Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘A NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
Assessment Year: 2022-23 Vs. Sh. Sunil Kumar, ACIT, Circle-3(1), C/o- Kailash, Palra, Gurugram Gurgaon- 122001 PAN: AVAPK8094K (Appellant) (Respondent) Assessee by Sh. R.S. Punia, CA Sh. Rajat Chaudhary, CA Department by Sh. Ajay Kumar Arora, Sr. DR Date of hearing 11.11.2025 Date of pronouncement 11.11.2025 ORDER
PER SATBEER SINGH GODARA, JM
This Revenue’s appeal for assessment year 2022-23, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1069504506(1), dated 07.10.2024 involving proceedings under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
The Revenue raises the following substantive grounds in the instant appeal: “A. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,51,49,250/- made by the AO on account of unexplained unsecured loan u/s 68 of the Income Tax Act, 1961 r.w.s. 115BBE of the Act. B. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in admitting additional evidence in the case without seeking remand report/comments of the AO and used the additional evidence as basis for deleting addition in respect of various issues. C. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,83,71,515/-u/s 41(1) of the Act made by the AO on account of un-substantiated sundry creditors. D. That on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 5,00,000/- as income from other sources us 56(2)(vii)(a) of the Act on account of gift received.
We now advert to the first and foremost issue between the parties raising qua section 68 unsecured loan addition of Rs.1,51,49,250/- made by the Assessing Officer in his assessment dated 27.03.2024 and reversed in the CIT(A)/NFAC’s lower appellate discussion, reading as under: 7. Ground No. 3 The appellant filed the ground against the addition of Rs. 1,51,49,250/- made by the AO on account of unsecured loan. It is noticed from the record that the AO had called for the details with respect to such loan such as confirmation of the lenders, ledger account of the lender, bank a/c statement loan agreement with rate of interest and ITR of the lenders to prove the identity, genuineness and creditworthiness of the lenders to prove the genuineness of the transaction. The AO has also narrated that the appellant has provided the PAN details and confirmation from the parties for loan amount of Rs. 1,31,98,750/-. Further, other details were not provided by the appellant, thus the AO, in absence of details called for, treated the entire loan amount of Rs. 1,51,49,250/- as unexplained and made addition u/s. 68 r.w.s. 115BBE of the Act.
2 | P a g e The appellant during the course of appellate proceedings, was given opportunity of being heard. The appellant submitted the following contention before the undersigned: “The appellant respectfully submits that the learned Assessing Officer (AO) has erred both in fact and in law by adding Rs.1,51,49,250/- under Section 68 of the Income Tax Act, 1961, to the appellant's assessed income. This addition is unjustified and legally unsustainable. In the show cause notice dated 12.03.2024, the AO stated: "On perusal of the balance sheet of the assessee for the relevant year, it is observed that the assessee has taken an unsecured loan of Rs.1,51,49,250/-. The assessee has not provided documentary evidence such as confirmation of the lenders, ledger account of the lender, bank statement showing the transaction of the loan amount, loan agreement with the rate of interest, and ITR of three years starting from A.Y. 2022- 23, A.Y. 2021-22, and A.Y. 2020-21. It was the onus of the assessee to prove the identity, genuineness, and creditworthiness of the lenders, but the assessee has failed to do so." In response to this notice, the appellant promptly submitted confirmations from all the lenders, including copies of their PAN cards. Out of the total loan amounting to Rs. 1,51,49,250/-, only a sum of Rs. 4,78,750/- was accepted or taken in the concerned previous year, while the remaining amount was carried forward from previous years. This fact is clearly evident from the appellant’s Form 3CD, which was already submitted. However, despite these submissions, the AO incorrectly added the entire loan amount under Section 68. It is critical to note that additions under Section 68 cannot be made for loans that were acquired in previous years and are reflected as opening balances. The sum of Rs.4,78,750/- was accepted during the relevant financial year, and the appellant had already submitted the necessary confirmations and identity proofs of the lenders. However, due to the insufficient opportunity provided by the AO, the appellant could not submit the complete evidence of creditworthiness and genuineness at the time of the assessment. The appellant now submits bank statements and income tax returns of these lenders as additional evidence, which unequivocally demonstrate the creditworthiness and genuineness of the 3 | P a g e transactions. The addition made by the AO under Section 68 is contrary to the law laid down by various courts, including: · In case of ITO vs. Rahul Kantilal Shah (ITAT Mumbai)
/Mum/2018 dt 26.07.2022, the Income Tax Appellate Tribunal (ITAT) ruled that the Assessing Officer's addition of an opening balance of unsecured loans under Section 68 was incorrect. The court concluded that the provisions of Section 68 cannot be invoked on the opening balance, as it represents transactions from prior years and should not be treated as current year transactions. This ruling reinforces that opening balances should not be subject to scrutiny as unexplained cash credits · CIT vs. Jagatkumar Satishkumar Patel, Citation: (2014) 45 taxmann.com 441 (Gujarat) : The Gujarat High Court held that if a loan is an opening balance carried forward from an earlier financial year, no addition can be made under Section 68 in the subsequent year. · CIT vs. Usha Stud Agricultural Farms Ltd, Citation: (2008) 301 ITR 384 (Delhi) : The Delhi High Court ruled that the addition under Section 68 can only be made in the year in which the credit appears. If the credit balance is an opening balance from the prior financial year, no addition can be made under Section 68 in the current assessment year. In light of these judgments, it is evident that the addition made by the AO is legally untenable. The appellant, therefore, prays for the deletion of the addition of Rs. 1,51,49,250/- made under Section 68 of the Income Tax Act, 1961.”
7.1 All the submissions and related arguments have been duly considered by the undersigned. It is noticed from the assessment order that the AO had made additions of Rs. 1,51,49,250/- u/s. 68 of the Act on the basis of the transaction could not pass the basic ingredients of section 68 of the Act i.e. identity, genuineness of transaction and the creditworthiness of the lenders. 7.2 It is also observed from the submissions and record available that the appellant has reported his balance sheet and details of unsecured loan as annexure to the balance sheet for the year under consideration as under:
5 | P a g e 7.3 There is no dispute that the appellant has reported Rs. 1,51,49,250/- as closing balance of unsecured loan. Further, on analyzing the details submitted by the appellant it is noticed that a sum of Rs. 1,52,54,750/- was raised during the year and Rs. 1,54,09,000/- was repaid during the year only. From the table given above, it is evident that the total loan raised during the year was Rs. 1,54,09,000/- out of Rs. 1,46,05,250/- was repaid during the year itself. Here core question is arisen whether the loan taken during the year and repaid during the year is subject to disallowance u/s. 68 of the Act as cash credit. Once, loan is repaid, there is no question of treating such amount of loan as unexplained cash credit. The AO has taken view and the closing balance of unsecured loan inclusive of opening balance was treated as unexplained. It is also settled law that the loan which has been raised in preceding years cannot be treated as income in the subsequent year(s). 7.4 There are plethora of judicial pronouncements in which such contention of the appellant has been duly considered and rendered the decision in favor of the respective appellant. The decisions of the higher appellate authorities which are relied by the appellant have also been perused. 7.5 After consideration all the submission made by the appellant during the course of appellate proceedings, the undersigned finds force in the argument forwarded by the appellant. It is true that the genuine transaction should not be ignored only on the basis of non- availability of confirmation from the lenders and for which the appellant has filed the grounds in support of his contention which were truly ignored by the AO. The AO before concluding the assessment ought to have made himself satisfied with the facts and circumstances of the case. In case, the appellant shown his inability to obtain the details in time from the lenders and the reasons of the same was offered, it becomes duty of the AO to exercise his powers to call for the details from the lenders. There are various judicial decisions in which it was held that proper enquiry must be carried out by the AO before reaching to any conclusion. Here, the undersigned finds that the appellant had duly submitted the details of the lenders the AO failed to carry out enquiry to find out the genuineness of the transaction. 7.10 In the case of PCIT vs Anshika Consultants (P.) Ltd. reported in 162 taxmann.com 792, the High court of Allahabad has held that “Thus, the suspicion voiced by the Assessing Officer as to the source of deposit received by the assessee was gone into. On the strength of material and evidence that was brought on record, the Tribunal reached a finding that the loans obtained by the assessee were interest bearing. Interest was actually paid. Second, the Tribunal found that the Assessing Officer had not been able to doubt the identity and existence of the 6 | P a g e creditors. As to the source of money deposited by the creditors, adequate enquiry had not been conducted by the Assessing Officer to doubt the claim made by the assessee.
Once the deposits were credited in the bank account of the assessee through banking channel, prima facie evidence existed of genuine transactions. In any case, the Assessing Officer was not successful in establishing that the money deposited by the creditors was not theirs but that it had been routed through the creditors by the assessee. In that regard, the Tribunal has categorically observed that there was no proof to establish that such money had been received by the creditors through cash deposits made by the assessee. Merely because the Directors of the two companies were common may have given rise to suspicion that the deposits received by the assessee company from the other, was bogus. Yet, the Tribunal has found, there is no material or evidence on record to establish that the creditors were shell companies. The observation made by the Assessing Officer in that regard is described as unfounded.
Besides the above, the Tribunal has taken note of the loan confirmation, Certificate of Incorporation, PAN registration, copy of the ITR, balance sheet, profit & loss account, bank statement of the creditors, to reach a conclusion that the transactions of deposit received by the assessee company were genuine. In face of such findings recorded by the Tribunal based on material and evidence on record, no question of law arises, as proposed.
Accordingly, the present appeal lacks merit and is dismissed.” 7.11 The Hon’ble High Court of Bombay while deciding the matter in the case of Principal Commissioner of Income-tax vs. Bairagra Builders (P.) Ltd. reported in 164 taxmann.com 162 (Bombay) held that “Where assessee had taken unsecured loan from two companies and had submitted all evidences to substantiate loan including confirmation from creditors and loan was taken and repaid through banking channels, Assessing Officer was not justified in treating said unsecured loan as fake and unexplained cash credit” 7.12 The High Court of Chhatisgarh while deciding the matter of lack of enquiry in the case of Commissioner Income Tax Bilaspur vs Shri Abdul Aziz held that: “19. In the case on hand, the CIT (A) has examined all the statements and depositions made by the creditors including their source of income and it was found that the A.O. without having any material on record, contrary to the statements and affidavits filed by the creditors taken a stand that the creditors 7 | P a g e have failed to prove their creditworthiness and, as such, the transaction was not genuine. The A.O. has not made any other independent enquiry to disprove the creditworthiness of the creditors, as established by affidavits, statements of the creditors disclosing source of income. Thus, the finding of the CIT (A) that the observation of the A.O. with regard to dissatisfaction was on the basis of surmises and conjectures, is just and proper. The I.T.A.T. has affirmed the finding recorded by the CIT (A) and, as such, there is no occasion for this Court to interfere with the finding of facts, which is based on proper appraisal of evidence and on the basis of sufficient records.
In view of foregoing, we are of the considered opinion that the findings recorded by the CIT (A) and affirmed by the I.T.A.T. are based on proper appreciation of facts and are not perverse, being correlated with each and every transaction. Thus, the issue is purely question of facts. No question of law, more so substantial questions of law, as aforestated, arise in the facts of the case.
As an upshot, the appeal, being bereft of merit, is liable to be and is hereby dismissed.” 7.13 There is no hesitation to state here that the facts and circumstances during the course of assessment proceedings was not prudently considered by the AO and made such addition u/s. 68 of the Act. Thus, in view of the above discussion and relying on the above judicial pronouncements(supra) and the decision of higher appellate authorities as reliance made by the appellant, the undersigned is of considered view that the unsecured loan obtained in preceding years cannot be added during the year under consideration as unexplained. Therefore, the addition made by the AO was not warranted in the case. Accordingly, such addition of Rs. 1,51,49,250/- made u/s. 68 of the Act is hereby deleted and Ground No. 3 is allowed.”
Suffice to say, it has come on record that the assessee’s impugned unsecured loans in fact represent the opening balance only as on 01.04.2021 which could not attract section 68 unexplained cash credits addition in light of various judicial precedents discussed in the CIT(A)/NFAC’s above extracted findings. That being the case, we hereby conclude that the 8 | P a g e Revenue’s instant first and foremost substantive grievance hardly carries any merit which stands rejected in very terms.
The Revenue’s second substantive ground seeking to revive section 41(1) assessment of liability addition of Rs.3,83,71,515/- is also found to be carrying no merit as the learned Assessing Officer had treated it as a case of deemed cessation than an actual one which forms a condition precedent as per their lordships landmark decision in CIT vs. Sugauli Sugar Works (P) Ltd. 236 ITR 518 (SC). We further make it clear that even the Revenue is fair enough before us during the course of hearing that the impugned addition has been made during the course of assessment for the sole reason that it represented outstanding liability for many preceding assessment years. Rejected accordingly.
The Revenue’s third substantive ground herein seeking to revive section 56(2)(vii)(a) addition of Rs.6 lakhs also meets same fate since the assessee has all along proved the same to have been received from Mr. Himanshi Yadav who happens to be his niece. The same is indeed coupled with the relevant gift