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Facts
The assessee, a salaried employee, received an amount of Rs. 29,00,000/- through bank transfers from his mother and sister for the purchase of a property. The AO added this amount to the assessee's income under Section 68 of the Income Tax Act as unexplained, which was upheld by the CIT(A).
Held
The Tribunal held that the assessee had successfully discharged the initial onus by providing identity, genuineness, and creditworthiness of the creditors. The repayment of the loan through banking channels was also established. Therefore, the addition made by the AO and sustained by the CIT(A) was deleted.
Key Issues
Whether the amount received as a loan from close relatives, duly supported by banking transactions and with established creditworthiness, can be treated as unexplained income under Section 68 of the Income Tax Act.
Sections Cited
68, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No.971/JPR/2025
PER DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of ld. CIT (A), National Faceless Appeal Centre, Delhi dated 05.06.2025 passed under section 250 of the I.T. Act, 1961, for the assessment year 2021-22. 2. The assessee has raised the following grounds of appeal :- “1.That the Ld.CIT(A) has erred in facts and in law in confirming the addition of Rs.29 Lacs considering the amount as unexplained money u/s 68 of the Income Tax Act, 1961.
1. 2. That the appellant craves to add, amend, and alter the grounds before OR at the time of appellate hearing.”
3. Succinctly, the facts as culled out from the records are that the Rupesh Kumar Mittal, Jaipur. assessee is a salaried employee and had filed ITR for the relevant year on 28.07.2024 disclosing a total income of Rs.14,41,610/-. The case was selected for compulsory scrutiny through CASS for the reason – (i) Large cash deposits in bank account and (ii) the assessee has also purchased/sold one property during the year. Being satisfied with the reply and the evidence filed by the assessee, no addition was made by the AO on account of cash deposits made in his bank account by the assessee. However, while analyzing the bank account of the assessee, the AO added an amount of Rs.29,00,000/- credited to his account through cheques, holding it to be unexplained, not accepting the assessee’s explanation regarding the same. Against the said addition, the assessee filed appeal before the CIT(A) who dismissed it.
4. Now the assessee is in appeal before the Tribunal. The ld. AR has filed a written submission on the ground of appeal which is reproduced below:-
“1. The assessee is a salaried employee and has filed its return of income declaring income of Rs. 14,41,610/- on which a tax of Rs.2,54,782/- was paid. In the year under consideration he also invested in one property.
The case was selected for scrutiny for verification of cash deposited in the bank and assessee has also purchased/sold one or more property during the year (both buying and selling transaction are to be considered).
The cash deposit was duly supported by the cash withdrawal from the bank so the AO considered the same and not made any addition in respect of same. Further the assessee has finalized a deal for purchase of one property situated at Plot no 51, Scheme no 9B, Pratap Nagar, Kishan Bagh Shastri Nagar Jaipur against a total consideration of Rs.55 Lacs. The assessee has invested his own savings of Rs. 26 Lacs Rupesh Kumar Mittal, Jaipur. and at the same time he applied for home loan for purchase of this property. The bank was taking time for process of the loan and the seller of the property was forcing to close the deal. So for the very short time frame the assessee requested to his family members i.e. Mother Smt. Anita Mittal and Sister Smt. Ruchita Mittal to support him. His Sister transferred the amount of Rs. 10 Lac to her mother’s (Anita Mittal) account on 06-08-2020 and Assessee’s mother transferred total 29 Lacs to assessee’s bank account on same day. Ssessee paid this and the purchase dead was got registered. Later on the bank has processed the loan and disbursed the same to the assessee’s account on 28-01-2021 (PB 5-7). Out of this loan proceeds, the assessee repaid the loan amount of Rs. 29 Lacs received from his mother and sister on 19-02-2021. The AO considered this amount of Rs. 29 Lacs (Loan received from Mother and sister) as unexplained and made the addition u/s 68 of the Income tax Act.
This whole amount was received from banking channel both mother and sister of the assessee are having PAN and regularly filing there return from last 10-15 years. There is no cash deposit in their account before making payment to assessee there was clear balance in their bank accounts. The PAN and ITR and bank details was provided to the AO, as well as also submitted before CIT(A). The AO as well as CIT(A) has not considered the same and applied the provision of section 68 of Income Tax Act. The summary of the amount received is tabulated as under:- Sr. Date Amount Remarks No 1 06-08-2020 10,00,000/- PB page no 4 and 16 2 07-08-2020 19,00,000/- 3 19-02-2021 4,00,000/- PB page no 5 and 16
Section 68 of Income Tax Act read as under:- 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :- Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
In respect of Identity it is to submit that the assessee has submitted the PAN of both the creditors, In respect of genuineness of the transaction it is to submit that the whole transaction is received as well as repaid through banking channel only, and in respect of Creditworthiness of the transaction it is to submit that the both the creditors are regular return filer and filing the returns for more then 10 years copy of ITR of last 5-6 years are submitted before the AO. There was clear balance in the accounts before making payment to assessee, and there is no cash deposit in that accounts.
It is settled principal principle of law that once the assessee establishes the above three ingredients – ie. Identity, genuineness of transaction and the creditworthiness the Initial onus cast upon the assessee u/s 68 stands discharged. Reliance can be placed on the following cases:- (i) CIT Vs Orissa Corporation Ltd 159 ITR 78 SC :- where it was held that once basic details are furnished no addition can be made merely on suspicion. (ii) CIT Vs Lovely Exports 216 ITR 195 SC: wherein the Hon’ble Supreme court held that if identity is proved, addition cannot be made in assessee’s hands.
It is further submitted that it is also a settled law that only on the credit in the bank account, the amount should not be considered as unexplained in the books of accounts, as the Bank statement/ pass book is not a books of accounts at all. Reliance can be placed on the following cases:- CIT v. Bhaichand N. Gandhi [1982] 11 Taxman 59/[1983] 141 ITR 67 (Bom.) it was held that the bank passbook could not be treated as books of account of the assessee. The court observed that "when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not that of trustee and beneficiary. Applying this principle, the passbook supplied by the bank to its constituent is only a copy of the constituent's account in the books maintained by the bank. It is not as if the passbook is maintained by the bank as the agent of the constituent nor can it be said that the passbook is maintained by the bank under the instructions of the constituent". It, accordingly, held that the bank passbook could not be regarded as a book maintained by the assessee. ITO v. Kamal Kumar Mishra [2013] 33 taxmann.com 610/143 ITD 686 (Lucknow - Trib.) it was held that when the assessee had not maintained any books of account and the amounts were found credited in the bank account, the provisions of section 68 Rupesh Kumar Mittal, Jaipur. could not be invoked in respect of various deposits/credits in the bank account in the absence of books maintained by him. Aravali Trading Co. v. ITO [2010] 187 Taxman 338 (Raj.) The assessee borrowed money and furnished the details of the lenders. The amounts were borrowed through account-payee crossed cheques and the existence of the depositors was proved beyond any doubt. The court held that when the assessee had discharged his onus the presumption raised under section 68 stood rebutted and it became the burden of the Revenue to prove the source of cash deposit as traceable/attributable to the assessee's source before it could be taxed as his undisclosed income.
7. As the loan was received on 06-08-2020 and was repaid on 21-02-2021 i.e. within the year itself, and the Identity, genuineness and the creditworthiness of the creditor is submitted the transaction could not be considered income u/s 68 of the income tax act. Prayer : It is therefore requested kindly delete the addition of Rs. 29 Lacs being made by the AO u/s 68 and oblige.”
5. The Ld. AR of the assessee in support of the contention so raised in the written submission, placed reliance on the following evidence / records in the form of Paper book :
S.No. Particulars Page No. 1. Income tax return of the assesssee 1 2. Assesssee’s bank statement from 01.04.2020 to 31.03.2021 2-5 3. Loan sanction letter 6-7 4. ITRs of Anita Mittal from AY 2013-14 to AY 2020-21 8-15 5. Bank statement of Anita Mittal from 01.04.2020 to 31.03.2021 16 6. ITRs of Ruchika Mittal from AY 2015-16 to AY 2020-21 17-22
6. During the hearing, the Ld.AR also drew our attention to second last paragraph of Page-5 of the assessment order, wherein the basis for Rupesh Kumar Mittal, Jaipur. AO’s rejection of submission is mentioned. He clarified that the assessee had repaid the loan using net banking facility. The account of the assessee and Smt.Anita Mittal (the lender and the payee) were in the same branch of BOB. While making transfers through net banking, reasons for the transaction has to be stated, in which the assessee rightly mentioned ‘Loan repayment’ which is getting reflected in the bank statement. Further, the term E-BANK WIB refers to e-banking transaction with-in- bank. He pleaded that adverse inference by the AO on this issue is baseless and uncalled for. He also referred to judgment of Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Varinder Rawlley, reported in [2014] 51 taxmann.com 524, in which, it has been held that no addition on account of cash credit can be sustained, where the amount of loan is squared up during the year under consideration. He also quoted the judgment of Hon'ble Gujarat High Court in the case of Ambe Tradecorp (P) Ltd. vs. PCIT [2022]145 taxmann.com27 (Gujarat), which upheld the Tribunal’s finding that once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries having been carried out in the later years.
Per contra, ld. DR is also heard, who relied on the findings of the lower authorities and more particularly advanced similar contentions as
Before we delve into to adjudicate the appeal, we are displeased at the way the Ld.CIT(A) has dealt with the matter. We note that he has passed a cryptic and non-speaking order, simply reproducing the findings of the AO, ignoring the submission and the evidence filed by the assessee. We deprecate such an approach by the Appellate authority, who has been entrusted with a duty to deliver justice, after considering the contentions of both the parties to appeal.
We have heard the rival contentions and perused the material placed on record, as well as the relevant provisions of law and the various case laws cited by the Ld.AR. We find that the assessee had borrowed Rs.29,00,000/- from his mother, Smt. Anita Mittal, which was received through two cheques of Rs.10,00,000/- and Rs.19,00,000/- respectively, for the purchase of an immovable property. The assessee had provided copy of his bank statement, and ITRs of his mother, Anita Mittal, along with ITRs of his sister, Ruchika Mittal, who had transferred Rs. 10,00,000/- through NEFT to Smt. Anita Mittal, to the AO as well as the CIT(A). The borrowed amount was repaid to Anita Mittal in February, 2021 through banking channel, as is evident from her bank statement (Page-16 of assessee’s paper book). Once the assessee substantiated the Rupesh Kumar Mittal, Jaipur. identity, genuineness of transaction and the creditworthiness of the cash creditors, the initial onus cast upon him u/s 68 stood discharged. All these evidences were more than sufficient to prove the genuineness of the loan transaction. Thereafter, the burden shifted to the AO to make necessary inquiries to prove otherwise, which he failed to do.
The Hon'ble Supreme Court of India in Sreelekha Banerjee vs. CIT (1963) 49 ITR (SC) 112, had held that "if the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject the explanation to hold that it was income. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof".
We would also like to refer to a latest decision by Hon'ble Calcutta High Court, vide its judgment dated 17.12.2024, in the case of PCIT vs. Alom Extrusions Limited, where in the Hon'ble High Court has deleted the addition made of loan credits u/s 68 of the Act by taking note of the fact of repayment of loan.
In view of the judicial pronouncements cited by assessee together with various evidential documents submitted by him, it can be inferred that since the assessee had taken loan from his close relative, in case of normal personal transaction and repaid the said loan through banking channel in Rupesh Kumar Mittal, Jaipur. the very same financial year, the impugned amount can not be deemed to be income of the assessee, without any cogent evidence brought on record by the AO and thus, addition u/s 68 by him cannot be sustained. Additionally, as discussed above, the assessee's burden is confined to prove identity of the creditors, creditworthiness of creditor and genuineness of the transaction with reference to transaction between assessee, which in our opinion has been successfully discharged by him. In the present case, the assessee had received unsecured loan of Rs.29,00,000/- from the lender, Anita Mittal, through banking channel and also repaid the same during the same year through banking channel and the same is well reflected in the bank accounts of both the parties. Hence, the addition of Rs.29,00,000/- u/s 68 of the Act, made by the AO and sustained by the CIT(A) is liable to be deleted. We order accordingly.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 30 /10/2025.