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Facts
The assessee's case was selected for scrutiny for A.Y. 2020-21, leading to additions by the AO for unexplained unsecured loans (Rs. 9,06,53,423/- under section 68) and related interest (Rs. 37,80,946/- under section 69C). The CIT(A) subsequently deleted these entire additions. The Revenue appealed to the ITAT, contending that the assessee failed to establish the creditworthiness and genuineness of fresh unsecured loans amounting to Rs. 3,63,73,694/- taken during the year, which the CIT(A) had deleted.
Held
The Tribunal found that the CIT(A) erred by deleting the entire addition without ensuring the AO had properly verified the creditworthiness, genuineness, and repayment of the fresh unsecured loans. Consequently, the ITAT set aside the matter concerning the additions for fresh unsecured loans (Rs. 3,63,73,694/-) and related interest (Rs. 6,54,650/-) and remanded it to the CIT(A) for fresh adjudication after obtaining a specific report from the AO.
Key Issues
1. Whether the CIT(A) was correct in deleting additions for unexplained unsecured loans and related interest payments under sections 68 and 69C. 2. Whether the assessee discharged the onus of proving the identity, creditworthiness, and genuineness of fresh unsecured loans and their repayment.
Sections Cited
Section 143(3), Section 144B, Section 68, Section 69C
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’], dated 19.05.2025 for the Assessment Year (A.Y.) 2020-21 in the proceeding u/s 143(3) of the Income Tax Act.
The brief facts of the case are that the assessee had filed return of income for the A.Y. 2020-21 on 23.02.2021 declaring total income of Rs. 1,18,610/-. The case of assessee was selected for complete scrutiny under CASS. In the course of assessment, additions were made on ITO vs. Hitika Fab, AY- 2020-21 2 account of unexplained unsecured loan and unexplained expenditure and the assessment was completed u/s 143(3) r.w.s 144B of the Act, on 21.09.2022 at total income of Rs. 9,45,52,979/-.
3. Aggrieved with the order of the AO the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed.
Now the Revenue is in appeal before us. The following grounds have been taken in this appeal:
1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting addition on account of increase in unsecured loan u/s 68 of the Act amounting to Rs. 3,63,18,794/- during the year (out of addition made of Rs. 9,06,53,423/-), on which the assessee has failed to establish the creditworthiness of the lenders?"
2. Whether on the facts and circumstances of the case and in law, the Id.CIT(A) has erred in deleting addition on interest payment on increase in unsecured loan during the year amounting to Rs. 6,54,650/- during the year (out of addition made of Rs. 37,80,946/-), on which the assessee has failed to establish the creditworthiness of the lenders?"
The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary."
4. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?"
The first ground taken by the Revenue pertains to addition on account of unsecured loan. Shri. R P Meena, Ld. CIT-DR submitted that in the course of assessment, the AO had made addition of Rs. 9,06,53,423/- on account of unsecured loan for the reason that no detail was furnished by the assessee in this regard. Before the Ld. CIT(A), ITO vs. Hitika Fab, AY- 2020-21 3 however, the assessee had furnished the details of unsecured loan and it was contended that the unsecured loans were on account of opening balances. The Ld. CIT(A) had remanded the matter to the AO with a direction to verify the contention of the assessee that the unsecured loans were only on account of opening balance and that no new loan was taken during the year. The Ld. CIT-DR explained that the AO had verified this fact and informed the Ld. CIT(A) in his remand report that new loans taken during the year were to the extent of Rs.3,63,73,694/- and the balance amount represented opening balances. However, Ld. CIT(A) had deleted the entire addition of Rs.9,06,53,423/-. The Ld. CIT-DR submitted that the assessee did not establish the genuineness and credit worthiness of the new loans of Rs.3,63,73,694/- taken during the year and, therefore, addition to this extent was required to be sustained.
6. Per contra, Shri Divyang Shah, the Ld. A.R of the assessee submitted that the assessee had filed confirmation for the entire loan including the fresh loan of Rs.3,63,73,694/- taken during the year and the copy of the ITRs of majority of the lenders were also filed. Considering this fact Ld. CIT(A) was satisfied with the identity, credit worthiness and genuineness of the transactions and accordingly he had deleted the entire addition of Rs. 9,06,53,423/- on account of unsecured loan. The Ld. A.R further submitted that fresh loan taken during the year was repaid during the current year as well as during the subsequent years and considering this fact the loans could not have been considered as in-genuine. He, therefore, strongly supported the order of the Ld. CIT(A).
ITO vs. Hitika Fab, AY- 2020-21 4 7. We have considered the rival submissions. Before the AO no detail in respect of unsecured loan of Rs. 9,06,53,423/- as appearing in the balance-sheet of the assessee was furnished. Therefore, the AO had treated the entire loan amount as unexplained and made the addition. Before the Ld. CIT(A), the assessee had furnished details of unsecured loan and it transpired that the total loan of Rs. 9,06,53,423/- was taken from 44 persons. The assessee had also contended that these loans were opening balances. The matter was referred by the Ld. CIT(A) to the AO with following direction:
The appellant claimed that the unsecured loans were only the opening balance and no new loans were received during relevant assessment year. You are directed to verify these claim by conducting necessary inquiry and submit remand report...
The AO had accordingly verified the contention of the assessee and sent a remand report to the Ld. CIT(A) with the finding that loan of Rs. 3,63,73,694/- was fresh loan taken during the year from 12 persons and the balance amount represented opening balances. The Ld. CIT(A) after considering the remand report of the AO had deleted the entire addition of Rs. 9,06,53,423/-. The finding of the Ld. CIT(A) is found to be as under:
I have perused the assessment order, written submission filed by the appellant and the remand reports submitted by the AO. In the assessment order, the AO added entire unsecured loans of Rs. 9,06,53,423/- as unexplained unsecured loans u/s 68 of the IT Act and also added the claim of interest payments of Rs.37,80,946/-towards that loan as unexplained expenditure u/s 69C of the IT Act. During the course of appeal proceedings, the appellant submitted the complete details of unsecured loans along with necessary evidences and the same was forwarded to the AO for necessary verification and submission of remand report The findings of the AO in the remand report are summarized below 1. Most of the loans are having opening balances and almost all of lenders has filed the return of income (though it is not a requirement).
3. Some of the lenders had not filed the return of income but the amount lended by them is very small considering the total quantum of the loan 4. The appellant has fulfilled all the 3 limbs of section 68 of the IT Act and has discharged the onus of burden of proof 6.1 In this regard, it is pertinent to note that except for the above findings, the AO has not given any adverse findings. In view of the above, the AO is directed to delete the addition made on account of unsecured loans of Rs 9.06 53 423/- and accordingly ground no 1 raised by the appellant is hereby allowed
The copy of the remand report is found reproduced in the appellate order. The finding given by the Ld. CIT(A) on the remand report of the AO is not found correct. The AO had merely reported that the assessee had filed confirmation of 12 lenders from whom fresh loan of Rs. 3,63,73,694/- was taken during the year and that the copy of ITR of 6 lenders was also filed. Apart from this fact no further submission was made by the AO in his remand report on the credit-worthiness of the lenders and the genuineness of the transactions. From the direction as given by the Ld. CIT(A) to the AO while forwarding the additional evidences, as reproduced earlier, it is evident that the AO was only directed to verify the opening balances and no specific direction was given to examine to credit- worthiness and genuineness of the fresh loans taken during the year. Under the circumstances the AO could not have carried on such verification on his own. In view of this fact the finding of the Ld. CIT(A) that the assessee had fulfilled all the three limbs to satisfy the identity, credit worthiness and genuineness of the transactions, is not found correct. The other contention of the assessee is that the fresh loan of Rs. 3,63,73,694/- taken during the year was also repaid in the current year and in ITO vs. Hitika Fab, AY- 2020-21 6 subsequent years. The factum of repayment of loan, which had a bearing on the genuineness of transactions, was also not verified by the AO. In the interest of justice, therefore, we deem it proper to set aside the matter to the file of Ld. CIT(A) with a direction to allow another opportunity to the AO to verify the credit worthiness and genuineness of the fresh loans amounting to Rs. 3,63,73,694/- taken from 12 loan creditors during the year. The repayment of these loans should also be verified by the AO. After obtaining specific report of the AO on these issues, the Ld. CIT(A) may decide the matter afresh about the correctness of addition of Rs. 3,63,73,694/- on account of fresh loans taken during the year. The ground taken by the Revenue is allowed for statistical purpose.
Ground No. 2 pertains to addition of interest of Rs. 6,54,650/- in respect of fresh unsecured loan taken during the year. As the issue of addition on account of fresh loan is set aside to the file of Ld. CIT(A), this matter is also remanded for fresh adjudication on the basis of the report of the AO. The ground is allowed for statistical purpose.
In the result, the appeal of the Revenue is allowed for statistical purpose.
Order pronounced in the Court on 03/02/2026 at Ahmedabad.