Hon’ble
Gujarat High Court in CIT v. Ranchhod Jivabhai Nakhava
[2012] 21 taxmann.com 159 observed that where the assessee substantiated the transaction with primary evidence including bank records, addition under section 68 was unsustainable. The ITAT Ahmedabad in JCIT (O ), Circle-3(1)(2) v. Radhe
Developers (India) Ltd., ITA No. 1240/Ahd/2018 with C.O.
95/Ahd/2019
deleted addition where confirmations and supporting evidence were furnished. Likewise, the ITAT Mumbai in ACIT-20(2) v.
Shri
Joit
Kumar
B.
Jain,
ITA
No.
5638/Mum/2017 (A.Y. 2010-11) held that once confirmations and bank statements are on record, addition cannot rest merely on suspicion. In view of these binding precedents, we hold that the assessee has discharged his onus, and the addition under section 68 is not sustainable.
Coming to the addition of Rs.5,18,175 under section 69 of the Act, we note that the assessee produced the purchase invoice from M/s Saumil Impex Pvt. Ltd., confirmation ledger, purchase register, Form 26AS reflecting TCS collection, and his bank statement evidencing payment through cheque. These documents corroborate that the purchase was genuine and duly accounted for in the books of account. The confusion arose only because the name ‘Saumil Impex’ appeared in the transportation ledger, but the actual purchase was duly reflected in the purchase register.
In view of the above discussion and respectfully following the judicial pronouncements relied upon, we are of the considered
I.T.A No. 1398/Ahd/2025 A.Y. 2018-19
Order pronounced in the open court on 30 -09-2025 (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL)
VICE PRESIDENT JUDICIAL MEMBER
Ahmedabad : Dated 30/09/2025
आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:-
1. Assessee
Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार
आयकर अपीलȣय अͬधकरण,
अहमदाबाद