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Facts
The assessee's return for AY 2018-19 was selected for scrutiny regarding unsecured loans. The AO made an addition of Rs. 97,50,000 under section 68, questioning the genuineness and creditworthiness of lenders due to lack of bank statements and income discrepancies. The CIT(A) partly allowed the appeal, deleting one part of the addition but confirmed Rs. 5,00,000 from Mahavir Oil Co., stating the assessee failed to fully prove the lender's creditworthiness. The assessee appealed against this confirmed addition.
Held
The Tribunal noted that the assessee submitted various documentary evidences (bank statements, ledger, ITRs) of Mahavir Oil Co. to the CIT(A), which may not have been fully considered. With no objection from the DR, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO for fresh adjudication on merits, after providing the assessee a reasonable opportunity to present evidence.
Key Issues
Whether the addition of Rs. 5,00,000 as unexplained cash credit under section 68 was justified when the assessee claimed to have provided sufficient evidence for the lender's creditworthiness to the lower authorities, which may not have been fully considered.
Sections Cited
143(2), 142(1), 133(6), 143(3), 144B, 68, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
Assessment Year : 2018-19 Mr. Hitesh Popatlal Oswal, The Income Tax Officer, 1021/22 Palkar Chambers, Circle – 12, Pune Sadashiv Peth, Pune-411030 Vs. PAN : AAFPO0180N अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee by : Shri Krishna V Gujarathi Department by : Shri Vidya Ratna Kishore Date of hearing : 16-12-2025 Date of 27-01-2026 Pronouncement : आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 24.01.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)/NFAC”] pertaining to Assessment Year (“AY”) 2018-19.
Briefly stated, the facts of the case are that the assessee is an individual. For AY 2018-19, the assessee filed his return of income on 24.10.2018 declaring total income of Rs.15,87,120/-. The case of the assessee was selected for complete scrutiny under the E-assessment Scheme, 2019 on the following issues : (i) Unsecured Loans and (ii) Business Expenses. Accordingly, statutory notice(s) u/s 143(2) and 142(1) of the Income Tax Act, 1961 (the “Act”) along with questionnaire were issued and served upon the assessee requesting the assessee to submit the details regarding the unsecured loans received along with the confirmation of the lender, PAN of the lender, copy of ITR filed by the lender and the bank statement from which such amount is given by the lender. On perusal of the details submitted by the assessee during the assessment proceedings, the Ld. Assessing Officer (“AO”) observed that the assessee has failed to prove the genuineness of the unsecured loans transaction with the lenders Divesh Oswal and Mahavir Oil Co. on account of assessee’s failure to submit the copy of bank statements of the respective lenders. The Ld. AO further observed that the creditworthiness of the lenders has also not been proved on the ground that as per the ITR of both the lenders for AY 2018-19 the lenders have given large amount of loan as compared to the income declared in their ITR’s i.e. Rs.92,50,000/- received from Divesh Oswal as against the income of Rs.8,87,670/- declared in his return of income and loan of Rs.5,00,000/- from Mahavir Oil Co. as against income of Rs.1,85,790/- declared in its return of income. Also notice u/s 133(6) of the Act issued to the lenders remained un-responded. He, therefore, completed the assessment u/s 143(3) r.w.s. 144B of the Act vide order dated 19.05.2021 on total income of Rs.1,13,37,120/- thereby making an addition of Rs.97,50,000/- (Rs.92,50,000/- + Rs.5,00,000/-) u/s 68 r.w.s. 115BBE of the Act.
Aggrieved, the assessee carried the matter before the Ld. CIT(A)/NFAC who partly allowed the appeal of the assessee by deleting the addition made by the Ld. AO in respect of unsecured loans transaction of Rs.92,50,000/- with the lender, Divesh Oswal. He, however, confirmed the addition made by the Ld. AO in respect of loan advanced to the assessee by Mahavir Oil Co by observing as under: “7.3) Addition of Rs.5,00,000/- received from Mahavir Oil. 7.3.1) Ground no.(2) is raised for making the addition of Rs.5,00,000/-. The AO in course of assessment proceedings has observed that the appellant has shown to have received an amount of Rs.5,00,000/- from Mahavir Oil. As the ITR of Mahavir Oil Co. showed the returned income for the year under consideration at Rs.1,85,790/- only, the AO held that the appellant had failed to prove the creditworthiness of the lender and genuineness of unsecured loan transaction of Rs.5,00,000/- received from Mahavir Oil, especially for not furnishing the bank account statement. Accordingly, the AO made the addition of Rs.5,00,000/- as per the provisions of section 68 of the Act 7.3.2) In course of appellate proceedings the appellant has submitted that the amount of Rs.5,00,000/- was lent from lender's regular business account and there were no cash deposits to support the said lending signifying that the source of the funds was legitimate business funds of M/s. Mahavir Oil Co. In support of the same the appellant has furnished the bank account statement of M/s Mahavir Oil for the year under consideration. 7.3.3) I have gone through the facts of the case and the submissions of the appellant. As could be seen from the HDFC Bank Account no. 06332000003092, it is noticed that the M/s Mahavir Oil has transferred an amount of Rs.5,00,000/- on 17.07.2017. Other than furnishing bank account statement, the appellant has not adduced any evidence to show that the lender has lent money from out of its business working capital funds. Thus, the creditworthiness in this case is not completely proved by the appellant. In view of the above, the addition made u/s 68 of the Act of Rs.5,00,000/ is sustained and this ground is dismissed.
Dissatisfied, the assessee is in appeal before the Tribunal raising the following grounds of appeal :
1) On the facts and in the circumstances of the case and in law the honorable CIT(A) has erred and is not justified in confirming the addition of Rs. 5,00,000/- by treating the unsecured loan received from Mahavir Oil Company as unexplained credit u/s 68 without appreciating the following facts: a) The appellant has submitted ITR of Mahavir Oil Company b) The appellant has submitted the bank statement and Letter Confirmation of the Mahavir Oil Company clearly reflecting the payment of unsecured loan Rs. 500,000/- The appellant prays that the addition of Rs. 5,00,00/- may please be deleted. 2) The appellant hereby reserves the right to add, amend, alter, delete or raise any additional ground of appeal.
The Ld. AR, at the outset, submitted that in order to prove the creditworthiness of the lender i.e. Mahavir Oil Co., the assessee has duly submitted all the details before the Ld. CIT(A)/NFAC pertaining to loan transaction with Mahavir Oil Co. Referring to pages 77 to 80 of the paper book, the Ld. AR submitted that the assessee had provided the bank statement of the lender Mahavir Oil Co. Also ledger confirmation from the books of account of the lender, Mahavir Oil Co. was provided to the Ld. CIT(A)/NFAC (pages 82 of the paper book refers) along with ITR of Mahavir Oil Co. for last three assessment years (pages 62 to 64 of the paper book refers). However, he has not considered the assessee’s submissions. The Ld. AR therefore requested that the matter may be set aside to the file of the Ld. AO to explain and verify the claim of the assessee in the light of the above documentary evidences filed by the assessee before the Ld. CIT(A)/NFAC in support of its claim.
The Ld. DR had no objection if the matter is set aside to the file of the Ld. AO to verify the claim of the assessee.
We have heard the Ld. Representatives of the parties and perused the material available on record. The facts of the case are not in dispute. The Ld. CIT(A)/NFAC has confirmed the addition of Rs.5,00,000/- in respect of loan advanced to the assessee by Mahavir Oil Co. for the reasons reproduced in the preceding paragraphs. Before us, the Ld. Counsel for the assessee has pleaded that the assessee had filed all the relevant documentary evidences in support of its claim before the Ld. CIT(A)/NFAC so as to prove the creditworthiness of teh lender which has not been considered by him and has therefore prayed that the matter may be set aside to the file of the Ld. AO to verify the claim of the assessee. The Ld. DR had no objection. Considering the totality of the facts and in the circumstances of the case, we deem it fit and proper to set aside the impugned order of the Ld. CIT(A)/NFAC and restore the matter back to the file of the Ld. AO with a direction to decide the impugned issue afresh on merits as per fact and law after giving reasonable opportunity of being heard to the assessee. Needless to say, the assessee shall co-operate by filing all the relevant details/documentary evidences in support of its claim before the Ld. AO on the appointed date without seeking any adjournment under any pretext, unless required for the sufficient cause, failing which the Ld. AO shall be at liberty to pass appropriate order as per law. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.