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Facts
The assessee filed his return of income declaring Rs. 20,10,270/-. The case was selected for limited scrutiny to examine the genuineness of unsecured loans and cash in hand. The Assessing Officer made an addition of Rs. 90,00,000/- on account of unverified unsecured loans.
Held
The Tribunal held that while the assessee failed to discharge his primary onus regarding the identity, creditworthiness, and genuineness of the creditors for loans from Atharva Associates and Prashant Pattiwal, there were circumstances to reconsider the issue concerning Geetaben Bharat Oswal. The order of the lower authorities was confirmed for two creditors, and the appeal was partly allowed for statistical purposes concerning Geetaben Bharat Oswal.
Key Issues
Whether the assessee discharged the onus of proving the identity, genuineness, and creditworthiness of unsecured creditors under Section 68 of the Income Tax Act, and if the lower authorities erred in confirming the additions without proper consideration of evidence.
Sections Cited
143(3), 68, 133(6), 250, 139(4), 46A, 10
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “A”, JAIPUR
Before: Dr. S. SEETHALAKSHMI & SHRI GAGAN GOYAL
This appeal by assessee is directed against the order of CIT(A)-04, Jaipur dated 29.02.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2016-17.The assessee has raised the following grounds of appeal:
(1) The order passed by the Ld. Assessing Officer u/s. 143(3) of the Act is invalid, without jurisdiction and against the principles of natural justice. (2) (a) The learned Commissioner of Income Tax (Appeals) -4, Jaipur ("the Ld. CIT(A)") erred in facts and law in confirming the addition u/s. 68 of the Act of Rs.90,00,000/- made by the Ld. Assessing Officer, on his own surmises and conjectures.
(b) The Ld. CIT(A) passed the order in haste and failed to appreciate that merely because third parties did not reply to the notices issued u/s. 133(6); no adverse view ought to have been taken against the assessee.
(c) The Ld. CIT(A) erred in facts in law in confirming the addition u/s. 68 of the Act of Rs. 35,00,000/- made by the Ld. Assessing Officer, in respect of loan taken from Geetaben Bharat Oswal, without considering the fact that copy of confirmation was duly filed during the assessment and appellate proceedings.
(d) The Ld. CIT(A) erred in facts in law in confirming the addition u/s. 68 of the Act of Rs. 55,00,000/- made by the Ld. Assessing Officer, in respect of loan taken from Atharva Associates and Prashant Pattiwal, without conducting independent enquiry u/s. 133(6) of the Act even though the latest address of said parties were duly provided.
(3) All the above grounds are independent and without prejudice to the other grounds of appeal.
(4) Your appellant craves leave to add, alter, amend, delete, or modify any or all the grounds of appeal.
2. The brief facts of the case are that the assessee filed his return of income on 16.01.2017 u/s. 139(4) of the Act declaring total income at Rs. 20,10,270/-. Case of the assessee was selected for limited scrutiny under CASS to examine the genuineness of the unsecured loans and cash in hand. Statutory notices were issued alongwith questionnaire. During the year under consideration as per the Tax Audit Report in Form No. 3CD following parties were reported as unsecured creditors as under: Name of the person Amount Geetaben Bharat Oswal 35,00,000/- Pramod Shanti Lal Doshi 30,00,000/- Tejashri Pramod Doshi 69,00,000/- Atharwa Associates 40,00,000/- Prashant Pattiwal 15,00,000/- Total 1,89,00,000/- Notices u/s. 133(6) of the Act were issued to all the parties concerned, but only Pramod Shanti Lal Doshi and Tejashri Pramod Doshi confirmed the transactions in response to the notices issued u/s. 133(6) of the Act and confirmed that they have availed loans from Shivkripa Sahakari Patpedhi of Vaduj Branch and further provided the loans to the assessee. Although, the assessee filed confirmations of all the 5 parties, but as mentioned (supra) only two creditors responded notices issued u/s. 133(6) of the Act and other parties were non-compliant till the conclusion of the assessment of the assessee. Further there was no explanation/evidence adduced by the assessee during the assessment proceedings to establish the identity, genuineness and creditworthiness of the transactions. Ultimately, the case of the assessee was assessed after making addition of Rs. 90 Lacs, i.e. unverified unsecured loans u/s. 68 of the Act. The assessee being aggrieved with the same preferred an appeal before the Ld. CIT(A), who in turn confirmed the order of the AO and dismissed the appeal of the assessee. The assessee being further aggrieved with the order of the Ld. CIT(A) preferred the present appeal before us.
3. We have gone through the order of the AO, order of the Ld. CIT(A) and submissions alongwith the grounds taken before us. It is observed that despite of repeatedly reminders from the office of the AO, the assessee never turned up to discharge his onus as provided in section 68 of the Act. For better understanding and application of facts, we deem it fit to reproduce the provisions of section 68 of the Act as under:
“Section - 68, Income-tax Act, 1961. Cash credits.
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:
Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company 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:
Provided also that nothing contained in the first proviso or second provisoshall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.” As the fact that the assessee was failed to provide relevant information before the AO as far as unsecured loans received from Geetaben Bharat Oswal,Atharwa Associates and Prashant Pattiwalare concerned and even before the First Appellate Authority information relating to Geetaben Bharat Oswal only furnished, i.e. copy of ITR, Computation of Statutory Total Income and Bank Statement. Although the same were not considered by the Ld. CIT(A) as the assessee has not filed any application as provided in Rule 46A of the I.T. Rules, 1962. Still, the same information was not provided for remaining two parties, i.e. Atharwa Associates and Prashant Pattiwal.
It is further observed that the assessee the assessee submitted before the Ld. CIT(A) to issue a direction to the AO for issuance of notice u/s. 133(6) of the Act to remaining two parties, i.e. Atharwa Associates and Prashant Pattiwal. It is beyond our understanding that how is it possible that somebody provided an unsecured loan to the assessee, but not cooperating in terms of sharing his/her information related to the transaction entered into between him/her and the assessee. Now, here we need to analyse the provisions of section 68 and 133(6) of the Act. As per section 68 of the Act, the assessee is duty bound to provide information and evidences to establish the identity, creditworthiness and genuineness of the creditors. Thereafter, if still, the AO is not satisfied or want to further enquire certainly he is authorized as well as duty bound to issue notice u/s. 133(6) of the Act. In that case appellate authorities have to examine whether the assessee has discharged the onus reasonably or not. May be notices issued u/s. 133(6) of the Act are not complied by the creditors.
But, in this case it is observed that the assessee himself has miserably failed to discharge his primary onus by not furnishing the information essential to satisfy the ingredients of section 68 of the Act. Simply, by passing on the onus on Appellate Authority or the AO will not absolve him. We have further analysed the information furnished by the assessee pertaining to Geetaben Bharat Oswal and it is observed that during the year under consideration the creditor declared the income of Rs. 2,66,590/- (after claiming deductions under chapter VI-A) and received a sum of Rs. 34,77,725/- on 12.01.2016 and provided the loan to the assessee on 13.01.2016itself amounting to Rs. 35 Lacs. It clearly demonstrates that there was no sufficient bank balance maintained by the lender and only a day prior to the transaction funds were received by the lender to be further transferred to the account of the assessee.
The above facts and overall conduct of the assessee raised serious concerns about the identity, creditworthiness and genuineness of the creditors, but as the Ld. CIT(A) ignored the evidences on a technical ground that no application has been filed as per Rule 46A of the Rules, hence information pertaining to Geetaben Bharat Oswal was not considered/entertained. We deem it fit to relax this condition as far as information pertaining to Geetaben Bharat Oswal is concerned and matter is restored back to the file of the Ld. CIT(A) for examination afresh only on this issue and relevant ground raised by the assessee is allowed for statistical purposes. For other two creditors order of the authorities below is confirmed and grounds raised by the assessee are dismissed.
In the result the appeal of the assessee is partly allowed for statistical purposes.
Order is pronounced in the open court on the 10th Day of April 2025. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 10/04/2025 Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. आयकर आयु� CIT 3. 4. िवभागीय �ितिनिध, आय.अपी.अिध., Sr.DR., ITAT, 5. गाड� फाइल/Guard file.