DCIT, CIRCLE-1(3), SURAT, ANAVIL BUSINESS CENTRE, ADAJAN, SURAT vs. SHRI ASFAQ HAJIYUNUS NOORANI, RANDER

5. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition made by AO ignoring the fact that merely submission of the identity of the lenders can't say that the assessee has discharged his onus in this case as the assessee has failed to prove to the satisfaction of the AO that these lenders have sufficient creditworthiness too.

6. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored.

7. The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal

either before or during the course of hearing of the appeal.”

3. Brief facts of the case are that the assessee filed his return of income for AY.2018-19 on 26.05.2019, declaring loss of Rs.6,67,22,594/-. The assessee derives income from retail trading of cloth, dealing in shares, F&O, derivatives and MCX etc. and consulting. He is also having income by way of share profits of partnership firms, namely, M/s Live-in-Style and M/s Unique Corporation. The case of the assessee was selected for compulsory scrutiny under CASS. The assessee had shown unsecured loans of Rs.7,21,06,936/- as on 31.03.2018. The Assessing Officer (in short, ‘AO’) asked assessee to furnish details of unsecured loans as per the format given in the notice, which is at page 3 of the assessment order. It includes name/PAN/address of the lender, opening balance, addition during the year, closing balance, re-payment, interests and outstanding loan as at the end of the year. It also required assessee to furnish mode of payment, purpose of which loan was taken and utilized and whether /AY.2018-19 Asfaq Hajiyunus Noorani the interest was claimed or capitalized. The assessee filed reply vide submission dated 28.01.2021, according to which it had taken fresh loan of Rs.5,43,16,269/- from 57 parties during the year. The assessee had repaid some unsecured loans during the year, either in full or in part. In order to verify genuineness of the loans and creditworthiness of loanees, the AO issued notice u/s 133(6) of the Act to all 57 parties requesting them to furnish details such as ITRs, financials, bank and ledger accounts etc. The assessee had also filed details which has been tabulated by the AO at pages 11 to 19 of the assessment order. Thereafter, the AO has verified the party-wise details of loans obtained during the year and given his observations and findings in all 57 cases. Such observations and findings are at pages 20 to 68 of the assessment order. Out of the 57 parties, he has not accepted the unsecured loan of Rs.3,79,66,269/- from 45 parties and his findings are at para 7.8 of the order. The AO has observed that though the identity of the lenders is ascertainable, the genuineness and creditworthiness of the loans taken as well as squared off during the year are not established. Only partial submission was submitted by the assessee, which reveals that though the lenders are assessed to tax, they are showing meagre income. In some cases, returns were filed though the income was below the taxable limit. Such practice is normally resorted to by persons who are engaged in providing accommodation entries on regular basis. They do not carry out any genuine business, yet they meticulously maintain and adhere to all statutory compliances. Further, most of the loanees /AY.2018-19 Asfaq Hajiyunus Noorani are in the business of stitching, tuition, dealing in textile material etc. Also, closing balances in such cases were on lower side and the opening cash balances were higher. The loanees do not have sufficient income or sufficient capital/bank balances to advance to such huge loans. It was also noticed that monies were routed into their accounts and subsequently transferred to the assessee. The assessee had submitted only part of the bank statements and thus crucial information was withheld from the department. Hence, creditworthiness and genuineness of the loanees have not been established. The AO also observed that the assessee has furnished the explanation without proper evidence. Therefore, the AO held that the unsecured advances of Rs.3,79,66,269/- is prima facie non-genuine as the creditworthiness of the loanees is not proved beyond doubt. The AO has invoked provisions of section 68 of the Act and has relied on various decisions, i.e., Sumati Dayal, 214 ITR 801 (SC), CIT vs. Korlay Trading Co. Ltd., 232 ITR 820 (Cal.), K. M. Sadhukhan & Sons Pvt. Ltd. vs. CIT, 239 ITR 77 (Cal.), CIT vs. Orissa Corporation Pvt. Ltd., 159 ITR 78 (Orissa), CIT vs. Kishorilal & Santhoshilal, 216 ITR 9 (Raj.), A. Govindarajulu Mudaliar vs. CIT, 34 ITR 807, CIT vs. Oasis Hospitalities (P.) Ltd., 333 ITR 119 (Del.) and Kale Khan Mohammad Hanif vs. CIT, 50 ITR 1 (SC). He held that the onus of proving the source of a sum of money found to have been received by the assessee is on the assessee. When the nature and source thereof cannot be explained satisfactorily, the revenue can hold that it was income of the assessee. Further, merely providing the identity of the creditor /AY.2018-19 Asfaq Hajiyunus Noorani does not discharge the onus of the assessee if the capacity or creditworthiness of the creditors is not proved. Hence, the AO treated the unsecured loans of Rs.3,79,66,269/- as unexplained cash credit u/s 68 of the Act and taxed it u/s 115BBE of the Act.

. In response, assessee filed replies on 05.07.2022, 09.07.2022, 10.08.2022, 15.09.2022, 17.10.2022 and 26.11.2022 (2). The CIT(A) has reproduced the relevant part of AO’s findings at para 2.1 of the appellate order. Before him, the assessee submitted that all details of the 57 lenders were filed during assessment proceedings, out of which, AO has accepted 12 as genuine parties and balance 45 lenders were treated as non- genuine. The appellant submitted that the AO has not even considered all submissions made before him. The AO had totally skipped the submissions dated 17.07.2021 filed online before passing the order on 30.08.2021. Hence, the entire addition was wrongly made by the AO. Thereafter, the CIT(A) has discussed party-wise comments made by the AO, submission of the appellant and his comments and decisions. The CIT(A) has observed that contrary to the claim of the AO that no details were filed, the assessee had filed all required details to substantiate the receipt of the unsecured loans. He found that there was sufficient cash balance and income to justify advancement of the impugned loans. The AO has not been able to rebut the presumption of /AY.2018-19 Asfaq Hajiyunus Noorani sufficient balance with the lenders. In some cases, the lenders were farmers having enough exempt income, which was sufficient to make the advance to the appellant. He also found that in some cases the family members of the lender have advanced loans to the lender, who in turn has given the loans to the appellant. The AO has skipped the above details filed by the assessee during assessment proceedings. Thus, the assessee was able to provide details of the even source of the source. The CIT(A) also found that in some cases, the lenders have submitted the balance sheet where there was sufficient capital to advance the loan. He also found that the cash books of the lenders have been ignored by the AO and the addition was made without rebuttal of the documents submitted by the lender/appellant. It was also found that in some cases, the lenders have received by the loans granted earlier out of which the appellant has received the impugned loans. The AO has not been able to bring any evidence contrary to the claims made by the assessee, which are backed by bank statements and loan confirmations. Further, there are also factual inaccuracy in the findings of the AO. The appellant has also been able to prove the cash deposit in the bank account of the lenders who had sufficient cash in hand before the said cash deposits. The CIT(A) also observed that the lenders have sufficient means to advance the loans. In some cases, the AO has not commented adversely on the details filed by the assessee and hence such addition u/s 68 is not liable to be sustained (page 66). The CIT(A) has also observed that even the loan advanced by the wife and family members have /AY.2018-19 Asfaq Hajiyunus Noorani been added without considering the details given by the assessee. In case of the wife of assessee, there was opening cash balance as well as sale proceeds of land for Rs.3,16,56,978/- out of which she had given a sum of Rs.1,86,00,000/- to the appellant. After adjusting the debit balance, remaining amount of Rs.52,11,974/- was shown as loan to the assessee. Hence, the appellant had explained even the source of the source and the AO has not been able to counter the evidence submitted by the appellant. The CIT(A) has summarized his findings at para 6.5 by observing that identity of the creditors was accepted by AO but he has doubted the creditworthiness without disputing the financials of the creditors submitted during assessment proceedings. The AO has not brought any evidence on record against the submission of the assessee to reject creditworthiness of the lenders. The AO has not considered the submissions filed by the assessee on 26.04.2021 and 17.07.2021. He has over-emphasized the income declared in the ITRs ignoring the balance sheet and cash book filed during assessment proceedings. The CIT(A) relied on same decisions and observed that meagre income of the lender alone cannot be the reason to make addition. He further held that the assessee has submitted all details of the lenders. Even source of funds of lenders were also filed by the assessee. Thus, the initial onus on the assessee was duly discharged by him. Thereafter, it was upon the AO to rebut and disprove the evidence filed by the assessee, which the AO has not done. The assessee had relied on the following decisions to canvass the proposition that /AY.2018-19 Asfaq Hajiyunus Noorani addition u/s 68 of the Act cannot be made without considering evidences submitted by the assessee: (i) CIT vs. Lovely Export 216 CTR 195 (SC), (ii) CIT vs. Ranchod Jivabhai Nakhva, 208 Taxman

35. (Guj.), (iii) Earch Metal Electrical Pvt. Ltd., SLP 2107/2009 (SC), (iv) Darshan Enterprises vs. Addl. CIT, 134 taxmann.com 188 (Guj.), (v) DCIT vs. Rohini Builders, 127 Taxman 523 (Guj.), (vi) CIT vs. Lalitkumar Poddar,

56. Taxman 462 (Del) and (vii) Mansukh E. Vagasia vs. ITO, 139 Taxman

84. (Surat – Trib.). The CIT(A) has also relied on the decisions of Hon’ble jurisdictional High Court in cases of PCIT vs. Sandipkumar Parsottambhai Patel, (2023) 150 taxmann.com 192, PCIT vs. Yogendrakumar Gupta, (2023) 152 taxmann.com 661 and PCIT vs. Neotech Education Foundation, (2023) 148 taxmann.com 372. In conclusion, the CIT(A) held that the assessee was able to discharge the onus about proving its claim by submitting documents such as PAN, ITRs, bank statements, loan confirmations etc. Therefore, no additions can be made without bringing on record incriminating material discrediting the details/evidences submitted by assessee. He held that the appellant has filed everything necessary to prove the creditworthiness of the lenders. Even source of the source has been explained. Therefore, the addition made by AO u/s 68 of the Act was deleted and appeal of assessee was allowed.

5. Aggrieved by the order of CIT(A), the revenue filed appeal before the Tribunal. The learned Commissioner of Income-tax - Departmental Representative (ld. CIT-DR) of the revenue supported the order of AO. He /AY.2018-19 Asfaq Hajiyunus Noorani submitted that the AO has made addition only of the fresh loans obtained during the years. Out of 57 parties, he has not added the loans of 12 parties because proper details were submitted by the assessee to establish the creditworthiness of the parties. In respect of the impugned addition of remaining 45 parties, the AO has found that the lenders were showing meagre income as compared to the loans advanced by them. There were cash deposits before advancing loans to the appellant. In many cases, no business activity was carried out by the lenders. He also submitted that the CIT(A) deleted the additions merely on presumption. Therefore, the deletion of the addition by the CIT(A) was not justified. He requested to set aside the order of CIT(A) and sustained the addition made by the AO.

6. On the other hand, learned Authorized Representative (ld. AR) of the assessee supported the order of CIT(A). The ld. AR has filed 11 paper books containing written submission and details filed before the AO and CIT(A). He submitted that the appellant has submitted detailed reply and enough supporting evidence before the AO, which was ignored by him while finalizing the order. These facts and the details were again submitted to the CIT(A) who has duly appreciated the evidence submitted by the assessee in respect of the unsecured loans received during the year. The ld. AR also submitted that some loans were repaid in current or subsequent year and hence no addition can be made on such loans u/s 68 of the Act, as held by the Hon’ble Gujarat High Court in case of Aiyachi Chandrasekhar, 221 Taxman 146 (Guj.) and Ambe /AY.2018-19 Asfaq Hajiyunus Noorani Tradecorp Pvt. Ltd., 145 taxmann.com 27 (Guj.). He further submitted that even the loans received from the wife and family members have been added despite furnishing confirmations and requisite details to the AO. He further submitted that the findings of the CIT(A) that evidence furnished by assessee has not been rebutted by AO still holds good even before the ITAT. Therefore, both on facts and in law, the addition is not liable to be sustained.

/AY.2018-19 Asfaq Hajiyunus Noorani 7.1 Ground nos. 2 to 5 are inter related and pertain to deletion of addition of Rs. 3,79,66,269/- u/s 68 of the Act. The assessee had received unsecured loan of Rs.5,43,16,269/- from 57 parties during the year under consideration. The AO called for various details u/s 133(6) from these parties and after analysing the same held that though identity of the parties is established but genuineness and creditworthiness of 45 parties for total unsecured loan of Rs.3,79,66,269/- were not established. The reasons for not accepting the explanation of the assessee by the AO has been discussed at para 3 of this order. According to the AO, the explanation given by the assessee was not supported by proper evidence. He added Rs.3,79,66,269/- u/s 68 of the Act. On further appeal, the CIT(A) examined each and every case and he was satisfied that the assessee has been able to explain the nature and source of the impugned loans. He found that the details submitted by the assessee during assessment proceedings were not considered by the AO and, hence, the addition was made. The CIT(A) deleted the impugned addition made by the AO. The ld. CIT-DR has supported the order of AO whereas the ld. AR has supported the order of CIT(A). The assessee had submitted the copies of PAN, contra-confirmation, bank statement, ITR details, capital account, balance sheet and P&L account, bank statements, cash book and ledger account etc. of all lenders. However, the AO has failed to consider the details furnished by the assessee on 17.07.2021. These details were again submitted to the CIT(A) during the appellate proceedings. He has discussed comment of the AO and /AY.2018-19 Asfaq Hajiyunus Noorani submission of the appellant and thereafter given his comment and decision in case of all 56 lenders including the 45 parties whose unsecured loans were added by AO. The CIT(A) has given a finding that the subject unsecured loans cannot be held to be non-genuine in the face of details submitted by the assessee. We find that the appellant had explained even the source of source in most cases. The AO has not considered all the details and evidences submitted by the assessee during assessment proceedings. The source of funds utilized for advancing loans were either repayment of earlier loans received by the impugned lenders or sufficiency of funds available with them on the date of loan. These facts are duly supported by the ITR, bank statement, capital account, balance sheet, cash book etc. As stated by the CIT(A), the AO has not been able to controvert the sufficiency of funds by bringing any adverse evidence to rebut the claim of the assessee. The ld. AR has relied on the decisions in cases of the Hon’ble Supreme Court in cases of Lovely Exports (supra) and the decisions of the jurisdictional High Court in case of Rohini Builders (supra), Ranchod Jivabhai Nakhava (supra), Darshan Enterprises (supra), Mansukh E. Vagasia (supra) and various other Hon’ble High Courts and Tribunals where it has been held that once assessee has submitted documents such as PAN of creditor, their confirmations, bank statements, ITRs, computation of income etc., the initial onus lying on the assessee would stand discharged. In such a situation, it is for the AO to make further inquiries to rebut the evidence and details submitted by the assessee so as to brining the /AY.2018-19 Asfaq Hajiyunus Noorani amount to tax u/s 68 of the Act. He has also relied on some decisions of the ITAT, Surat Bench where under similar facts, the addition was deleted. The unsecured loan received by the appellant may be divided into two categories, i.e., (i) unsecured loans which have been repaid in the current or subsequent year and (ii) the loans which are outstanding in the books of the assessee. As far as the unsecured loans of the first category are concerned, the repayment of loan is undisputed. As per the decision of the Hon’ble Gujarat High Court in case of Ayachi Chandrasekhar Narsangji (supra), when the Department has accepted the repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. The ITAT, Surat in a number of cases has also held that if the assessee has repaid the loan in subsequent years, the genuineness of the transaction should not be doubted and the addition so made should be deleted. Since the loan was repaid, assessee is no more a beneficiary of the said amount; hence, following the above decisions, the CIT(A) has rightly deleted such additions. 7.2 Regarding the remaining unsecured loans outstanding in the books of account of assessee, the assessee has furnished various details as discussed above. The AO concluded the assessment proceedings without considering the details and documents submitted by assessee, as stated above. He has ignored the relevant details furnished during the assessment proceedings. On the other hand, the CIT(A) has duly considered all the details and documents submitted by the assessee and has given a categorical finding regarding /AY.2018-19 Asfaq Hajiyunus Noorani genuineness of the transactions and creditworthiness of the lenders. Such finding of CIT(A) has not been controverted by the revenue in the proceedings before the Tribunal by furnishing any relevant material or evidence. The revenue has simply relied on the order of AO, which, as stated above, was based on incorrect appreciation of the facts. The AO has not considered the relevant details and evidences submitted by the assessee during the assessment proceedings. The ld. AR has relied on the decisions in cases of Lovely Exports (supra), Ranchod Jivabhai Nakhava (supra)and Rohini Builders (supra) in support of the contention that the burden of proof has been duly discharged by the assessee. The CIT(A) has observed that the assessee has placed on record the details and evidence regarding the source of funds of the lenders. The appellant has also provided details of source of the source. Such details and evidence have not been disproved by the AO. Hence, we do not find any infirmity in the order of CIT(A) in absence of any cogent material or evidence by the revenue during the present proceedings. We also find that the CIT(A) has relied on the decisions of Hon’ble jurisdictional High Court in case of Sandipkumar Parshottambhai Patel (supra), Yogendrakumar Gupta (supra) and Neotech Education Foundation (supra) and held that when the assessee is able to discharge the onus about proving its claim by documents such as PAN, returns, bank statements, loan confirmations etc., additions cannot be made without brining on record incriminating material, discrediting the details submitted by the assessee. He was satisfied that assessee has filed everything /AY.2018-19 Asfaq Hajiyunus Noorani necessary to prove creditworthiness of the lenders and even the source of the source has been explained. As stated earlier, the revenue has failed to counter the finding of the CIT(A). In view of the above facts and respectfully following the decisions cited supra, the grounds raised by the revenue are dismissed.

8. Ground nos. 6 & 7 are general in nature and do not require any adjudication.

9. In the result, appeal of the revenue is dismissed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 30/06/2025.