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Facts
The assessee filed its return for AY 2017-18, which led to scrutiny assessment and additions by the AO under Sections 68 and 69 for unexplained capital account, unsecured loans, and cash deposits totaling approximately Rs. 3.19 Crores. The CIT(A) partly allowed the appeal. At the ITAT hearing, the assessee did not appear, and their adjournment request was rejected.
Held
The Tribunal found that the AO and CIT(A) had not disputed the identity, creditworthiness, and genuineness of the partners' capital account transactions, supported by agricultural income evidence. It held that the AO erred in treating these as unexplained credits under Section 68 and unexplained cash deposits under Section 69A, as these amounts were already considered by the CIT(A). Therefore, the additions made were deemed incorrect.
Key Issues
Whether the additions made under Section 68 for unexplained capital account and unsecured loans, and under Section 69A for unexplained cash deposits, were justified when the genuineness and creditworthiness of the transactions were not disputed by lower authorities.
Sections Cited
Section 68, Section 69, Section 69A, Section 143(2)
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 06-03- 2025 passed by National Faceless Appeal Centre(NFAC), Delhi for assessment year 2017-18.
The grounds of appeal are as under:- “1.01. That Learned C. I. T. (Appeal), Gandhinagar has erred in confirming addition made by Learned Assessing Officer of on account of addition in Capital account amounting to Rs. 2,52,80,028/- u/s.68 of The Income Tax Act, 1961. 1.02. That various reasons advanced by Learned C. I. T. (Appeal), Gandhinagar while conforming addition are contrary to the facts and circumstances of the case.
1.03. Therefore, addition of Rs.2,52,80,028/-u/s 68 of The Income Tax Act, 1961 confirmed by Learned C. I. T. (Appeal), Gandhinagar deserves to be deleted.
2.01 That Learned C. I. T. (Appeal), Gandhinagar has erred in confirming addition made by Learned Assessing Officer of on account of addition on account of unsecured loan amounting to Rs. 2,50,000/- u/s. 68 of The Income Tax Act, 1961.
2.02 That various reasons advanced by Learned C. I. T. (Appeal), Gandhinagar while conforming addition are contrary to the facts and circumstancesof the case.
2.03 Therefore, addition of Rs.2,50,000/- u/s 68 of The Income Tax Act, 1961 confirmed by Learned C. I. T. (Appeal), Gandhinagar deserves to be deleted.
3.00. The appellant craves leave to add, amend, alter, edit, delete, modify any of the grounds of appeal at the time of or before final hearing of the appeal.
Total Tax Effect 3,38,31,307”
The assessee filed return of income on 28-10-2017 declaring total income of Rs. 9,630/-. The assessee’s case was selected for scrutiny and notice u/s. 143(2) was issued on 11- 08-2018. The assessee did not comply with statutory notices and thus the Assessing Officer made addition of Rs. 34,89,500/- as unexplained cash deposits u/s 69 of the Act. The Assessing Officer also made addition of Rs. 31,30,909/- as unexplained credit in respect of unsecured loan u/s. 68 of the Act. The Assessing Officer also made addition in respect of cash account to the extent of Rs. 2,52,80,028/- as unexplained credit u/s. 68 of the Act.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
Somnath Cold Storage, A.Y. 2017-18 5. At the time of hearing, none appeared on behalf of the assessee and the assessee’s representative filed the adjournment application dated 18-12-2025. But from the perusal of the records, the assessee was categorically informed on 1st Oct, 2025 not to seek further adjournment which was totally ignored by the A.R. from time to time as the assessee’s representative has sought adjournment on 11-11-2025, 13-11-2025 as well as on 10-01-2026. Thus, we rejected the application of the ld. A.R. and proceeding on the basis of the assessment order and the order of the CIT(A).
The ld. D.R. submitted that the CIT(A) has categorically mentioned the remand report filed by the Assessing Officer during the appellate proceedings and thus, the CIT(A) has categorically mentioned that one of the partners possibly have the creditworthiness to make an investment at least on partly basis income from agriculture in assessment year 2017-18. The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard ld. D.R. and relied upon the assessment order and the order of the CIT(A). The CIT(A) has categorically mentioned that one of the partners has the creditworthiness to make an investment and is not doubting his genuinenity as well as the creditworthiness. Beside this, the assessee submitted before the CIT(A) that the capital account of the partners, copy of affidavit by 7 partners, their bank statements as well as 7/12, proof of holding, land in support of agricultural income along with copy of return of income in case of 3 partners out of 10 partners for assessment year 2017-18 as well as copy of returns of income in case of 7 partners out of 10 partners for the Somnath Cold Storage, A.Y. 2017-18 assessment year 2016-17. The Assessing Officer at no point of time is disputing the identity, creditworthiness of the parties as well as genuineness of the transaction. Thus, the Assessing Officer as well as the CIT(A) cannot question the creditworthiness and genuinenity of the capital account transaction to the extent of these parties/partners. Thus, the Assessing Officer was not right in treating the same as unexplained credit u/s. 68 of the Act. As regard to unexplained cash deposits u/s. 69A and section 68 addition relating to unexplained credits amounting to Rs. 31,30,000/-, the Assessing Officer has not taken cognizance of all the 9 parties while giving remand report and the same amount was already taken into account by the CIT(A). Hence, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.