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Facts
The assessee received unsecured loans from three entities, which the Assessing Officer (AO) treated as unexplained cash credit, doubting the transactions due to common banking and screener associations with a known entity provider. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the assessee had provided all necessary details and the lenders confirmed the transactions. The AO failed to discharge his burden to disprove the creditworthiness or genuineness after the assessee furnished sufficient evidence.
Key Issues
Whether the addition of unsecured loans as unexplained cash credit under Section 68 of the Income-tax Act was justified when the assessee provided complete documentation and the lenders confirmed the transactions, and the AO failed to further investigate?
Sections Cited
68, 143(2), 142(1), 133(6)
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 29.08.2025 for the AY 2022-23.
The only issue raised by the assessee in various grounds of appeal is against the confirmation of addition of ₹2.00 cores by the ld. CIT (A) as made by the ld. AO u/s 68 of the Act by treating the unsecured loans received from three entities as unexplained cash credit.
The facts in brief are that the assessee filed the return of income on 30.09.2022, declaring total income at ₹21,96,23,000/- and book profit u/s 115JB of the Act of ₹21,68,02,511/-. The case of the assessee was selected for scrutiny and notices u/s 143(2), 142(1) of the Act and
4. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee on the ground that the assessee was non-compliant despite providing adequate number of opportunities and not submitted any evidences. Though, the ld. CIT (A) decided the issue on merit noting of the facts that the assessee has filed all the evidences/ reply before the ld. AO and the loan creditors have also complied the notices issued u/s 133(6) of the Income-tax Act, 1961 (the Act).
5. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee has filed before the ld. AO all the information/ details qua these loan creditors comprising names, addresses, PAN numbers, audited accounts, confirmations, bank statements, etc. We also note that the notice issued u/s 133(6)
5.1. We note that the ld. AO has not pointed out any defects in the evidences filed by the assessee and merely reached to the conclusion that the loans taken by the assessee were bogus as loan creditors have no creditworthiness whereas as a matter of fact the assessee as well as the loan creditors have furnished all the details/ evidences before the authorities below. We further note that in the case of loan creditor M/s Alco Suppliers Private Limited, from whom ₹60 lacs were borrowed, the co-ordinate Bench in for A.Y. 2022-23 vide order dated 04.011.2025, allowed the appeal in favour of the loan creditor by directing the AO to delete the addition made in respect of amount received from sale of shares which were source of loan to the assessee. We also note that in case of Scroll Merchants Pvt. Ltd., from whom ₹90 lacs were borrowed, the assessment was framed u/s 147 of the Act vide order dated 28.03.2025, by the ld. AO whereas in the case of third lender Shristi Investments Pvt. Ltd. from whom ₹50 lacs were borrowed, assessment was framed by the ld. AO u/s 147 of the Act vide order dated 28.03.2025, which is available at page no.472 to 475 of the Paper Book. Under these circumstances, we are not in a position to uphold the order of ld. CIT (A) especially, where the loan transactions were affirmed by the lenders in reply to section 133(6) of the Act issued by the ld. AO as well as these were all assessed by the department as stated hereinabove. The case of the assessee is squarely covered by the decision of PCIT vs. Sreeleathers “3. We have heard Mr. Vipul Kundalia, learned Senior Standing Counsel along with Mr. Anurag Roy, learned Advocate for the appellant and Mr. Avratosh Mazumder, learned Senior Advocate assisted by Mr. Avra Mazumder and Mr. Md. Bilwal Hossain, learned Advocates for the respondents.
Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we need to take note of section 68 of the Act. This provision deals with cash credits. It states that 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. The crucial words in the said provision are "assessee offers no explanation". This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income-tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC), it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source CIT v. P. Mohanakala [2007] 161 Taxman 169/291 ITR 278/210 CTR 20 (SC). The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds Lal Mohan Krishna Lal Paul v. CIT [1944] 12 ITR 441 (Cal.) and Anil Kumar Singh v. CIT [1972] 84 ITR 307 (Cal.).
Further to be noted that where the assessee furnishes full details regarding the creditors, it is up to the department to pursue the matter further to locate those creditors and examine their creditworthiness. It has been further held in A.S. Sivan Pillai v. CIT [1958] 34 ITR 328 (Mad.) that while drawing the inference, it cannot be assumed in the absence of any material that there has been some illegalities in the assessee's transaction. Thus, more importantly, as held by the Hon'ble Supreme Court in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), the onus of proving that the appellant was not the real was on the party who claims it to be so. Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13.01.2026.