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Facts
The assessee received unsecured loans amounting to Rs. 18,00,000/- from two relatives, Smt. Santosh Kumari and Sh. Yogesh Bansal, via banking channels. Following a revisionary order by the PCIT under Section 263, the AO made an addition under Section 68, treating these as unexplained cash credits due to alleged lack of lender creditworthiness, which was upheld by the CIT(A).
Held
The Tribunal held that the assessee had successfully discharged the initial onus under Section 68 by proving the identity of the lenders and the genuineness of the transactions, which occurred through banking channels and were supported by documentary evidence. It emphasized that once the assessee establishes these points, the onus shifts to the Revenue to investigate the source of funds in the hands of the creditors, and as such, the addition made was unjustified.
Key Issues
Whether the assessee discharged the onus of proving the identity, genuineness, and creditworthiness of unsecured loans under Section 68 of the Income Tax Act.
Sections Cited
68, 143(3), 250, 263, 142(1)
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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the Assessee against the order dated 04.10.2024 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi.
2. Grounds of appeal
are as under: - 1123-Chd-2024 Jai Gopal Goyal, Mohali 2
1. That on the facts, circumstances and legal position of the case, Worthy CIT(A), NFAC in Appeal No. NFAC/2016-17/10236932 has erred in passing order dtd. 04.10.2024 in contravention of provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as "Act").
1. 2. That on facts, circumstances and legal position of the case, Worthy CIT(A) has erred in confirming addition of Rs. 17,10,000/-made by the Ld. AO by erroneously treating the unsecured loan from Smt. Santosh Kumari as unexplained cash credit u/s 68.
3. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same.
3. Brief facts of the case as per the order of the Ld. CIT(A) are as under: - That the appellant is an individual and in the present case the assessment u/s 143(3) of the I.T. Act was completed on 03/12/2019 assessing total income at Rs.3,59,91,230/- by accepting the returned income. Subsequently, the PCIT Chandigarh passed order u/s 263 of the I.T. Act dated 23/03/2022 wherein the PCIT has held that the said assessment order dated 03/12/2019 passed by the AO is erroneous and prejudicial to the interest of 1123-Chd-2024 Jai Gopal Goyal, Mohali 3 revenue since the appellant did not furnish the evidence to prove the creditworthiness of the person from whom unsecured loans were received by the appellant during the relevant previous year. In view of the direction received from the PCIT vide order u/s 263 of the I.T. Act, the AO has completed assessment proceedings u/s 143(3) r.w.s. 263 of the I.T. Act on 29/03/2023 by making addition of Rs.18,00,000/- as unexplained cash credit u/s 68 of the I.T. Act in respect of two loan creditors. Aggrieved by this addition the present appeal is placed for adjudication.
The Ld. CIT(A) in his order has given findings on this issue as under:-
The appellant was required to discharge initial onus cast upon it by provision of sec. 68 of the I. T. Act since the sum so credited in the books of account is on account of unsecured loan received. However, in spite of sufficient and reasonable opportunities offered by the A.O. and even by this office, the appellant failed to discharge onus cast upon it to explain with support of authentic documentary evidences, the genuineness of unsecured loan of Rs.18,00,000/-received from Santosh Kumari during the relevant previous year.
1123-Chd-2024 Jai Gopal Goyal, Mohali 4 5. During proceedings before us, the Counsel of the Assessee has filed a written submission on this issue which is as under:-
The appellant is an individual and is a proprietor of the business concern under the name & style of 'PD Steels, Mohali. The appellant had filed the return for the year in question declaring the income Rs. 3,59,91,230/-.
The earlier assessment was selected for scrutiny u/s 143(3) and the returned income of Rs. 3,59,91,230/- declared by the appellant was accepted vide order dtd. 03.12.2019. Thereafter, the Worthy PCIT initiated the revisionary proceedings u/s 263 and concluded the same whereby she directed the re-examination of some specific unsecured loans raised by the appellant.
Thereafter, as per the directions of Worthy PCIT, the AO initiated fresh assessment proceeding u/s 143(3) r.w.s. 263 vide issuance of notice u/s 142(1) dtd. 07.04.2022. Thereafter, various notices u/s 142(1) were issued. After that, show cause notices dtd. 06.03.2023 & 20.03.2023 were also issued to the appellant. In response to these notices, the appellant duly complied and furnished his submission/reply wherein the appellant explained the entire facts of the case along with 1123-Chd-2024 Jai Gopal Goyal, Mohali 5 relevant documentary evidences. Thereafter, the Ld. AO passed impugned assessment order u/s 143(3) r.w.s 263 dtd. 29.03.2023 making the impugned addition of Rs. 18,00,000/-whereby he treated the loans of Rs. 17.10 Lacs and Rs. 0.90 Lacs raised from Smt. Santosh Kumari & Sh. Yogesh Bansal respectively as unexplained cash credit u/s 68. Relevant extract from the impugned assessment order showing the reason for making the impugned addition is reproduced as hereunder: 8. Considering all these facts of the case as discussed above and material available on record, it is held that the assessee received accommodation entries of Rs. 18,00,000/-(1710000+ 90000) from Smt. Santosh Kumari and Sh. Yogesh Bansal respectively in the garb of unsecured loan whereas such person did not have creditworthiness for advancing such amount. It has been further established that cash amount was deposited in the bank account of Smt. Santosh Kumari before the transferring the money to the assessee. Accordingly, the amount of Rs. 18,00,000/- is hereby treated as unexplained credit u/s 68 of the Act and added to the declared returned income for the year under consideration." From the above extract, it is clearly evident that the AO has made the impugned addition on the 1123-Chd-2024 Jai Gopal Goyal, Mohali 6 sole basis that the appellant has procured unsecured loans and was unable to prove the creditworthiness of the lenders. The impugned addition deserves to be deleted on the basis of under-mentioned arguments. 4. In the relevant year, the appellant had raised unsecured loans out of which following have been added: S.No. Party from Amount unsecured of Loan loan was (in Rs.) procured 1 Smt. 17,10,000 Santhosh Kumari 2 Sh. 90,000 Yogesh Bansal
The above were genuine unsecured loans in the books of the appellant and were duly reflected in the Balance Sheet as at 31.03.2017. For the above unsecured loans, party wise submission, as made to the Ld. AO, is furnished as follows: a. Smt. Santosh Kumari- Rs. 17,10,000/- Smt. Santosh Kumari is the aunt (Chachi) of the appellant. During the year in question, she gave loan of Rs. 17,10,000/- to M/s PD Steels which is the proprietary firm of the 1123-Chd-2024 Jai Gopal Goyal, Mohali 7 appellant. Such amount was utilized by the appellant for the business purpose. The said amount was transferred from her saving account no. 3447000100012932 maintained with PNB, Branch Nihal dtd. Singh Wala, Distt. Moga-142055 (Pb) through RTGS No. PUNBR520160525106 dtd. 25.05.2016 of Rs. 15,00,000/- and RTGS No. PUNBR52017011213747449 12.01.2017 of Rs. 2,10,000/-. Furthermore, we are enclosing herewith a copy of the ledger account of the lender in the books of the appellant depicting the receipt of unsecured loans and interest outstanding thereon. It is hereby submitted that the necessary TDS on such interest was also deducted by the appellant, as can be seen in the given ledger. Such TDS was further claimed by the lender, which can be substantiated by her ITR and computation of income. The said ITR and computation of income of the lender is also appended herewith. A confirmation from the lender stating that she had advanced a sum of Rs. 18,16,493/- (including Rs. 17,10,000/- for the business purpose and the balance of Rs. 1,06,493/- as outstanding interest) during the relevant year in question is also appended herewith. All above documents were furnished to the AO also. Copies of relevant replies dtd. 09.03.2023 & 24.03.2023 uploaded on the portal, during faceless assessment, containing the mention of filing of these documents is appended herewith. This reply 1123-Chd-2024 Jai Gopal Goyal, Mohali 8 includes documents of Smt. Santosh Kumari as also of Sh. Yogesh Bansal. b. Sh. Yogesh Bansal Rs. 90,000/- Sh. Yogesh Kumar is the cousin brother of the appellant. During the F.Y. 2016-17 he gave loan of Rs. 90,000/- to M/s PD Steels which is the proprietary firm of the appellant. Such amount was utilised by the appellant for the business purpose. The said amount was given on 16.05.2016 through A/c Payee cheque vide cheque no 215664. Furthermore, we are enclosing herewith a copy of the ledger account of the lender in the books of the appellant depicting the receipt of unsecured loans and interest outstanding thereon. On the perusal of such ledger, it can be seen that there was an opening balance of loans from the said party. It shows that the said party had advanced loans to the appellant during the preceding year as well. However, receipt of such loans was never doubted by the Ld. AO in the preceding years. It is hereby submitted that the necessary TDS on interest paid to the lender was also deducted by the appellant, as can be seen in the given ledger. A confirmation from the lender stating that he had advanced a sum of Rs. 90,000/- during the relevant year in question is also appended herewith.
6. Furthermore, the above unsecured loans were taken through the banking channels only and are genuine in nature. And the above stated facts 1123-Chd-2024 Jai Gopal Goyal, Mohali 9 clearly substantiate the identity of the lenders along with their creditworthiness and genuineness of the transaction. The appellant has filed complete documents from the lenders also. The lenders are not unknown persons but are close relatives of the appellant. The appellant has declared business turnover of Rs. 25.35 cr. and had filed ITR of Rs. 3.59 cr. for the year in question. Comparing this level of compliance of the appellant with treatment of unsecured loans of Rs. 18 Lacs was highly unjustified on the part of Ld. AO. Further, the onus u/s 68 stood discharged by the appellant and so, the addition thereunder should not have been made.
7. Further, In Para 3.6.6 at page 10 of impugned assessment order passed u/s 143(3) r.w.s 263 dtd. 29.03.2023, the Ld. AO has reproduced the entire source of source of funds as explained by Smt. Santosh Kumari (source of funds). It was explained that the said funds were emanating from the proprietorship of Smt. Santosh Kumari, i.e. M/s R.K. Marbles during the FY 2015-16.
Per contra, the ld. DR relied on the order of the Ld. CIT(A).
We have considered the findings given by the Assessing Officer in the assessment order and by the Ld. 1123-Chd-2024 Jai Gopal Goyal, Mohali 10 CIT(A) in the appellate order. We find that Ld. counsel has filed a detailed written submission. From the aforesaid written submissions, it is clear that Smt. Santhosh Kumar who has given a loan of Rs. 7,10,000/- to the Assessee is an aunt (Chachi) of the Assessee and similarly Yogesh Bansal who has given Rs. 90,000/- is the cousin brother of the Appellant, therefore, the existence of both the parties is beyond doubt. Further, the Counsel of the Assessee has also filed confirmation and other related documents from both these persons. In his support, the Ld. Counsel has brought it on record different case laws on this issue which are as under: - CIT vs Burma Electro Corporation [P&H JC] 252 ITR 344 dt. 9.8.2000 Aravali Trading Co. vs ITO (Raj HC) 8 DTR 199 dt. 25.1.2007] PCIT vs Neotech Education foundation (2023) 458 ITR 0150 (Guj.) CIT vs Jawaharlal Oswal (382 ITR 453) (P&H HC) DCIT vs Smt.Veena Awasthi (ITA 215/LKW/2016) [Luck. ITAT] dated 30.11.2018 M/s Choice Buildestate Pvt. Ltd vs ITO, Jaipur (ITA No. 431 & 432/JP/2016) dated 28.3.2018 1123-Chd-2024 Jai Gopal Goyal, Mohali 11 In orient Trading Co. Ltd v CIT 949 ITR 723) (Bom.HC) [1963]
After going through the gist of all these case laws, it is clear that once the Assessee proves the identity of the creditor and filed relevant papers showing that all the loans have been received through banking channels alongwith bank account of the creditors, it is for the Revenue to investigate the source of such funds in the hands of the creditors, therefore, keeping in view the case laws cited above and the facts of the case, we find that there is no justification for making addition on this issue. Accordingly, Assessee’s appeal on this issue is allowed.
In the result, Assessee’s appeal is allowed.
Order pronounced on 11.08.2025.