M/S BHAGIRATH DAIRY PRIVATE LIMITED,NAGAUR vs. ASSISTANT COMMISSIONER OF INCOME TAX,, NAGAUR

ORDER Dr Mitha Lal Meen, A.M.: This appeal is filed by the assessee, against the order of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “NFAC/CIT(A)”] dated 29/08/2025 with respect to the assessment year 2017-18 which is arising out of the assessment order dated 28/12/2019 passed under section 143(3) of the Income Tax Act, 1961 by Assistant Commissioner of Income Tax, Circle-Nagaur.

2. The appellant has raised the following grounds of appeal:

1. Under the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in passing the order u/s 143(3) which void ab-initio and the same deserves to be quashed.

2. Under the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in treating the unsecured loan from parties as unexplained cash credit and thereby making addition of Rs. 2,96,50,000/- by applying the provisions of Section 68. 3.Under the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in making addition of Rs. 8,56,000/- in respect of alleged unexplained transaction of receipts of money from Mohan Ram Choudhary and from Tulchi Devi by applying the provisions of Sec. 69 A.

3. The ground no. 1 of the appeal has not been pressed by the appellant assessee and accordingly the same is dismissed as not being pressed.

4. In ground no.2, the appellant has challenged the confirmation of the unsecured loan received from the parties as unexplained cash credit under section 68 of the act.

5. Briefly, the facts of the case are that the assessee company is deriving income from running a dairy. During the year under consideration, the Assessing SA No. 03/Jodh/2025 (In Assessment Year 2017-18 3 Officer (in short “the AO”) noticed deposits of Rs. 2,96,50,000/- in the names of various parties, some of them were related to the assessee company directly or indirectly. The AO being not satisfied with the explanation of the assesee, held them as not genuine and accordingly, the ld AO treated the amount of Rs. 2,96,50,000/- as unexplained cash credits under section 68 of the act and and added to the income of the assessee. In addition to the cash-credits, the AO has further made addition of Rs. 8,56,000/- u/s 69A of the by treating the deposit in the name of Sh. Mohan Ram Choudhary and Smt.Tulchi Devi of Rs. 5,00,000/- and Rs. 3,56,000/- respectively.

6. Being aggrieved with the assessment order, the assessee preferred an appeal before the ld CIT(A) who has reproduced the assessment order and endorsed the finding of the Assessing Officer in arbitrary manner by way of reproducing the assessment order in the impugned order on pages 2 to 59. It is seen that the Ld. CIT(A) has not even addressed the submission made by the assessee with respect to each cash creditor before him although the ld CIT(A) has reproduced the submissions of the appellant from page No. 60-80 of the SA No. 03/Jodh/2025 (In Assessment Year 2017-18 4 impugned order. While confirming the finding of the AO the Ld. CIT(A) merely observed that the parties did not attend in compliance to summon u/s 131; that the income shown by the depositors in their ITR do not commensurate with the amounts advanced to the assessee company; that the plea of keeping cash by persons having rural and agricultural background is not acceptable and that these loans were repaid in subsequent years.

“"In the case of the assessee, assessment has been completed on 28/12/2019 u/s 143(3). The Learned Assessing Officer has made additions of Rs. 2,96,50,000/- by treating the unsecured loans as unexplained u/s 68. The action of the Learned Assessing Officer was arbitrary. On further appeal, the Learned CIT(A) has also confirmed the action of the Learned Assessing Officer in a ritualistic manner. Both the Learned Assessing Officer and the Learned CIT(A) did not consider the submissions of the SA No. 03/Jodh/2025 (In Assessment Year 2017-18 5 assessee and the various evidences, which included copy of bank account, copy of return of income, copy of computation of income, confirmation etc etc. The details of unsecured loans treated unexplained are as under :-

Sr. Name PAN Total loans Addition obtained during made by the No. the year A.O.

1. Bhanwar Lal Choudhary ADQPL6825P 2550000 2550000 2. Jhamku Devi BLNPD7216C 3000000 3000000 3. Mohan Ram Choudhary ADSPC4690D 5100000 5100000 4. Bhagirath Choudhary ADKPC3504E 13000000 13000000 5. Piyush Kumar Biyani AMJPB1202G 500000 500000 6. Soni Devi BLNPD7215D 1500000 1500000 7. Surendra Singh Lora AOGPL6341H 1500000 1500000 8. Tulchi Devi AQJPD4671P 3000000 2500000 TOTAL 29650000 At the outset, it is submitted that the assessee company is engaged in the business of dairy and dairy products. The base of the company is rural, i.e in a village Jaton Ka Bas, PadampuraSargoth, Tehsil Kuchaman, Dist. Nagaur. It is submitted that in rural background, it is the entire family who is engaged and support the business of the family, although done in the name of a company. In view of this, the deposits are mainly from the family members, who are closely related. The money has come and gone in the company from family members and relatives of the director, Shri Bhagirath Ram Choudhary. In the assessment order as well as in the appellate order, this factor has been taken adversely and the Learned CIT(A) has commented that the cash-credits have been introduced in the names of relatives and are, therefore, not genuine. It is this SA No. 03/Jodh/2025 (In Assessment Year 2017-18 6 prejudicial approach by the Learned CIT(A) on account of which additions have been confirmed by him. Whereas the fact is that in rural villages, it is the family business and they put all their might and money for making it a success. It would be seen that despite best efforts, during the year under consideration, the assessee suffered losses and the return was filed declaring loss of Rs. 2,93,24,094/-. It is the submission of the assessee that the unsecured loans are required to be viewed in this context. All the unsecured loans are genuine and the persons who have advanced money to the assessee company are more or less engaged in dairy and agricultural activities and are closely or distantly related with the director of the assessee company.

Now the assessee discusses the facts in respect of each unsecured loan and also submits why the same was wrongly treated as unexplained and why the addition should be deleted.

In order to establish the genuineness of the unsecured loan in the case of Bhanwar Lal Choudhary, the assessee furnished the following documents :- (a) Copy of IT return for A.Y. 2010-11 to 2017-18. The fact of filing returns establishes the identity and capacity of the creditor. (b) Copy of bank account of Shri Bhanwarlal Choudhary reflecting that the transactions are through banking channel. This establishes that the transactions of loans are genuine. (c) Copy of ledger account reflecting that during the year under consideration, the assessee has obtained loan of Rs. 25,50,000/-. In addition to this, there is opening balance as on 1/4/2016 of Rs.42,00,000/-. It is the submission of the assessee that the opening balance of Rs. 42,00,000/- has remained undisturbed and stands accepted. Therefore, the capacity of the creditor to advance loan is SA No. 03/Jodh/2025 (In Assessment Year 2017-18 7 also established. In view of this vital fact that opening balance of Rs. 42,00,000/- , which was received by the assessee in A.Y. 2016-17 stands accepted by the Department. Therefore, there was no case left for treating the unsecured loan as unexplained. (d) The assessee also furnished copy of computation for A.Y. 2017-18 in the case of Shri Bhanwar Lal Choudhary, creditor. The perusal of the same discloses that the creditor derived income from salary from Bhagirath Dairy Pvt. Ltd. Income was also derived by plying of five trucks bearing No.RJ-37 GA-1701, RJ-37-GA-4438, RJ-37-GA-4818, RJ-37 GA-5491 and RJ-37-GA-5492. From plying of trucks, the creditor had declared profit u/s 44AE Rs.5,36,000/-. Similarly, the creditor has also disclosed income of Rs.1,74,580/- u/s 44 AD on business receipts of agricultural products. In response to notice u/s 131, the creditor had furnished a reply that he had advanced Rs.25,50,000/- out of his business receipts, both of plying of trucks and agricultural products. In view of all the aforesaid facts, it was amply proved that Shri Bhanwar Lal Chodhary was in a position to advance Rs.25,50,000/-. The unsecured loan in his name required to be accepted. Finding of the Learned Assessing Officer & the Learned CIT(A) It is submitted that the only ground on which the unsecured loan has been treated as unexplained by the Learned Assessing Officer and sustained by the Learned CIT(A) is that the bank account of the depositor disclosed that cash was deposited in the bank account immediately before advancing the same to the assessee. The Learned Assessing Officer has also mentioned that the assessee did not appear in response to notice u/s 131. Further, the Learned Assessing Officer has committed a blunder in appreciating the facts of the case. In his letter dated 10/11/2019, which has been reproduced by the Learned Assessing Officer on page 8 of the assessment order the depositor had mentioned that he was engaged in the business of agricultural products and out of gross receipts of Rs. 88,82,250/-, the amount of Rs. 25,50,000/- was advanced. The Learned Assessing Officer has wrongly interpreted this submission as the assessee was engaged in agricultural operations and did not furnish any evidence regarding ownership of land and production of agricultural produce etc. It is the submission of the assessee that the approach of the Learned Assessing Officer was misdirected and thereby he wrongly concluded that the SA No. 03/Jodh/2025 (In Assessment Year 2017-18 8 deposit was unexplained. The Learned CIT(A) also did not go through the facts in correct perspective. The submission of the assessee has been rejected mainly on the ground that the returned income was not commensurate with the unsecured loan. It has also been observed by the Learned CIT(A) that the loan being from close relatives are fabricated. In the view of the Learned CIT(A), there was no credible evidence for accepting the cash credit. Conclusion It is submitted that the Learned CIT(A) has ignored the vital facts that creditor has deposited Rs.42,00,000/- in the immediately preceding assessment year, which was appearing as opening balance as on 1/4/2016 and the same stands accepted by the Department. Similarly, in the computation of income for A.Y. 2017-18, the assesseehad disclosed ownership of five trucks and income from the same was also disclosed u/s 44 AE. Owing five trucks establishes the financial capacity of the creditor. It was also wrong on the part of the Learned CIT(A) to treat the credits as unexplained on the ground that cash was deposited in the bank account almost immediately before advancing the same to the assessee. In this regard, it is submitted that assesseehad quoted decision of Rajasthan High Court in the case of CIT Vs. HS Builders 78 DTR 169. In this case, the Hon'ble High Court had held that depositing of cash in the bank account of the creditor just before loan to the assessee would not lead to the conclusion that the money was deposited by the assessee. As regards, failure of the creditor to appear u/s 131, the assessee had quoted the decision of the Hon'ble Supreme Court in the case of CIT Vs. Orissa Corporation P. Ltd (159 ITR 78), wherein it has been held that when the Learned Assessing Officer failed to pursue the matter further on failure of non-compliance of summons u/s 131, no adverse inference could be drawn. Keeping all these facts in view, the deposit of Rs. 25,50,000/- deserves to be accepted. Copies of relevant documents, such as IT return, copy of bank account, copy of ledger account were furnished before the Learned CIT(A) as per paper book. These are available on fresh paper book being submitted before the Hon'ble ITAT on page No. 15-32.

(i) Copy of ledger account. (ii) Copies of acknowledgment of income tax returns and computation of total income for assessment year 2015-16 to 2017-18. (iii)Copies of bank accounts maintained by the assessee with Oriental Bank of Commerce, Kuchaman City, where the transactions are reflected. (iv)In response to summon u/s 131, the depositor has furnished a written reply before the Learned Assessing Officer on 5/7/2017, which has been reproduced in the assessment order on Page No.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 10 It is submitted that the main ground on which the loan amount has not been accepted by the Learned Assessing Officer as well as by the Learned CIT(A) is that the creditor had deposited cash in her bank account immediately before advancing the same to the assessee company. It has further been observed that income disclosed in the returns of income also did not justify the advance of Rs. 30,00,000/- given to the assessee. The Learned Assessing Officer has also rejected the claim of the depositor that she had received Rs. 25 lacs at the time of marriage, which was deposited in the bank account. In the view of the Learned Assessing Officer, keeping cash of Rs. 25 lacs at home for a long time was against human probabilities. The Learned CIT(A) has just upheld the action of the Learned Assessing Officer. Conclusion It is submitted that both the Learned Assessing Officer and the Learned CIT(A) have erred in not treating the loan of Rs. 30,00,000/- from Jhumki Devi as genuine. The action of the Learned Assessing Officer, which has been confirmed by the Learned CIT(A), is purely based on guesswork and surmises. Copies of returns of income of the depositor for A.Y. 2015-16 to 2017-18 have been furnished, which disclose that the assessee was having salary income as well as income from rural activities of selling milk, khad etc. The Learned Assessing Officer has simply disbelieved the facts submitted before him on assumption and presumption. Otherwise how could it be so that the entire loan amount of Rs. 30,00,000/- has been treated as unexplained. It is submitted that keeping in view the returns of income of the depositor, amount received during marriage of Rs 25 lacs , the depositor was in a position to advance a loan of Rs. 30,00,000/- to the assessee. Her identity is established by virtue of her filing returns of income. The transactions of loan stand established being through banking channels. The capacity of the depositor also stands proved. In view of these facts, the Hon'ble ITAT is humbly requested to accept the loan amount of Rs. 40 lacs advanced to the assessee. It is further submitted that in the case of HS Builders (78 CTR 169), The Hon'ble Rajasthan High Court has held that depositing cash in the account of the creditor just before giving loan to the assessee would not lead to the conclusion that money was deposited by the assessee. In view of this, both the Learned Assessing Officer as SA No. 03/Jodh/2025 (In Assessment Year 2017-18 11 well as Learned CIT(A) were not justified to treat the credit of Rs. 30,00,000/- as unexplained. The Learned CIT(A) had a wrong notion that amount being from relatives was not genuine whereas the contrary is truth that money normally comes from friends and relatives. More so is true in the case of the assessee, being of totally rural background. It is further submitted that in the rural background, transactions through bank are done under compulsion, otherwise cash is kept at home. Copies of relevant documents, such as IT return, copy of bank account, copy of ledger account were furnished before the Learned CIT(A) as per paper book. These are available on fresh paper book being submitted before the Hon'ble ITAT on page No.33-44.

4. Bhagirath Ram Choudhary ADKPC3504E Rs .13000000 The depositor, Shri Bhagirath Ram Choudhary, is Managing Director of the assessee company. In his individual capacity, he is also running a dairy in the same name Bhagirath Dairy, Asanpura, Kuchaman City. He has advanced Rs. 1,30,00,000/- to the assessee company (Rs. 99,00,000 as share capital and Rs. 31,00,000/- as loan). The major facts which are vital in explaining the deposits and the share capital produced and furnished both before the Learned Assessing Officer and the Learned CIT(A) are discussed as under :- (i) Copy of account. The perusal of the copy of account, which is available on Paper Book Page mentioned below, reveals that in the case of the depositor, there is opening balance of Rs. 30,00,000/-. This shows that in the immediately preceding assessment year, there was a deposit of Rs. 30,00,000/- of the depositor with the assessee and the same stands accepted. In the given circumstances, the capacity and the identity of the depositor stands proved beyond doubt. (ii) Copy of income tax returns from A.Y. 2011-12 to A.Y. 2017-18. The perusal of computation of income for the A.Y. 2017-18 reveals that the assessee was having capital of Rs. 1,17,28,767/-. The proprietorship business in the name of Bhagirath Dairy, Asanpura had turnover of Rs. 21,94,86,685/-. The return SA No. 03/Jodh/2025 (In Assessment Year 2017-18 15 for A.Y. 2017-18 was furnished disclosing income of Rs. 14,65,190/-. The books of accounts of the proprietorship business are audited. (iii) The copy of assessment order dated 11/12/2019 completed u/s 143(3) for A.Y. 2017-18 was also furnished. The Learned Assessing Officer has determined the income of the assessee at Rs. 18,53,670/- as against returned income of Rs.14,65,190/-. During the course of assessment proceedings, as mentioned in the assessment order, books of accounts consisting cash book, bank book, ledger were produced and were examined by the Learned Assessing Officer. It is relevant to submit that the amount deposited by the assessee and advanced to the assessee company were part and parcel of the assessment proceedings. The bank account of the assessee was scrutinized by the Learned Assessing Officer and no adverse inference was drawn. This establishes and proves beyond doubt that loan of Rs. 31,00,000/- and investment in share capital fo Rs. 99,00,000/- having been made through the bank account were also scrutinized and accepted. The Department, having accepted the facts of amounts deposited and transferred to the assessee company of Rs. 1,30,00,000/-, was precluded in taking a different stand of treating these amounts unexplained in the hands of the assessee company. When the amount is found explained in the hands of the depositor, how can the same be treated as unexplained in the hands of the assessee company. Therefore, the action of the Learned Assessing Officer as well as the Learned CIT(A) in treating the explained money of Rs. 1,30,00,000/- as unexplained is most unwarranted, uncalled for and unlawful. (iv) The depositor had bank account with Oriental Bank of Commerce, Kuchaman City and also with State Bank of India, Kuchaman City, Dt. Nagaur. The perusal of bank accounts with Oriental bank of Commerce reveals that the assessee has transferred Rs. 39,00,000/- on 30/03/2017 to the account of the assessee. As regards the source, the money in the Oriental Bank account has been received by way of transfer on 29/03/2017 amounting to Rs. 39,50,000/-. It may kindly be noted that there is no deposit of cash in the bank account immediately before transferring the amount to the account of the assessee. The account further reveals the financial capacity of the assesseeinasmuch as on 29/03/2017, there is receipt by way of transfer of Rs.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 16 55,00,000/- and on the same day, it has been transferred to some other account. Although the assessee is not concerned with this entryof Rs. 55,00,000/-, but all the same it establishes that the depositor was of good financial position. The perusal of account with State Bank of India also reveals that the assessee has transferred a major amount of Rs. 60,00,000/- on 29/03/2017 and on this very date, in the account of the depositor, an equal amount of Rs. 60,00,000/- has been credited by RTGS from Shri Harendra Choudhary. Again there is no cash deposit in the bank account of the depositor immediately before transferring amount to the account of the assessee. It is further submitted that in addition to money transferred to the account of the assessee, there are multiple transactions which strengthens the financial position of the depositor. These transactions are as under :- Date Amount (Dr) Amount (Cr) 24/5/2016 Rs. 4,00,000 Rs.4,00,000 04/08/2016 Rs.10,17,451 Rs.22,53,168 Rs.10,17,451 22/08/2016 Rs.25,00,000 Rs.25,00,000 06/02/2017 Rs.11,30,000 Rs.11,37,469 06/03/2017 Rs.11,90,000 Rs.4,84,179 Rs.6,49,393 29/03/2017 Rs.55,50,000 Rs.55,50,000 The above multiple transactions reveal that the depositor was enjoying good financial position and was in a capacity to advance money amounting to Rs. 1,30,00,000/- to the assessee company. Therefore, the source of the deposit stands fully explained. Finding of Learned Assessing Officer and Learned CIT(A)

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 17 The Learned Assessing Officer and the Learned CIT(A) have summarily rejected the submissions of the assessee without appreciating the facts stated therein. Both the Learned Assessing Officer and the Learned CIT(A) have observed that the depositor was not having funds and money has been transferred to the assessee by raising loans. It has further been observed that the scrutiny assessment completed u/s 143(3) also did not conclusively prove the depositor was having creditworthiness for advancing Rs. 1,30,00,000/-. In the above regard, it is submitted that the Learned Assessing Officer and the Learned CIT(A) have ignored the vital fact of the large scale dairy business conducted by the assessee in his individual capacity. The return of income for A.Y. 2017-18, which stands accepted u/s 143(3), disclosed voluminous turnover of Rs. 21,94,86,685/-. The Learned CIT(A) has acted against the settled principles of law that when in the scrutiny assessment, the capacity of the depositor has been accepted, then how could the same would be unacceptable when the same depositor has deposited amount with the assessee. Further, out of total loan amount of Rs. 1,30,00,000/-, the amount of Rs. 99,00,000/- has been advanced otherwise than by cash. Therefore, it was wrong to mention that amount advanced in cash did not prove the financial capacity of the depositor. In the facts and circumstances, it appears that the Learned Assessing Officer as well as the Learned CIT(A) have not accepted the deposit of Rs. 1,30,00,000/- in a casual manner. Conclusion The deposit in the name of Shri Bhagirath Ram Choudhary of Rs. 1,30,00,000/- deserves to be accepted keeping in view the fact that the depositor was an old one, there being opening balance of Rs. 30,00,000/- in the account of the depositor, the depositor was having dairy business in his individual capacity and was transacting money in several lacs as is evident from his bank accounts and lastly, the amount of Rs. 99,00,000/- out of total deposit of Rs. 1,30,00,000/- has been deposited through banking channels. It is further submitted that when the financial capacity and deposits with the assessee stand accepted in the individual assessment of the depositor, then SA No. 03/Jodh/2025 (In Assessment Year 2017-18 18 there was no case for treating the same as unexplained. The Hon'ble ITAT is humbly requested to kindly accept the deposit of Rs. 1,30,00,000/- as explained. Copies of relevant documents, such as IT return, copy of bank account, copy of ledger account , cash flow statement etc. were furnished before the Learned CIT(A) as per paper book. These are available on fresh paper book being submitted before the Hon'ble ITAT on page No.86-143.

7. Surendra Singh Lora AOGPL6341H Rs. 1500000 Shri Surender Singh has deposited a sum of Rs. 15,00,000/- on 04/06/2016. He has withdrawn Rs. 5,00,000/- on 16/7/2016. Thus, there is balance of Rs. 10,00,000/- only as on 31/3/2017. It is submitted that the Courts have held that where the money has been returned, the genuineness of the deposit is proved. It is submitted that in the case of the depositor the amount has come from Oriental Bank of Commerce. The depositor has also been filing returns of income for the last so many years. Copies of acknowledgment of returns for A.Y. 2015-16 to A.Y. 2017-18 were filed before the Learned Assessing Officer as well as before the Learned CIT(A). The perusal of computation of income for A.Y. 2017-18 reveals that the depositor has been deriving salary income from the assessee company as well as was doing his own business of dairy. Considering all these facts, the deposit in the case of the depositor required to be accepted. During the course of assessment proceedings, in response to summons u/s 131, the assessee furnished a written submission on 10/11/2019, which is reproduced in the assessment order on Page 33. In this reply, the depositor had confirmed the loan amount out of his income from agriculture and salary. The assessee also furnished balance sheet disclosing capital of Rs. 33,65,401/-. In these circumstances, the loan amount deserved to be accepted. However, the Learned Assessing Officer as well as the Learned CIT(A) have not accepted the same simply on one and the same ground that the loan amount has come out of cash deposited in the bank account immediately before advancing the same to the assessee. In this regard, the assessee seeks support from the decision of Hon'ble Rajasthan High Court (78 DTR 169 (Raj), wherein the Hon'ble Rajasthan High Court has held that depositing of cash in the bank account of the depositor immediately before transferring the amount as loan to the assessee would not lead that the cash was deposited by the assessee. Keeping the decision in view, the Hon'ble ITAT is requested to accept the loan as genuine.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 21 Copies of relevant documents, such as IT return, copy of bank account, copy of ledger account were furnished before the Learned CIT(A) as per paper book. These are available on fresh paper book being submitted before the Hon'ble ITAT on page No. 158-166.

8. Tulchi Devi AQJPD4671P Rs. 2500000 The Learned Assessing Officer has made addition of Rs. 25,00,000/- on the ground that there is deposit of this amount in the account of the depositor in the books of assessee company. In the account of the depositor, there is opening balance of Rs. 48,00,000/-, which stood accepted in the earlier year. Keeping this fact in view alone, the financial capacity of the depositor stands proved. This fact was not taken into consideration by the Learned Assessing Officer or by the Learned CIT(A). It is further submitted that the depositor has been filing returns of income. Copies of acknowledgement of returns for A.Y. 2010-11 to 2017-18 were furnished before the Learned Assessing Officer as well as before the Learned CIT(A). The assessee has declared income of Rs. 11,39,066/- in A.Y. 2016-17 and Rs. 8,30,072/- in A.Y. 2017-18. The assessee had following sources of income :-

(i) Salary income from the assessee Rs, 71,389/- company (ii) Income from dairy business in Rs.4,79,050/- individual capacity ; (iii) Interest on FDR Rs.2,43,636/- SA No. 03/Jodh/2025 (In Assessment Year 2017-18 22 Besides the above, Smt. Tulchi Devi is also owner of fertile agriculture land of 29 bigha in Village Sargoth. Copy of purchase deed as well as khasragirdawari is available on paper book page no. 167 to 184. It is further submitted that during the course of assessment proceedings, in response to summon u/s 131, the depositor had furnished a written reply, stating that her capital was of Rs. 2,45,55,802/-, which included bank FDRs, jewellery, land etc. Reply of the depositor dated 10/11/2019 has been reproduced by the Learned Assessing Officer in the assessment order on Page 37. All the above facts prove beyond doubt that Smt. Tulchi Devi was a lady of means. Therefore, the deposit in her name required to be accepted.

Findings of the Learned Assessing Officer & Learned CIT(A)

It is submitted that both the Learned Assessing Officer as well as the Learned CIT(A) have treated the deposits in almost all the accounts on similar grounds that the account of the depositor has been used as a conduit to introduce own money by the assessee and the second ground used is that cash has been deposited in the bank account of the deposited immediately before transferring to the account of the assessee company. The Learned Assessing Officer and the Learned CIT(A) have failed to appreciate the background of the assessee company that it is located and conducting business in a rural place and the business is also of dairy closely connected with farmers and rural persons. Keeping this fact in view, the transactions in cash are not something surprising because in rural areas, in those times in A.Y. 2017-18, the villagers kept the amount in cash and did not had adequate banking facilities, operating all the 24 hours of the day. In the business of dairy, cash is required to meet out the demands of the farmers and others. So, the depositors had kept cash at their homes and when the assessee company required, the same was advanced by depositing in the respective bank accounts. Had this fact been taken in correct perspective, the deposits would have been accepted. It is further submitted that the Learned Assessing Officer and the Learned CIT(A) have treated all the SA No. 03/Jodh/2025 (In Assessment Year 2017-18 23 deposits with the same yardstick, ignoring the individual facts and circumstances of the depositor, particularly the deposits in the case of (i) Bhanwarlal (Rs.25,50,000) (ii) Mohan Ram (51,00,000), Bhagirath Ram Choudhary (Rs.1,30,00,000) and (iv) Tulchi Devi (Rs.25,00,000), totaling to Rs.2,31,50,000/- could not have been treated as unexplained. The other depositors are of very small amount and required to be accepted as well. The Hon'ble I:TAT is humbly requested to delete the additons made by the Learned Assessing Officer and sustained by the Learned CIT(A). Copies of relevant documents, such as IT return, copy of bank account, copy of ledger account , ledger account of share application, ledger account of share capital etc. were furnished before the Learned CIT(A) as per paper book. These are available on fresh paper book being submitted before the Hon'ble ITAT on page No.167-204. Further the confirmation of all the depositors are also available on Paper Book Page No. 205-212.

CASE-LAW IN SUPPORT OF THE SUBMISSIONS The assessee further quotes the following case-law in support of the submissions made above. The ratio of these case law is fully applicable to the facts of the case.

(i) CIT vs Orissa Corporation (P) Ltd (159 ITR 78) (SC) It was held that the assessee had given names and addresses of the alleged creditors, which were income tax assessees, their index nos. were also in the file of the Revenue, however, Revenue after issuing notices u/s 131 did not pursue the matter further and examined the source of income of the alleged creditors. There was no effort made to pursue the so calledalleged creditors. In these circumstances, Supreme Court held that no addition could be made. The assessee had discharged the burden laid upon it.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 24 (ii) CIT Vs. Chandela Trading Corporation Pvt Ltd (2015) 372 ITR 232 (Kolkata High Court) Mere omission on the part of the creditors to subject themselves to the enquiry by the revenue or their failure to furnish accounts would not lead to the conclusion that the creditors were bogus (iii) CIT vs. H.S. Builders 78 DTR 169 (Rajasthan High Court) Deposit of cash in the account of creditors just before giving loan to the assessee would not lead to the conclusion that the money was deposited by the assessee. (iv) Aravali Trading Co. V/s ITO 25-1-2007 (2008) 8 DTR (Raj) 199 Once the existence of the creditors is proved and such person own the credits which are found in the books of the assessee, the assessee's onus stand discharged and the later is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of section 68 or on general principle. (v) Kanahiya Lal jangid V/s CIT (2008) 217 CTR 354 (Rajasthan high court) In the case of cash credits confirmation and existence of the credit is enough.

(vi) CIT V. Heera Lal Chagan Lal 257 ITR 281(Raj.) It has been held that where the identity of the creditor is established and the creditor has confirmed the loan, addition can’t be made. (vii) CIT vs. Chandra Prakash Rana 48 DTR 271 (VIII)CIT vs. Jai Kumar Bakliwal 101 DTR 377 Once the amount was advanced by the creditors by account payee cheques from their respective bank accounts and the creditors were being assessed to income tax, the capacity of the creditor and the genuineness of the transaction stood proved. Addition u/s 68 was not sustainable.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 25 (IX) Mangilal Agarwal Vs. ACIT reported in 300 ITR 372 (Rajasthan High Court) It was held that where the assessee points out a depositor from whom he has received money and if the depositor owns advancement of the money to the assessee, further enquiry into the source cannot result in invoking the provisions of section 68 of the Income Tax Act, 1961. It was held that once the creditor is proved to exist and he admits having lent money to the assessee, the money cannot be considered as income of the assessee unless the revenue establishes by some evidence that it clearly flowed directly from assessee himself. In this regard our submission is that when the assessee has submitted the PAN, copy of confirmation, copy of income tax returns, copy of bank statements, etc. and especially when the loans were repaid in subsequent years, there is no basis to allege that transaction is not genuine. The Jurisdictional Rajasthan High Court has specifically laid down in the case of Aravali Trading Co. V/s ITO 25-1-2007 (2008) 8 DTR (Raj) 199 that once the existence of the creditors is proved and such person own the credits which are found in the books of the assessee, the assessee's onus stand discharged and the later is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of section 68 or on general principle.

Ground No.3 Under the facts and circumstances of the case, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in making addition of Rs. 8,56,000/- in respect of alleged unexplained transaction of receipts of money from Mohan Ram Choudhary and from Tulchi Devi by applying the provisions of Sec. 69 A. It is submitted that the learned AO in para 20 of the assessment order mentioned that Shri Mohan Ram Choudhary has deposited Rs. 5,00,000/- on 04.04.2016 and transferred to M/s Bhagirath Dairy on 25.04.2016 which he has added by applying the provisions of section 69A of the Income Tax Act, 1961.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 26 Similarly the learned AO has also mentioned in the same para that Smt. Tulchi Devi has also deposited Rs. 2,43,400/- on 07.04.2016 and thereafter she transferred Rs. 3,56,000/- to the assessee company and same is not reflected in the confirmation filed by the assessee as well as in the books of accounts of the assessee company. Therefore the learned AO added this amount also by applying the provisions of section 69A of the IT Act 1961. The facts of these entries are that these are pertaining to share application money received by the assessee company. The same was also shown in the assessee’s books. During the year assessee company has received share application money of Rs. 54,06,000/- from the various persons which also included of Rs. 3,56,000/- received from Smt. Tulchi Devi and Rs. 5,00,000/- from Shri Mohan Ram Choudhary on 25.04.2016. Copy of ledger account is available on paper book page no. 203 in which cheque number are also available. The total share application money of Rs. 54,06,000/- was transferred in share capital account. Copy of share capital account is available on paper book page no.

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 27 It is submitted that the assessee is not found to be owner of any money, bullion, jewellery or valuable article. The book entries/entries in the bank account cannot be equated with money found. Therefore, the Learned Assessing Officer was not justified in applying the provisions of Sec. 69A. The addition made by the Learned Assessing Officer and sustained by the Learned CIT(A) deserves to be deleted."

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 29 10.1 In the case of one of the creditors, Sh.Bhanwar Lal Choudhary, PAN: ADQPL6825P, an addition of Rs.25,50,000/- is made by the AO,bytreating the same as unexplained on the grounds that he did not appear in response to summons u/s 131; that the depositor did not furnish evidence of ownership of land; that the loan was from a close relative and that the return of income was not commensurate with the amount of deposit. The appellant has submitted that the depositor has been filing return of income from Assessment Year 2010-11 to 2017-18; that copy of acknowledgment of filing returns have been filed; that the loan has been advanced through banking channels; that the Copy of bank account maintained with State Bank of India Account No. 61070941021 has been filed and that the assessee was also having opening balance of Rs.42,00,000/- in the account of the depositor, which stood accepted by the Revenue in the previous Years. The depositor was also having income from plying five trucks No.RJ-37 GA- 1701, RJ-37-GA-4438, RJ-37-GA-4818, RJ-37 GA-5491 and RJ-37-GA-5492 besides agricultural income. It seems that Assessing Officer had an imaginary impression about the depositor that he had agricultural land, but no evidence was furnished regarding agricultural produce. We find that the depositor, Sh. Bhanwar Lal SA No. 03/Jodh/2025 (In Assessment Year 2017-18 30 Choudhary, in fact, has been filing returns of income for a pretty long period, wherein he has income from plying of 5 trucks and agricultural produce with the gross receipts of Rs. 88,82,250/- annually. Since there was an opening balance of Rs. 42,00,000/-, which itself substantiates the source of the deposit of Rs. 25,50,000/- as genuine and thus, same stands explained. 10.2 In the case of Smt. Jhumki Devi, PAN: BLNPD7216C, an amount of Rs. 30,00,000/- was treated by the AO as unexplained ignoring the documentary evidence filed on record that the creditor has been filing returns of income since Assessment Year 2010-11 onwards, disclosing income from sale of dairy products and salary and she had filed the Copies of IT returns along with copy of bank account. The depositor was having opening balance of Rs. 5,00,000/- with the assessee. Meaning thereby, the identity of the depositor, the genuineness of transaction stands proved beyond doubt. It was also pleaded that in her marriage, which occurred 15 years back, she was in receipt of "streedhan" amounting to Rs. 25 lacs. It has been vehemently pleaded that in the area dominated by Jat community, giving dowry in the marriage of daughters is considered as a matter of pride and status. Day in and day out, there are reports SA No. 03/Jodh/2025 (In Assessment Year 2017-18 31 in the news papers regarding heavy dowry in marriages in this area. Therefore, receipt of dowry around Rs. 25 lacs cannot be treated as improbability. It was also submitted that keeping cash in the rural areas is not something unbelievable, particularly when the person is engaged in the line of dairy and agriculture. In the totality of facts , the deposit of Rs. 30,00,000/- in the name of Jhumki Devi stands explained. Needless to mention that the submission of the assessee stands supported by the decision of Rajasthan High Court in the case of HS Builders (78 CTR 169), wherein the Hon'ble High Court held that depositing of cash in the bank account just before giving loan alone cannot lead to the conclusion that the money belongs to the assessee.

10.3 Similarly, Sh. Mohan Ram Choudhary, PAN:ADSPC4690D, the AO has treated an amount of Rs. 51,00,000/- as not genuine, even though he owned agricultural land, and proved carrying out of agricultural activities. With regards to the genuineness of the deposit in the name of Shri Mohan Ram Choudhary, the Ld. AR explained as under:

SA No. 03/Jodh/2025 (In Assessment Year 2017-18 32 a) That he is son of Sh. Bhagirath Ram Choudhary, the director of the assessee company. b) That the depositor was having assets worth Rs. 50,60,308/- on which depreciation has been claimed as he was also running a dairy in his proprietorship concern. c) That the depositor has also been filing returns of income since Assessment year 2010-11 onwards. d) That in the bank account of the assessee there was deposit of Rs. 55,00,000/- by way of transfer on 29/3/2017 and out of which he has advanced part deposits to the appellant company. Therefore, it was factually incorrect on the part of the AO to mention that deposit was made from cash deposited in the bank account on the same day. e) Further, the assessee was also having opening balance of Rs. 5,00,000/- in the account of the depositor. It is relevant to mention here that the observation of the ld CIT(A) that when there was purchase of agricultural land, no agricultural income was disclosed is factually incorrect. In this regard, assessee has furnished copy of purchase deed of agricultural land dated 24/2/2020, which is much later than the assessment year 2017-18, which is under consideration. Copy of purchase deed has been SA No. 03/Jodh/2025 (In Assessment Year 2017-18 33 placed on record for reference (Paper Book Page No. 80-85). All the observation of the Assessing Officer and the ld CIT(A) are factually incorrect, in treating the deposit as unexplained, and without appreciation of the correct facts. Thus, the factual explanation furnished by the appellant assessee duly established the identity of the depositor, the creditworthiness and the genuineness of the transaction and accordingly, this deposit stands explained.

10.4 Similarly, Sh. Bhagirath Choudhary, PAN: ADKPC3504E, the AO has treated an amount of Rs. 1,30,00,000/- as not genuine, even though the said depositor is the main director of the assessee company. The appellant has submitted that in his own individual case, scrutiny was carried out u/s 143(3) for the same assessment year 2017-18 , in which loans have been advanced to the assessee company. The scrutiny assessment u/s 143(3) has been completed on 11/12/2019, determining income at Rs. 18,53,670/- as against returned income of Rs. 14,65,190/-. The loans to the company stood disclosed in the Balance sheet and there were no adverse comment made by the AO in the assessment order of the said depositor for the very same assessment year. Further, the assessee was SA No. 03/Jodh/2025 (In Assessment Year 2017-18 34 having opening balance of Rs. 13,00,000/- in the account of the depositor, which also establishes that the depositor was having capacity to advance loan. It is seen that this depositor has also business in his proprietorship name, Bhagirath Dairy, Asanpura, having turnover of Rs. 21,94,86,685/-. The disputed amount of loan has been advanced to the assessee through banking channel and even there was no deposit of cash before transferring of money to the assessee company. The assessee has also furnished bank account of the depositor where there are multiple transactions in the bank account of the depositor, to establish his individual financial status. Considering the facts in totality, in our view, the AO and ld CIT(A) were not justified in treating the said deposit in the name of Bhagirath Ram Choudhary as unexplained. The said deposit is thus treated as explained.

10.5 The other such cases of depositors are listed in tabular form as under:

5 Piyush Kumar Biyani AMJPB1202G 500000 6 Soni Devi BLNPD7215D 1500000 7 Surendra Singh Lora AOGPL6341H 1500 SA No. 03/Jodh/2025 (In Assessment Year 2017-18 35 8 Tulchi Devi AQJPD4671P 2500000 In the aforesaid cases of creditors/depositors, the addition was made by the AO and sustained by the ld CIT(A) mainly on the ground that in the bank account, cash was deposited immediately before advancing the amount to the assessee company. It is seen that both these authorities have ignored the facts of the individual depositor and the decision given by the Hon'ble Rajasthan High Court in the case of HS Builders (78 DTR 169), wherein the Court has held that depositing of cash in the bank account immediately before transferring the amount as loan alone cannot be a ground for treating the same as unexplained.

10.5.1 In the case of Piyush Kumar Bihani, it has been submitted that assessee is income taxpayer and was deriving income from salary. The deposit is of a small amount of Rs. 5 lac only. Similarly in the case of Smt. Soni Devi, the deposit is Rs. 15 lacs. In her case also, copy of income tax returns have been filed, which disclose that she was deriving income from the business of milk and livestock. In the case of Shri Surendra Singh, the deposit is Rs. 15 lacs. He has also been deriving income from salary and business of dairy. The basic fact ignored by SA No. 03/Jodh/2025 (In Assessment Year 2017-18 36 the AO and the Ld. CIT (A) which can be noticed in the common man’s knowledge that in the rural villages, dairy and agriculture are the main sources of income. Further, these depositors have also been filing IT returns from 2011-12 to 2017- 18. In the case of Tulchi Devi also, there are similar facts that there was deposit in her name of Rs. 25 lacs. She has also been filing returns of income from Assessment year 2010-11 onwards. She is owner of agricultural land of 29 bighas, which is quite fertile and has been enjoying agricultural income. She was having capital of Rs. 2,45,55,802/-. Further, the assessee was having opening balance of Rs. 48,00,000/- in the name of the depositor, which already stood accepted. Thus, the capacity of the depositor stands proved. She is income tax payer, thus her identity stands proved. Further, the transactions are through banking channels as such the genuineness of transactions also stands proved. Thus, the deposit of Rs. 25 lacs in the name of Smt. Tulchi Devi stands unexplained and the said addition is deleted.

13.1 It is noted that the AO has made an addition of Rs. 5,00,000/- and Rs. 3,56,000/- totaling to Rs. 8,56,000/- under section 69A of the Act by observing that Shri Mohan Ram Choudhary had deposited Rs. 5,00,000/- on 4/4/2016 and transferred it to the assessee company on 25/4/2016 and Smt. Tulchi Devi had deposited Rs. 2,43,400/- and thereafter she transferred to the assessee, but these are not reflected in the confirmation filed by the appellant which has been confirmed by the ld. CIT(A).

13.2 The appellant has submitted that these entries pertain to share application money received by the appellant from Shri Mohan Ram Choudhary and Smt. Tulchi Devi and the same stands disclosed in the assessee's books. During the year, the appellant company received share application money from various persons, which includes the aforesaid sums received from Sh. Mohan Ram SA No. 03/Jodh/2025 (In Assessment Year 2017-18 39 Choudhary and Smt. Tulchi Devi. The appellant has furnished the Copy of their ledger account on Paper book Page No. 203 & 204, where cheques number are also available. It is seen that the AO did not consider the submissions of the assessee and made the addition u/s 69A, though the said provisions of the act are not applicable to the facts of the present case. The AR for the assessee stated that both the share holders are assessed to income tax and copy of their ledger accounts have been filed. It is also stated that provisions of Sec. 69 A were not applicable as the assessee is not found to be any owner of any money, bullion, jewellery or valuable article of thing.

13.3 Considering the factual matrix of the case, we hold that the addition of Rs. 8,56,000/- made u/s 69 A is unwarranted and accordingly, it is directed to be deleted. Thus, ground no. 3 of the appeal is allowed.

14. In the last ground, the assessee has requested to add, amend or alter any ground of appeal. Since no grounds has been added, altered or amended, this ground is only a general ground, which the appellant has not pressed. The same is accordingly rejected.