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Facts
The assessee filed an appeal against an order that added Rs. 73,48,000/- to her income under Section 68 of the Income Tax Act, treating unsecured loans as unexplained cash credits. The appeal was filed with a delay of 322 days due to issues with the previous tax consultant.
Held
The Tribunal condoned the delay in filing the appeal, finding that the assessee had a reasonable and sufficient cause for the delay. The Tribunal also noted that the assessee had provided documentary evidence for the loans and that the Assessing Officer (AO) had not properly considered these submissions.
Key Issues
The primary issue was whether the unsecured loans added to the assessee's income under Section 68 were indeed unexplained cash credits. Another issue was the incorrect invocation of Section 115BBE by the AO and the propriety of the penalty proceedings under Section 271AAC.
Sections Cited
68, 115BBE, 250, 143(3), 144B, 269SS, 271AAC, 139(1), 143(2), 142(1), 44AB
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Income Tax Appellate Tribunal, CUTTACK BENCH AT KOLKATA
Before: SHRI DUVVURU RL REDDY(KZ) & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2018-19 dated 22.02.2024, I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. which has been passed against the assessment order u/s 143(3)/144B of the Act, dated 20.04.2021. 1. 1. The Registry has informed that the appeal filed by the assessee is barred by limitation by 322 days. An affidavit seeking condonation of delay has been filed by the assessee stating as under: “I URMILA KISHAN, submits that the present appeal has been filed before this Hon'ble Tribunal with a delay of 322 days beyond the prescribed limitation period from order under section 250 on dated 22/02/2024 The delay in filing the appeal is neither intentional nor deliberate but due to reasons beyond the control of the appellant. 2 I am an illiterate individual engaged in the business of wholesale and retail trading of Petrol and Diesel and has minimal knowledge of taxation laws and procedures. Due to My Lack of Knowledge & awareness, I am entirely dependent on My tax consultant for compliance with tax matters, including the filing of the appeal.
Unfortunately, the earlier consultant engaged by me has failed to inform or update me regarding the adverse assessment order and the necessity to file an appeal within the prescribed period I was unaware of the consequences of the delay
On 28/02/2025, upon communication with a CA Firm M/s ADN AND ASSOCIATES, Chartered Accountants, I became aware of the CIT(A) Order and immediately took necessary steps to file the present appeal without any further delay.
The delay caused is purely due to Lack of my Knowledge and awareness of the me and the negligence of the earlier consultant. I have always been diligent in complying with tax matters to the best of My ability and had no intention to disregard the statutory time limits. 6 For all practical purpose 28/02/82025 should be consider as notice service date PRAYER: For all the aforesaid genuine reasons, I could not file the necessary Appeal with ITAT within the due date. Now the Form- 36 is being filed with the help of a Chartered Accountant Firm ADN AND ASSOCIATES for which I have given an Authorised letter to them. I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. I humbly request your Ld. Office to kindly condone the delay in filing the ITAT Appeal and kindly admit the same Appeal for which I will be grateful to your kind office forever.”
Considering the affidavit for condonation of delay and the reasons stated therein, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication.
The assessee is in appeal before the Tribunal raising the following grounds of appeal which are more in the nature of submissions than the grounds of appeal but are reproduced as under:
“1. Unjustified Addition of Unsecured Loans u/s 68 of the Act, Ld. AO has erred in facts and has added the loans received by the Assessee Rs.73,48,000/- on the account of unexplained cash credit u/s 68 of the Act. The Learned Assessing Officer (Ld. AO) erred in making an addition of Rs. 73,48,000/- under section 68 of the Income Tax Act, 1961, by treating the unsecured loans as unexplained cash credits without properly appreciating the submissions, confirmations, and documents provided by the Assessee. Loans have been received through banking channels. It was further stated that all the supporting evidence i.e. account confirmation by of the lenders, copy of ITR of lender, bank statements of lenders showing receipt and payment respectively. Confirmations of receipt of repayment have been furnished. Hence the Assessee has proved the identity of the lenders, genuineness of the transactions and the capacity of the party who had given the loan amount. In general practice of the business, appellant takes loans and repays the same within the stipulated time period. Loans have been taken from friends and relatives and repayment also made through same manner. In petrol pump business everyday appellant requires lump sum amount to pay to the Indian Oil Corporation (IOCL) as Advance payments are done to IOCL and only after the receipt of advance. IOCL dispatches the Petrol/ Diesel tankers to the Petrol pump of the Appellant. All the payments to IOCL are made through Banking channel only. I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. Appellant has a turnover of Rs.33,43,04,077/- (Rs 33.43 Cr) out of which only Rs.43,70,355/- was unsecured loan and repayment done out of that is Rs.14,03,710/- and Rs.29,66,645 is left as closing balance at the end of the year. Appellant has submitted Pan card and credit worthiness report of the lender during the assessment proceeding also. Particular OPENING loan taken TOTAL LOAN CLOSING REPAYMENT TAKEN BALANCE Arun Kumar Majhi 12,00,000 12,00,000 1200000 - Bargaon Sundergarh - 770016 Babita Pattnaik 2,50,000 2,50,000 0 2,50,000 Angul Town Angul Kali Kinkar Das 6,99.000 6,99,000 0 6,99,000 Bhubaneswar Seema Kishan 14,00,000 14,00,000 1400000 - Nalco Nagar, Angul- 759145 Tikinu Kishan 577645 8,21,355 13,99,000 366645 4,54,710 Nalco Nagar, Angul- 577645 43,70,355 49,48,000 29,66,645 14,03,710 759145 Tikinu Kishan, Arun Kumar Majhi, Babita Pattnaik, Kali Kinkar Das and Seema Kishan all are appellants relative and also loan taken and repayment done through Banking channel. Please refer following evidence in this regard; - • Audited Profit and Loss - • Income tax Return FORM-ITR-3 • 3CB & 3CD The learned A.O. should not have treated unsecured Loan as unexplained income under section 68 of the Act and should not have taxed it by applying section 115BBE of the Act because appellant has explained the unsecured loans by providing there PAN card and other details. The Legal verbatim of section 68 law are as below- 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 Appellant has explained the unsecured loans by providing there PAN card and other details. I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. (Please refer the Order U/s 250, DIN & Order No: ITBA/NFAC/S/250/2023- 24/1061344475(1) dated 22/02/2024) However, while passing the order AO has not consider the replies and pass the adverse order without giving the opportunity of being heard. All this goes to support the contentions of the appellant that AO has passed the order on the basis of mere conjectures and surmises, without bothering to bring any concrete material on record. Further, the Appellant has relied upon following judicial pronouncements: - Appellant hereby prays your Ld. Office to kindly set aside the addition on account unsecured loan in view of various judicial judgments/pronouncements in the same matter. Kindly consider the matter and pass the necessary order regarding the above point. . Erroneous disclosure of Loan from Ashadeep Homes Pvt Ltd The loan taken from the Lender is only required to disclose when there is a transaction other than account payee cheque or account payee bank draft or use of electronic clearing system through a bank account and also cross the limit of twenty thousand rupees or more as per section 269SS under Income Tax Act 1962. The Legal verbatim of law are as below- “”269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if, — (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more. I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. If assessee take or accept loan from any other person using the Bank Account/ cheque then no disclosure is required in 3CB & 3CD under clause
The amount of loan disclosed in 3CB & 3CD are erroneous as are occurred in cheque. However, there is no such transaction occurred from Ashadeep Homes Pvt Ltd during the FY17-18. Neither the amount of receipt nor the amount of payment is appearing in any of the bank accounts of the appellant or the Assessee. Moreover, this Ashadeep Homes Pvt Ltd. all together has no business relationship with the appellant. It appears that the Tax Auditor has erroneously copy pasted it from any of his other Tax Audit client and erroneously disclosing it in form 3CD of the appellant under clause 31. He has disclosed all the loan by showing the mode in cheque in clause 31 which is not required. In 3CB & 3CD only if there is any deviation found during the audit, Auditor needs to be addressed it through a disclosure in 3CB and 3CD. Further there is no such loan was disclosed in the financial statement. Based on #3cd only AO has concluded that loan from Ashadeep Homes Pvt Ltd is correct and had treated the whole unsecured loan as unexplained cash credit. The above disclosure is also not as per law. Further only mode other than account payee cheque or account payee bank draft or use of electronic clearing system through a bank account is required to be disclose. Hence Disclosure is not correct, void-ab-initio. AO has not consider the above and pass the erroneous order. The Ld. AO wrongly treated the loan amount of Rs. 24,00,000/-received from Ashadeep Homes Pvt Ltd as unexplained income, despite the fact that there is nothing like such transaction occurred during the FY17-18. Further, the Tax Auditor has made an erroneous disclosure while preparing the 3CB & 3CD under clause 31, shown Ashadeep Homes Pvt Ltd as a lender in 3CB & 3CD. On realizing the mistake of tax auditor, Assessee had provided the details to A.O voluntarily which proves the Bonafide-ness of the Assessee. A.O has not considered the above and had not provide any opportunity to rectify the mistake. The A.O has not provided sufficient opportunity to the Assessee to prove the above unsecured Loan and pass the adverse order. Kindly consider the matter and pass the necessary order regarding the above point.
Ld. officer has not considered the Documentary Evidence Regarding the Loan. I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. AO has not accepted the documents submitted by the Appellant such as including PAN of Lender, ITR copies, and bank statements of appellant to establish creditworthiness, and genuineness of the loan transactions. The A.O has not provided sufficient opportunity to the Assessee to prove the above unsecured Loan and pass the adverse order. Non-consideration-of-Third-Part-Confirmations The Ld. AO has not considered the third-party confirmations which have been submitted for some of the lenders, but the assessment has concluded. The Ld. AO had not provided the Appellant an opportunity to prove the lenders before treating the loans as unexplained. The failure to allow such opportunity has resulted in an unjustified addition, which should be deleted.
Incorrect Invocation of Section 115BBE Section 115BBE of the Income Tax Act, 1961, deals with the taxation of unexplained income, including cash credits, unexplained investments, and other such unexplained amounts. Section 115BBE is applicable only when additions are made under sections 68 to 69D in cases where the nature and source of income are not satisfactorily explained. However, in the present case, the Assessee had duly explained and substantiated the loan transactions with credible evidence. Further if an Assessee provides sufficient documentary proofs regarding the source of income, invoking section 115BBE is not justified. The Ld. AO erred in applying the provisions of section 115BBE of the Act without justifiable reasons, thereby subjecting the assessed income to an excessive tax rate. Hence, the Ld. AO's action in applying an exorbitant tax rate under this section is arbitrary and unsustainable in law.
Unsecured loan used in the Business can not be treated as Income. Loan are generally taken for day to day payment and return it back after purpose are fulfilled. Appellant is in petrol pump Business, so Big amount of repayment always been required and for that loan is required. An unsecured loan is a financial liability and not an earning. The funds received are borrowed and come with an obligation to repay, either with or without interest. I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. Under Generally Accepted Accounting Principles (GAAP) and IFRS, loans are recorded as liabilities on the balance sheet, not as revenue in the profit and loss statement. Treating it as income would violate fundamental accounting standards. According to income tax laws, only earnings from business operations (such as sales revenue, service income, or investment income) are considered as taxable income. Loans are not taxable income because they are not gains but financial obligations. An unsecured loan is a debt, not a profit, and must be treated accordingly in accounting and tax records. It should be recorded under liabilities and not as income in the financial statements. Appellant has taken loan from relative occasionally and pay it back after completion of purpose.
Erroneous Levy of Penalty Proceedings under Section 271AAC. The initiation of penalty proceedings under section 271AAC is bad in law and contrary to the facts of the case, as the primary assessment itself is unjustified. Since the addition made under section 68 is arbitrary and without basis, the corresponding penalty proceedings should be dropped.
Case law regarding section 68 Bansal-Separators-and-Spares-Pvt-Ltd-Vs-ITO-ITAT-Mumbai sec 68.pdf
Any-Other-Ground Additional Grounds The Appellant hereby craves to submit additional Grounds , evidence , documents , explanation , Judicial Pronouncements etc during the ITAT proceedings in order explain its position to obtain adequate relief.”
Brief facts of the case are that the assessee had filed her return of income for AY 2018-19 u/s 139(1) of the Act showing total income of ₹ 20,87,570/- on 28.12.2018. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (in short 'CASS') on the issue of unsecured loans and transaction with the company whose registration had been cancelled by the Ministry of Corporate Affairs. In response to the notices issued u/s 143(2) and 142(1) of the Act the assessee submitted reply. Since the creditworthiness of the creditor Arun Kumar Majhi was not established for loan of ₹ 12 Lakh I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. and the assessee failed to submit her reply and the proposed addition to the total income of the assessee at ₹ 73,48,000/- being the loan received from six persons during the year, after discussing the facts of the case a sum of ₹ 73,48,000/- was added to the income of the assessee u/s 68 of the Act including a sum of ₹ 24 Lakh from Ashadeep Homes Pvt Ltd which was an inactive company and had been struck off and any kind of investment made in the assessee’s business by a struck off company has been treated as the income of the assessee under section 68 of the Act.
1 Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who issued six notices but there was no compliance and accordingly, the appeal of the assessee was dismissed on account of non-prosecution.
Aggrieved with the order of the Ld. CIT(A) the assessee has filed the appeal before this Tribunal.
Rival contentions were heard and the submissions made have been examined. The Ld. DR argued that the assessee has to file a proper condonation petition as the negligent consultant has not been identified. We have considered the submission made both before the Assessing Officer (hereinafter referred to as Ld. 'AO') as well as before the Ld. CIT(A). Before us the assessee has stated in the statement of facts that the assessee submitted ITR copies, Bank statement, copy of PAN and other related required documents for verification during the course of assessment but the same was not considered. The Ld. CIT(A) also confirmed the addition. The books of account have been audited u/s 44AB of the Act and the Tax Audit Report on Form Nos. 3CB & 3CD has been uploaded in the Income Tax Portal within the due date. The I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. assessee is the sole proprietor of M/s. Adirupa Petrol Pump and was engaged in the filling of petrol and diesel in the vehicles under the Dealership Agreement with Indian Oil Corporation Limited (IOCL) during the FY 2017-18 relevant for AY 2018-19. In the business of petrol pump, dealing in cash is allowed and is part of the normal course of business and daily ₹ 10 to 15 Lakh cash is required normally. The assessee is a sole proprietor and taking unsecured loan from relatives also as and when required in order to pay to the IOCL for procurement or for advance payment for procurement of petrol and diesel. The assessee is an illiterate person and was ignorant of the notice. Further she is a senior citizen and the earlier tax consultant had not communicated anything regarding the hearing notices u/s 250 of the Act, therefore, she consulted another Chartered Accountant to enquire about the status of the appeal and the closure of the CIT(A)’s order came to the knowledge of the assessee on 27.02.2024 only after confirmation by the new consultant. It was requested that only 27.02.2025 may be considered as the actual date of order of the appeal. Various reliefs have been claimed in the course of appeal. The loans are stated to be received from the relatives as and when required and repayment was done through banking channel. It is stated that there is no such transaction from Ashadeep Homes Pvt Ltd during the FY 2017-18 and neither the amount was received and nor the amount of payment is appearing in any of the bank accounts of the assessee. It is further submitted that the documentary evidences have not been considered and reliance has been placed upon the decision of ITAT, Mumbai in the case of ITO vs. M/s. Bansal Separators and Spares Pvt. Ltd. in ITA No. 3173/MUM/2022 order dated 31.05.2023. It is requested that the entire demand of tax may be dropped by setting aside both the orders I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. passed by Ld. AO as well as the Ld. CIT(A). The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
We have considered the submissions made. The assessee has stated that the accounts are audited but the same had not been considered by the Ld. AO. It is further stated that there is evidence for the loans received from the relatives. Before the Ld. AO proper compliance could not be made and before the Ld. CIT(A) also the assessee was not represented properly. Since the Ld. CIT(A) has not decided the merits of the case, therefore, we deem it appropriate in the interest of justice and fair play that another opportunity needs to be provided to the assessee to represent his case properly before the Ld. CIT(A). We, therefore, set aside the orders of the Ld. CIT(A) and remand the matter to the Ld. CIT(A) to be decided afresh after considering the documents filed viz. the audit reports and other evidence in support of the reliefs. Claimed. The Ld. CIT(A) shall allow an opportunity of being heard to the assessee and also grant an opportunity of representing the case and to be heard to the Ld. AO as per rule 46A of the Income Tax Rules, 1962, if required, and thereafter pass an order in accordance with law. For statistical purposes, the appeal of the assessee is allowed.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 12th June, 2025. [Duvvuru RL Reddy] [Rakesh Mishra] Vice President (KZ) Accountant Member Dated: 12.06.2025 Bidhan (P.S.) I.T.A. No.: 191/CTK/2025 Assessment Year: 2018-19 Urmila Kishan. Copy of the order forwarded to:
Urmila Kishan, Nalco Nagar, Angul, Odisha, 759145. 2. DCIT, Circle-1(1), Bhubaneswar.
CIT(A)-NFAC, Delhi.
CIT-
CIT(DR), Cuttack Bench, Cuttack.
Guard File. //// By order