CONVENICA TEXTILES VILLAGE HEERAN AT HEERAN KOHARA LUDHIANA,PUNJAB vs. THE NFAC DELHI JURISDICTIONAL ASSESSING OFFICER INCOME TAX OFFICER WARD 3(1) LUDHIANA, PUNJAB

As per grounds of appeal

The assessee filed an appeal before the CIT(A) NFAC and the submissions of the assessee have been recorded by the CIT(A) at pages 5 to 10 of his order. It has been stated therein that the assessee had duly proved the identity, credit worthiness and genuineness of transactions and the assessee filed the confirmation from the lender and all the transactions are through banking channel. Merely non- furnishing of ITR, cannot prove that the unsecured loan was bogus and in genuine and, as such, the addition u/s 68 was not called for. However, the CIT(A) dismissed the appeal of the assessee stating therein that since the copy of ITR return had not been furnished so he confirmed the addition in a summary manner.

During proceedings before us, the Ld. Counsel of the assessee argued vehemently that the identity and genuineness and credit worthiness of the lender, namely M/s Woodstow Apparels clearly proves the genuineness and creditworthiness of the lender and even the PAN card of lender had also been furnished. It was also argued that the copy of the bank statement of 'M/s Kelly Impex' had also been furnished, which proves that the amount was received by the lender, through banking channel from the above said concern. The amount was given to the assessee as per the chart reproduced in the assessment order by the AO. It was argued that the source of source have also been proved beyond any doubt. Since all the transactions are through banking channel, the finding of the Assessing Officer at page 10, that the assessee had routed its unaccounted income in the form of unsecured loan is misplaced. It was further stressed by the Ld. Counsel that if the copy of the ITR of M/s Woodstow Apparels have not been filed that should not go against the assessee, in as much as, the existence, identity, creditworthiness and genuineness of transaction stood proved beyond any doubt. The Ld. Assessing Officer could have made enquiries by issuance of notice u/s 133(6) or otherwise for reason best known to the AO. 10. Further, it was argued that the amount was repaid to the lender after two years through banking channel, for which, the necessary evidence was filed before the CIT(A) and copy of the same has been placed in the Paper Book at pages 72 to 75. Thus, it was stressed that the finding of CIT(A) that ITR of M/s Woodstow Apparels had not been filed should not go against the assessee. The Ld. Counsel of the assessee relied upon the judgment of ITAT, Delhi Bench in the case of Vivek Nagpal in (Copy placed in the judgement set) for the preposition that where the identity and source of source and genuineness of transactions have been proved, merely that the copy of the ITR return of lender has not been furnished, would not go against the assessee. The reliance was also made in the judgment of Hon'ble Apex Court in the case of Sh. Chunni Lai, reported in 2111TR11 (Statute), in which, the SLP of the department was dismissed, since the assessee had proved the source of source. Similarly, reliance was placed on the case of Malbros International Pvt. Ltd. in ITA No. 676/Chd/2024 vide order, dated 30.12.2024 of Chandigarh Bench in the same context that once the source of source is proved, no addition can be made by invoking the provisions of section 68. Similarly, reliance has been placed in the case of M/s Ganeshay Overseas Industries bearing ITA No.361/Chd/2023 order, .dated 11.04.2025 of Chandigarh Bench of ITAT and of the Punjab & Haryana High Court in the case of CIT Vs Jeeta Khan reported in 292ITR 597 for the same preposition.. 11. Lastly, the reliance was also placed on the Judgement of 'Smt. Nirmal Rani', reported in (2017) 79 taxmann.com 180, wherein, it was held that, when the assessee having adequately discharged the onus of proving the identity of the donor, capacity of donor and genuineness of transaction, merely non-filing of income tax return of lender, the addition could not be made u/s 68. It was also argued that the loan has been returned back through banking channel in subsequent year as per evidence furnished before the CIT(A) and before us. Reliance was placed on the judgment of Gujarat High Court in the case of 'Ambe Trade Corpn. Pvt. Ltd.', reported in 145 taxmann.com, order dated 05.07.2022, in which, it has been held that if the three ingredients have been proved and the amount had been repaid through banking channel in the subsequent year, addition u/s 68 could not be made. Similar reliance was placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT, Bathinda Vs Karaj Singh, reported in [2011] 15 taxmann.com 70. Besides that, some other judgments of Ahmadabad Bench, Surat Bench, Chandigarh Bench were cited in this context.

The Ld. Sr. CIT (DR) relied upon the order of the Assessing Officer/CIT(A) and stated that since no evidence of ITR has been filed of the' Lender' party namely M/s Woodstow Apparels, it could not be established that whether the lender is genuine or not. Further the nature of transaction as per the order of the AO, created a doubt and suspicion and, thus, argued for confirmation of addition as made by the CIT(A).

We have gone through the order of the CIT(A)/AO, arguments of both sides and the Paper and 'judgment set,', as filed by the counsel of the assessee and find that the facts are not disputed at all. Since the assessee could not furnish any evidence with regard to the amount of Rs. 2,25,000/- thus, the addition to that extent is confirmed. Regarding the amount received from Lender, namely M/s Woodstow Apparels, we have gone through the confirmation, copy of account of the lender in the books of assessee, alongwith bank account of the lender and also the bank account of M/s Kelly Impex, who had remitted the amount to lender, namely M/s Woodstow Apparels on different dates and that amount has further been lent to the assessee. It is a fact that the amount was remitted to M/s Kelly Impex on various dates on account of purchases made from that party by the assessee and thereafter, through banking channel, M/s Kelly Impex was remitted this amount to M/s Woodstow Apparels who in turn, advanced the amount to assessee concern. Thus, the assessee has established the source of source and no case has been made out by the Revenue that it is unaccounted income of the assessee, which have been routed through M/s Woodstow Apparels. The assessee has proved the three ingredients i.e. identity, creditworthiness and genuineness of transactions and merely that ITR of the Lender was not furnished would not go against the assessee as per the judgment of Chandigarh Bench of the ITAT in the case of SmtNirmal Rani as cited supra. The assessee has discharged his onus of proving the source of source. Law in this respect is well settled. Reliance by the Ld. Counsel of the assessee on various judgments, as cited, before us are quite apt and further, we also find that the amount has been repaid in the subsequent years. The judgment of Hon'ble Gujarat High Court in the case of 'Ambe Trade Corpn. Pvt.Ltd.' is also applicable to the facts and circumstances of the case, in which, it has been held that once the identity, creditworthiness and genuineness of loan transactions have been established and the amount has been repaid by the assessee in subsequent years, no addition could be made u./s 68 of the Income Tax Act. Thus, the addition of Rs. 1,18,61,000/- as sustained by the CIT(A) deserves to be deleted.

In the result, appeal of the Assessee is partly allowed.