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Facts
The assessee, a partnership firm named Jaydev Developers, received an unsecured loan of Rs. 1.50 crores from 'Jain Farms Private Limited' in FY 2016-17. During scrutiny under Section 143(3), the Assessing Officer found the lender company to be non-existent, struck off by the Registrar of Companies (RoC), and not filing income tax returns. The AO observed immediate fund transfers from the lender's bank account to the assessee, raising suspicions about the genuineness of the transaction.
Held
The Income Tax Appellate Tribunal (ITAT) affirmed the addition of Rs. 1.50 crores under Section 68, concluding that the assessee failed to establish the identity and creditworthiness of the lender and the genuineness of the transaction. The Tribunal noted the lender's cessation of business activities, lack of IT returns, and that a director of 'Jain Farms Private Limited' was also a partner in the assessee firm, suggesting the company was used to route the assessee's unaccounted income.
Key Issues
Whether the unsecured loan received by the assessee could be added as unexplained cash credit under Section 68 due to failure to prove the lender's identity, creditworthiness, and genuineness of the transaction, especially when the lender company was found non-existent and linked to the assessee.
Sections Cited
68, 143(3)
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Income Tax Appellate Tribunal, “ A ” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
"ी संजय गग", "ाियक सद" एवं अ"पूण" गु!ा, लेखा सद" के सम%। ] ] Before Shri Sanjay Garg, Judicial Member And Annapurna Gupta, Accountant Member आयकर अपील सं / Year : 2017-18 Jaydev Developers The Income Tax Officer बनाम/ 16, 4th Floor Ward-4(2)(1) v/s. Agarwal Mall Ahmedabad – 380 015 Opp. Bhagwat Vidyapith S.G. Highway Ahmedabad – 380 054 "थायी लेखा सं./PAN: AAIFJ 1174 C (अपीलाथ(/ Appellant) ()* यथ(/ Respondent) Assessee by : Shri Suresh Gandhi, AR Revenue by : Shri B.P. Srivastava, Sr.DR सुनवाई की तारीख/Date of Hearing : 29/07/2025 घोषणा की तारीख /Date of Pronouncement: 25/09/2025 आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 10/10/2023 for Assessment Year (AY) 2017-18. 2. The assessee, in this appeal, has taken following grounds of appeal: Jaydev Developers vs. The ITO Asst. Year : 2017-18 2
1. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 1,50,00,000/- u/s. 68 of the Act in respect of unsecured loan received from Jain Farms Pvt. Ltd. without proper consideration and appreciation of the facts of the case. Under the facts and circumstances of the case, the addition of Rs. 1,50,00,000/- u/s. 68 of the Act is required to be deleted.
The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the net amount of unsecured loan taken from the said company Jain Farms Pvt. Ltd. during the FY 2016-17 is of Rs. 1,19,85,000/- since the loan amount of Rs. 30,15,000/- has been repaid during the same financial year 2016-17 itself. Under the facts and circumstances of the case, the addition of Rs. 1,50,00,000/- confirmed by the Ld. CIT(A) is contrary to the facts available on record.”
The brief facts of the case are that the assessee is a partnership-firm engaged in the business of construction and property development. During the scrutiny assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”), the Assessing Officer (AO) noted that the assessee-firm had taken unsecured loans from various persons during the Financial Year (FY) 2016-17 relevant to assessment year under consideration AY 2017-18. The AO asked the assessee to furnish the complete details of the persons and to establish the identity and creditworthiness of the creditors and genuineness of the transactions. From the details furnished by the assessee, the AO noted that one of the creditors of the assessee was ‘Jain Farms Private Limited’ . The assessee, during the year under consideration, had taken a loan of Rs.1.50 crores from the said company ‘Jain Farms Private Limited’. However, the closing balance of the loan as on 31/03/2017 was shown as Rs.1,19,85,000/- and no interest was paid on the said amount. The Ld. AO further noted that no Income Tax Return was filed by the said lender- company and further from the bank statement of the said company, the AO noted that there were transfers/credits/deposits on the same date which were then immediately advanced to the assessee-firm, which transactions prima facie appeared suspicious. Having noted the above facts, the AO Jaydev Developers vs. The ITO Asst. Year : 2017-18 carried out field enquiry about the identity of the said company. As per the field enquiry report of the Inspector, he went personally to the available address of the said company and found that there was no such company or office of such company existing on the given address. He also made enquiry from the neighbourhood/surroundings from which it was gathered that no such person/entity was available on the said address. Considering the circumstances, that the said Jain Farms Private Limited had not filed any income-tax return and further it had no office at the given address and its name was also struck off from the