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Facts
The Revenue filed an appeal against the CIT(A)'s order deleting an addition of Rs. 87,35,000/- made by the Assessing Officer. The AO had added this amount to the assessee's income, treating unsecured loans from four parties as non-genuine. The assessee, a developer, had declared income of Rs. 26,17,190/- for AY 2018-19.
Held
The Tribunal held that the assessee had discharged the initial onus of proving the identity, creditworthiness, and genuineness of the creditors. The AO failed to conduct further investigation into the source of the funds, making the addition based on conjecture. Therefore, the addition made under section 68 of the Act was deleted.
Key Issues
Whether the addition of Rs. 87,35,000/- made by the AO under Section 68 on account of alleged non-genuine unsecured loans was justified, considering the evidence provided by the assessee and the CIT(A)'s findings.
Sections Cited
143(3), 68
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
Date of hearing : 08-01-2025 Date of pronouncement : 07-03-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue as against the appellate order dated 16.02.2024 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.
A.Y. 2018-19 Page No 2 ITO Vs. Sarovar Realty LLP
Brief facts of the case is that the assessee is a Limited Liability Partnership Firm engaged in to business as developer and organizer of scheme of residential and commercial construction. For the Asst. Year 2018-19, assessee filed its Return of Income on 25-01-2019 declaring income of Rs.26,17,190/-. During the assessment proceedings, the Assessing Officer found that assessee had unsecured loan of Rs. 11,32,63,843/- from various parties wherein loan amount of Rs. 87,35,000/- availed from four parties was found to be not genuine and thereby added as the undisclosed income of the assessee.
On further appeal, the Ld. CIT(A) gone through the transactions with the four creditors and thereby deleted the addition by observing as follows: “In the assessment order the AO has noted the evidence filed before him regarding the above 4 creditors. As per the same all the four creditors were regular return filers. The lead creditor Kavita Janakbhai Shah, who had lent Rs. 40 lacs as per the details noted in the assessment order had returned an income of Rs 7,28,300/- Vasantlal Shivlal Shah HUF Manjulaben Narayanbhai Patel and Shivangi Ghanshyambhal Bhatt are acknowledged to have filed returns of income with total income of Rs.3,84,110/- Rs 5,92,930/- and Rs. 2,99.480/- respectively. It is also acknowledged by the AO that the lending was done by normal banking channels. I thus find that the appellant had duly discharged the initial onus of establishing the identity of the creditor their credit-worthiness and the genuineness of the transaction. It was then incumbent on the AO to do detailed investigation before he could have reached the conclusion that section 68 was invocable in the case of the appellant. The AO has only stated that genuineness of the transactions is not proved as there were credit entries of same or similar amounts in the bank accounts of the creditors before the loan was advanced to the appellant. Thus the AO concluded that this was money of the appellant routed through the bank accounts of the aforesaid four persons. It is not as if the amounts have been deposited in cash in the bank accounts of the lenders before providing loans to the appellant. The relevant bank accounts were before A.Y. 2018-19 Page No 3 ITO Vs. Sarovar Realty LLP
the AO and the source of the credits in the bank accounts of the four persons could have been ascertained by the AO through bank accounts. In the absence of any such enquiry, it is only a conjecture that the money of the appellant has been routed through the bank accounts of the above creditors, more so when the explanation of the source of the source was also given to the AO, as seen from table reproduced at Page 2 of the impugned order. 63 The evidence for source of the source has been produced during the appeal proceedings. The same has been perused and found to be in order. This additional evidence regarding source of source is not the primary reason for deleting the above disallowance. Hence the same has not been formally remanded to the AO but has been perused by this office as corroborative evidence. In the facts and circumstances of the case I find that the initial onus having being discharged in this case the AO could not in law have cast the onus of establishing the ‘source of the source’ of the funds lent to the appellant. Having failed to conduct any further enquiry into the source of the source the AO could not have made the addition u/s 68 of Rs 87, 35,000/- on conjecture and surmises alone. Thus, the addition of Rs. 87,35,000/- u/s 68 is hereby deleted and grounds no. 1.1 to 3.4 are treated as allowed.”
Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal: 1." Whether the CIT(A) has justified In law and on facts in deleting the addition made of Rs.87,35,000/- u/s. 68 of the Act, without considering the facts of the case 7"
2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3."It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored".
5. Ld. Sr. D.R. appearing for the Revenue supported the order passed by the Assessing Officer and requested to confirm the addition.
A.Y. 2018-19 Page No 4 ITO Vs. Sarovar Realty LLP
Per contra, Ld. Counsel appearing for the assessee submitted that every unsecured loans were properly explained before the Assessing Officer as well as before Ld. CIT(A) thereby Ld. CIT(A) deleted the addition which does not require any interference. Ld. Counsel brought to our attention in the case of unsecured creditor Ms. Kavita Janakbhai Shah whereas the submissions made before Ld. CIT(A) as follows: “Ms. Kavita Janakbhai Shah has advance a sum of Rs. 40,00,000/- through an account payee cheque from her ODFD (Overdraft against Fixed Deposit) account with The Kalupur Commercial Co. Op. Bank, C.G. Road Branch, Ahmedabad on 06-03-2018. Ms. Kavita Janakbhai Shah has made advance in the year's prior to 01-04-2017 to Jitendra J. Jetpariya (PAN: AIOPJ9098D) having address at Morbi, Gujarat and was deriving income on the said advance from Jitendra J. Jetpanya. The interest income eamed is also reflected in her return of income for relevant year. During the year under consideration, Ms. Kavita Janakbhai Shah has received back the amount advance to Jitendra J. Jetpariya amounting to Rs. 39,45,940 on 06- 03-2018. The said amount is deposited in her ODFD (Overdraft against Fixed Deposit) account with The Kalupur Commercial Co. Op. Bank, C.G. Road Branch, Ahmedabad. Thus there is an immediate credit in her account before advancing the your assesse but the said amount is her legal and valid fund. The copy of relevant extract of account from of Kavita Shah, from Jitendra Jetpariya, Copy of her bank statement, copy of her ITR and computation, copy of ledger account with your assessee is enclosed herewith marked as Annexure I.” 6.1. Similarly in the case of Vasantlal Shivlal Shah HUF, Manjulaben Naranbhai Patel and Shivangi Bhatt every details provided and thus Ld. Counsel pleaded the findings arrived by Ld. CIT(A) does not require any interference.
We have carefully gone through the submissions made by rival parties and perused the materials available on record. The Revenue except the Grounds of Appeal
, no material is placed before us to deviate the findings arrived by Ld. CIT(A). Without any materials A.Y. 2018-19 Page No 5. ITO Vs. Sarovar Realty LLP placed on record, we do not find any infirmity in the findings arrived by Ld. CIT(A). Thus the grounds raised by the Revenue are devoid of merits and liable to be dismissed.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 07 -03-2025