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Facts
The assessee, a partnership firm, faced an addition of Rs. 24,50,250/- under Section 68 of the Income Tax Act for unexplained cash credits (unsecured loans), which was confirmed by the CIT(A). The assessee contended that these loans were not received during the assessment year 2010-11 but were brought forward credit balances from previous years, supported by audited financial statements and confirmations.
Held
The Tribunal found that the unsecured loans were indeed credit balances brought forward from preceding years and were not received in the current year. It was observed that audited balance sheets and confirmation accounts supported this fact. Consequently, Section 68 was deemed inapplicable as the primary condition for its invocation (sum credited in the books in the previous year) was not met, and the addition was deleted.
Key Issues
Applicability of Section 68 of the Income Tax Act for alleged cash credits (unsecured loans) that are brought forward balances from previous years and not fresh receipts in the current assessment year.
Sections Cited
250, 143(3), 68, 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: Dr. MANISH BORAD
Assessee by : Shri Rajiv Thakkar Revenue by : Shri Vishwajit Shinde, JCIT Date of hearing : 19.01.2026 Date of : 23.01.2026 pronouncement आदेश/ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :- This appeal at the instance of the assessee is directed against the order of Ld. CIT(A) ADDL/JCIT(A), Panaji dated 18.07.2025 framed u/s 250 of the Income Tax Act, 1961 for A.Y. 2010-11 which is arising out of order passed u/s 143(3) of the Act dated 11.07.2014.
The sole greviance of the assessee is that Ld. CIT(A) erred in confirming the addition made by Ld. Assessing Officer (AO) u/s 68 of the act at Rs. 24,50,250/-
At the outset Ld. counsel for the assessee referring to the Audited financial statements for preceeding A.Y. 2009-10 submitted that the alleged cash credit in the form of unsecured loans were not received during the year under consideration but the credit balance were brought forward from preceeding years and therefore section 68 of the act cannot be invoked. Reference was also made to the confirmation account of each of the alleged cash creditors which are reproduced in the impugned order.
On the other hand Ld. Departmental Representative (DR) submitted that this fact that the unsecured loans are taken in the preceeding years from the alleged parties has not been argued before the lower authorities and therefore the matter may please be restored to the file of Jurisdictional Assessing Officer (JAO).
I have heard rival contentions and perused the record placed before me. The assessee is a partnership firm engaged in the business as Builders and Developers and ‘Nil’ income declared in the return filed for A.Y. 2010-11 filed on 15.10.2011. After the case being selected for scrutiny through CASS, valid statutory notices u/s 143(2) and 142(1) of the Act duly served upon the assessee. Ld. AO examined the Books and financial statements and concluded the assessment proceedings making addition for unexplained cash credit from five parties totaling to Rs. 24,50,250/- by invoking section 68 of the Act. As the assessee revised the computation of income during the course of assessment proceedings declaring income of Rs. 12,55,539/- Ld. AO assessed the income at Rs. 37,05,789/- after making the addition u/s 68 of the Act at Rs. 24,50,250/- I observe that assessee failed to get any relief from Ld. CIT(A) inspite of the fact that all the confirmation accounts showing brought forward credit balance were placed before Ld. CIT(A) and duly reproduced in the impugned order.
I also observe that the impugned addition has been made for the unsecured loans of Rs. 24,50,250/- received from following parties:-
Sr. Name of the party Amount No. Rs. 1. Mrs. Geeta Samtani 2,75,250/- 2. Hatimbhai F. Kothari 6,80,000/- 3. Iqbal Tejani 6,90,000/- 4. Ashwini Sahani 3,00,000/- 5. Aslam Baghwan 1,75,000/- 6. Mahmood Musavi 3,30,000/- Total 24,50,250/-
From perusal of section 68 of the Act, I find that the same can be invoked for the sum found credited in the books of the assessee maintained in the previous year for which the assessee offers no explanation about the nature and source to the satisfaction of AO. The first condition for invoking section 68 is that the alleged sum is found credited in the books of account for the previous year. In the instant case the unsecured loans from six parties referred above has not been received during the year and that the alleged unsecured loans were taken in preceeding years. Audited balance sheet and confirmation of account supports this fact that alleged sum was not received during the year under consideration. I also find that the confirmation of account of all the alleged cash creditors stood filed before Ld. AO as well as Ld. CIT(A). Considering the facts and circumstances of the case since the alleged sum has not been received by the assessee during the year, I fail to find any merit in the action of the AO invoking section 68 of the Act. Finding of Ld. CIT(A) is reversed, impugned addition is deleted and effective ground No. 2 raised by the assessee is allowed. Other grounds being general in nature needs no adjudication.
In the result, appeal of the assessee is allowed.
Order pronounced on this 23rd day of January, 2026.