INCOME TAX OFFICER, CHANDIGARH vs. SANBIR SINGH, CHANDIGARH

आदेश/ORDER

PER A.D.JAIN, VICE PRESIDENT

This is an appeal filed by the Revenue and Cross Objections by the assessee against the order of ld.

ITA 455/CHD/2023

The Revenue has raised the following grounds of appeal :

“1. Whether the Ld. CIT(A) has erred on facts and in law by allowing the appeal of the assessee without appreciating the facts of the case.

2. Whether the Ld. CIT(A) had erred on both facts and in law by allowing the claim of the assessee by setting aside the findings of the AO.

3. Whether on facts and circumstances, the Ld CIT(A) is justified by considering evidence in large during the course of appellate proceedings, as the same were perused and were not considered in the assessment order, as result of which an addition of Rs. 1,30,00,000/- has been deleted.

4. It is prayed that the order of the Ld CIT(A) be revoked and that of the Assessing Officer may be restored.

2. Ground Nos. 1 & 2 are general.

3. As per Ground No.3, the ld. CIT(A) is not justified in considering the evidence produced by the assessee, since the same was perused, but was not considered in the assessment order and that therefore, the ld. CIT(A) has erred in deleting the addition of Rs.1,30,00,000/- correctly made by the AO.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 3 in AY 2018-19 and the same was not reported in the ITR filed for AY 2018-19 on 16.07.2018, declaring income of Rs.10,45,270/-. The AO issued a Show Cause Notice to the appellant on 15.03.2022, but the same was not complied with. The AO recorded reasons in writing and obtained approval of the PCIT-1, Chandigarh and issued notice under Section 148 of the Income Tax Act to appellant. The AO issued notice under Section 133(6) to Shri Sanjit S Randhawa, who filed reply on 23.03.2023. The Appellant explained that this loan advanced of Rs. 1,30,00,000/- was sourced from the following :- i) Smt. Amarjit kaur - Loan of Rs.40,00,000/-. Copy of bank account of said party was filed. ii) Sh. Sangram Singh - Loan of Rs.35,00,000/- and Shri Gaganpreet Singh-Loan of Rs.5,00,000/- iii) Amount of 55,00,000/- was paid from overdraft facility 4.1 The appellant contended that this amount was advanced, as the appellant had agreed to enter into partnership with Shri Sanjit S Randhawa for carrying out business of mining as per MOU dated 07.04.2017. The sources of the funds were explained as under :

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 4 i) Rs.40,00,000/- from Shri Sangram Singh & Shri Gaganpreet Singh; ii) Rs.50,00,000/- taken Over Draft from HDFC Bank (A/c No. 50200007892212) iii) Rs.40,00,000/- from Smt. Amarjit Kaur, Grandmother of the appellant

The AO stated that vide written submission dated 14.03.2023, the appellant reaffirmed the loans of Rs. 40 lac from Amarjit Kaur and Rs.35 lac from Shri Sangram Singh, but did not explain about the the remaining amount. The appellant just stated that he had two OD facilities of Rs.50 lac and Rs.200 lac with HDFC bank.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 5 8. The ld. DR has contended that the ld. CIT(A) has erred in deleting the addition correctly made by the AO, while wrongly accepting the evidence produced by the assessee, which evidence was rightly rejected by the AO.

Rs. 40 lacs loan from Smt. Amarjit Kaur 10.1 Apropos the loan of Rs.40 lacs from Smt. Amarjit Kaur, the AO Show Caused the assessee-appellant that ITR of Amarjit Kaur was not filed to show that she earned Agricultural income in past. Her bank account shows a small opening balance of Rs.54,248/-. At the end of the period the closing balance was Rs.2,87,825/-. This shows that the loan given is not from own source. In reply, the appellant stated that Smt. Amarjit Kaur is grandmother of the appellant and ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 6 loan of Rs.40 lacs was not sourced from her agricultural income. This loan was given on 14.06.2017 by using her OD facility with Kotak Mahindra Bank.

10.2 The AO held that the above documents do not prove the identity and creditworthiness of Smt. Amarjit Kaur and the genuineness of transaction. Thus, the sum of Rs.40 lac was added under Section 68 r.w.s. 115 BBE of Act.

“7.3 Finding of Grounds of Appeal No. 6 to 9:- Addition made of Rs.1,30,00,000/- u/s. 68 of Act. a) Addition of Rs.40,00,000/- u/s 68 i) Appellant stated that he received Rs.40,00,000/- from Amarjit Kaur, (grandmother of Appellant) on 14.06.2017. Appellant used these funds to advance Rs.40,00,000/- to Sanjit S Randhawa on 14.06.2017. Source of said funds was from the OD facility jointly held by Appellant and Amarjit Kaur in Kotak Mahindra Bank vide A/c No. 565044015115. ii) In support the Appellant filed bank statement copy and (affidavit of Amarjit Kaur before the AO vide submission dated 09.02.2023. iii) Appellant returned the said sum to Amarjit Kaur as under:- Rs.35,00,000/- on 23.08.2017 from the HDFC Bank a/c. Rs.3,00,000/- on 10.01.2018 from his HDFC Bank a/c.

In addition an amount of Rs.4,98,000/- was also given to Amarjit Kaur on 10.05.2017. iv) In On In the affidavit and bank statement filed, Smt. Amarjit Kaur has clearly stated that these funds are advanced to Appellant from OD facility with Kotak Mahindra Bank vide Account no. 565044015115. (v ) On the other hand the AO in assessment order has stated that Smt. Amarjit Kaur has given Rs.40,00,000/- to Appellant out of her Agricultural Income and ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 7 no documentary evidence was filed. Appellant contended that he has never ever mentioned in his reply that Amarjjt Kaur has given these funds to him out of her Agricultural Income. This shows that AO has not duly considered the replies filed, affidavit of Amarjit Kaur and bank statement before making the said addition u/s 68 of Act. vi) Appellant contended that evidences such as bank statement, OD facility, Affidavit of Amarjit Kaur etc. were discussed during video conference also and AO did not rebut the same nor was any further query made by him. vii) Appellant is a Co-borrower in the said OD facility with Kotak Mahindra Bank and funds of Rs.40,00,000/- were received from the said joint Account of OD facility with Kotak Mahindra Bank. It is jointly in names of Appellant and Smt. Amarjit Kaur. viii) The above facts clearly show that Appellant has discharged the onus cast on him of proving the identity and creditworthiness of creditor and genuineness of transaction. Even the source of funds of Rs.40,00,000/- was explained before the AO. ………………

7.5 a) The AO while considering the explanation filed by appellant and evidences filed has to act reasonably and his satisfaction that a particular transaction is not genuine must be based on relevant factors and on a just and reasonable enquiry. The word "may" used in section 68 gives discretion to AO to treat a particular sum as income or not. Once the documentary evidences with explanation is provided to the AO hence, the question of addition should not arise. b) The AO while exercising his powers u/s 68 is not vested with unfettered powers to reject an explanation as being not to his satisfaction without any substantial reasoning. AO has to act reasonably while framing satisfactory opinion surrounding the explanation offered by Appellant. ………………. (e) No addition u/s 68 can be made if Appellant proves the identity and creditworthiness of lenders from whom majority of funds were received and genuineness of transaction. ………………. 7.6 a) The AO has not pointed out any evidence to show that these parties were entry providers or shell companies used to giving accommodation entries. Neither the name of the appellant nor the names of the two parties from whom

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 8 amounts have been taken appear in any list of accommodation entry Providers and Shell Companies involved in financial manipulation or providing accommodation entries. b) The facts outlined in para 7.3 above show that the appellant has duly discharged the onus cast on it to prove the identity, creditworthiness and genuineness of transactions in respect of these two parties. The notices issued u/s 133(6) by the AO were complied with and the confirmation were filed by these parties. ……………………. ……………………. (e) It is trite law that creditworthiness of a depositor can't be solely^ assessed on the basis of its present income but it depends upon the means of finance held by it. In other words it depends upon the wealth i.e. net worth of the depositor. It is observed that the AO's inference that the two parties were not creditworthy on the ground that these two parties had shown low income has no force in as much as the capacity to invest funds by an investor depends upon the availability of funds with the investors and not on the tax paid/annual income of the investor. ……………………. f) The intention of law is that unaccounted money should be brought to tax. As per provisions of section 68 of the Act onus is on the person in whose books of account such money has surfaced. If an amount has surfaced in the books of an assessee either in the shape of share application money or a deposit/loan; it is presumed that such money belongs to the person in whose name it has been shown. However, as per provisions of section 68 of the Act, deeming provisions postulates that it is possible that the assessee may circulate its own unaccounted money in the shape of bogus persons and therefore legal onus has been created. What is relevant is the identity, creditworthiness of the depositor and genuineness of the transaction. All these three conditions have been established and onus of the assessee/appellant has been discharged u/s 68 of the Act. The appellant has amply proved and discharged its burden by filing the necessary relevant documentary evidences in support of unsecured loans raised during the year. The AO in the assessment order has held that the amount of Rs. 1,30,00,000/- is held to be appellant's income and was added u/s 68 of the Act. This is a bald assertion by the AO. The AO has to be bridge the gap between suspicion and proof to bring home the allegation. There was neither direct nor circumstantial evidence on record to show that the said loan amount actually belonged to or were owned by the appellant. No material has been placed by the AO to allege that such sums/funds raised by the appellant was from the coffers of the appellant.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 9 In Income Tax Officer Vs. Jaidka Woolen & Hosiery Mills Pvt. Ltd. ITA.No.5302/Del./2015 the Hon'ble ITAT Delhi held that there was no evidence to show that money actually emanated from the coffers of the assessee-company so as to be treated as undisclosed income. Additionally, if the loan taken by the assessee has been repaid to the creditor, then no addition is allowed, even though such transactions are done to square off the entries entered earlier. 7.7 It is now a settled law that initial onus is upon the assessee and if no explanation is given or the explanation given is not satisfactory, the AO can disbelieve the alleged credit transaction. But the law is equally settled that if the initial burden is discharged by assessee by producing sufficient materials in support of credit transactions, the onus shifts upon the AO and after verification he can call for further explanation from assessee. In this process the onus may again shift from AO to assessee. Appellant filed complete details about the transactions before the AO. Identity of Investors is established and all payments are through account payee cheques. There is no evidence to show that transactions are not genuine or that these entries were accommodation entries. There is no finding of AO that documents filed by appellant are untrustworthy or lacked creditability. There is no link between the suspicion and evidence. 7.8 a) It has been held that when the loans received by assessee were bogus then there is no question of repayment of the said loans and if the loans received are from assessee's own income then there is no question of repaying them to lender companies. In the present case, the appellant has repaid the loans to Amarjeet Kaur, Sangram Singh and Gaganpreet Singh as outlined in para 7.3(a)(iii) and 7.3(b)(ii) of this order. This is clinching factual evidence, Once the repayment of loans is established then credit entries cannot be (poked in isolation by ignoring the debit entries of repayment of loans in same FY or subsequent FY. …………………….. Respectfully following the above judgements it is clearly held that genuineness of transaction stands proved in view of repayment of loan in same or subsequent FY. In the present case, the loans of Amarjeet Kaur, Sangram Singh ad Gaganpreet Singh have been repaid back by Appellant as outlined in para 7.3(a)(iii) and 7.3(b)(ii) of this order. 7.9. In view of the above facts and discussion and respectfully following the judgments outlined in para 7.3 to 7.8 of this order it is hereby held that the addition made by AO of Rs.1,30,00,000/- u/s. 68 of Act is not sustainable in the eyes of law and same is hereby deleted. Grounds of Appeal No. 6 to 9 are allowed.”

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 10 12. It is seen that in his reply dated 06.02.2023/09.02.2023, the assessee submitted before the AO that Shri Sanbir Singh received Rs.40 lacs from Smt.

Amarjit Kaur, his grandmother, in HDFC Bank Account No.50200007892212, which amount was subsequently given to M/s Rajbir Enterprises.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 11 mentioned that Smt. Amarjit Kaur had given the amount of Rs.40 lacs to the assessee by using her over draft facility of Kotak Mahindra Account No.565044015115, and not from any agricultural income; and that the assessee had returned the amount to her, as mentioned in the reply. For ready reference, the relevant portion of the said reply dated 14.03.2023/16.03.2023 (APB 72-75) is reproduced hereunder:

“As mentioned by your goodself that Smt. Amarjit Kaur has given funds to the assessee from her agricultural income is not correct. Smt. Amarjeet Kaur (grandmother of Sh. Sanbir Singh) has given Rs. 40,00,000/- to Sh. Sanbir Singh on 14.06.2017 by using her overdraft facility of Kotak Mahindra Bank Account No. 565044015115 as proof of this, the assessee has already submitted bank statement and Affidavit of Smt. Amarjeet Kaur vide reply submitted on 09.02.2023. In the Affidavit and bank statement submitted, it is clearly mentioned that Smt. Amarjit has given the above said funds to the assessee by using her overdraft facility of Kotak Mahindra Bank Account No. 565044015115 and not from her agricultural income. The assessee has returned back the said sum to her Rs. 35,00,000/- on 23.08.2017 and Rs. 3,00,000/- on 10.01.2018 from his HDFC Bank Account No. 50100069089503 and 50200007892212 respectively. In addition to this Rs. 4,98,000/- was also given to her on 10.05.2017. During the year, all the transactions in the overdraft account of Smt. Amarjit Kaur are explained and the money received from Smt. Amarjit Kaur was returned back during the year from the overdraft account with the bank and after adjusting all deposits and withdrawal during the year the balance in thIs account comes to is Rs.2,87,825.34/-. (We are again submitting Bank Statement of Kotak Mahindra Bank Account No. 565044015115 and Affidavit of Smt. Amarjit Kaur as per Annexure-1 for evidencing the identity and genuineness of the transaction and creditworthiness of the party.)”

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 12 acknowledged that the bank statement and affidavit of Smt.

Amarjit Kaur were filed. The AO observed that however, the assessee had not provided necessary documents to prove the identity, genuineness and credit worthiness, as asked for; that the bank statement did not prove the credit worthiness; and that the document granting over draft facility was also not furnished, nor any copy of Income Tax Return was filed.

For ready reference, the AO’s relevant portion of the order reads as under :

“Copy of Bank statement and an Affidavit of Smt. Amarjet Kar was provided. However, the assessee has not provided necessary documents to prove the identity, genuineness and creditworthiness as requested for. The bank statement, as explained, above, is not proving the creditworthiness, as explained as above and in the Show Cause Notice. The document granting overdraft facility is also not furnished, nor any copy of Income-tax return. Such unexplained cash credits are income taxable under the "provisions of section 68 of the Income Tax Act. Therefore, the sum of Rs.40.00.000/- is treated as unexplained cash credited added to the total income of the assessee. Accordingly tax on such unexplained income is computed as per the provisions of section 115BBE of the Act.

B. Shri Sangram Singh - Loan of Rs.35,00,000/-

In this case also, the assessee failed to furnish any documents to prove the identity, genuineness and creditworthiness as requested for. The only thing provided by the assessee was Agreement between the assessee and Shri Sangram Singh wherein he agreed to pay to Sanbir Singh a sum of Rs. 35,00,000/- and a zerox copy of Cheque in favour of Sangram Singh for Rs.36,40,000/-, being security of return of loan. "These documents do not prove the identity, genuineness and creditworthiness of the transactions. In the absence of the requirement, as explained above, and copy of Income-tax return etc. Such unexplained cash credits are income taxable under the provisions of section 68 of the Income Tax Act. Therefore, the sum of Rs.35,00,000/- is treated as unexplained ;ash credit and added to the total income of the assessee. Accordingly tax on such unexplained income is computed as per the provisions of section 115BBE of the Act.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 13 14.1 The Department has not been able to show as to how the AO is correct in rejecting the bank statement and affidavit of Smt. Amarjit Kaur. In the bank statement (APB 58-60) of her Bank A/c No.565044015115 with Kotak Mahindra Bank for A.Y. 2018-19, the narration shows the assessee's stand to be correct. It reads as follows (abridged):

14.06.2017 RTGS-KKBKR52017061400787273- 553199/000059534 4,000,000.00 3,599,248.34(Dr) SANBIR SINGH 777 14.2 Then, in her affidavit (APB 56-57) dated 02.02.2023, the deponent, Smt. Amarjit Kaur has specifically stated (APB-57 para 4) that “The funds were given by using over- draft facility of Kotak Mahindra Bank Account No. 565044015115.” This has reference to the amount of Rs.40 lacs, which, the deponent, Smt. Amarjit Kaur categorically states in para-1 that she transferred the amount to her grandson, Shri Sanbir Singh, i.e., the assessee, through banking channel, on 14.06.2017. In para 2, she has stated in no uncertain terms that she had received back the amount of funds through banking channel. Further, the OD sanction is to be found at APB 61-62. This, again, remains undisputed. It categorically states that “Initially Rs.40 lacs will be released.”

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 14 14.2.1 Then, the assessee's copy of Bank Account Statement (APB 21-25), for assessment year 2018-19, with HDFC Bank, Bathinda, i.e., Account No. 50100069089503 shows the receipt of Rs.40 lacs therein. The relevant entry (abridged) (APB 22) dated 14.06.2017 reads as follows:

14.06.17 RTGS CR-KKBK0000958-AMARJIT KAUR-SANBIR KKBKR52017061400 4,000,000.00 14.3 Vide entry (APB 22) dated 14.06.2017 itself, this entry of Rs.40 lacs is shown transferred to the assessee's Bank Account No. 50200007992217, in the same bank. The entry (abridged) is as under :

14.06.17 IB FUNDS TRANSFER DR-50200007892212 14.06.17 4,000,000.00 14.4 In the copy of Bank Statement (APB 26-28) of the assessee’s Bank Account No.50200007892212 in the same Bank, the relevant entry (abridged) (APB 26) dated 14.06.2017 is thus ;

14.06.17 IB FUNDS TRANSFER CR-50100069089503 4,000,000.00 14.5 Further, this amount was transferred to the Account (Account No. 50200013459869 in the same bank) of M/s Rajbir Enterprises, the proprietorship concern of Shri Sanjit Singh, (abridged entry) as follows :

14.06.17 FT-DR-50200013459869-RAJBIR 4,000,000.00

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 15 14.6 The trail of Rs.40 lacs is, therefore, complete. So far as regards its receipt by the assessee. It can be depicted diagrammatically as follows ;

Amarjit Kaur Sanbir Singh Sanbir Singh Rajbir Enterprises Bank A/c Bank A/c Bank A/c Bank A/c 50200007892212 50100069089503 50200007892212 50200013459869 200007892212

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 16 providing OD facility was not filed. It was only observed that the Bank Statement of Smt. Amarjit Kaur did not prove her credit worthiness; and that the assessee did not provide the necessary documents to prove the identity, genuineness and credit worthiness, as above, and in the Show Cause Notice (dated 13.03.2023, APB 10-18). In the said Show Cause Notice, it has been stated, inter-alia that; “The copy of bank account has been given in this case. It has been stated that the amount has been given out of her agricultural income.

There was no documentary evidence furnished in this regard. No return of income and other documentary evidence has been furnished to establish that Amarjeet Kaur was earning agricultural income in the past. On verification of the bank account also It is seen that she had very small opening balance in the bank account of Rs.54,248/- and the transactions taken place during the period has been between Sanbir Singh or other related parties and ultimately at the end of the period the bank balance again came down to Rs.2,87,825/-. This indicates that the money given by her is not from her source. In the circumstances, the" identity, genuineness and creditworthiness of the person giving loan is not proved. You are, therefore, requested to ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 17 show cause as to why the loan amount of Rs.40,00,000/- should not be added to your total income.”

15.1 It is, thus, clear that the AO did not enter any adverse comment on the bank statements of the assessee and M/s Rajbir Enterprises. Rather, the AO was swayed by a non-existent contention, allegedly made by the assessee, that the amount had been given by Smt. Amarjit Kaur out of her agricultural income, for which, no documentary evidence had been furnished. The AO further observed that no return of income and other documentary evidence had been furnished to establish that Smt. Amarjit Kaur was earning agricultural income in the past; that the very small opening balance in her bank account of Rs.54,248/-, the transactions during the period, which transactions were with the assessee and other related persons, and the closing balance, which again came down to Rs.2,87,825/-, showed that the money given by her was not from her source; and that therefore, the identity, genuineness and credit worthiness of the person giving the loan was not proved.

15.2 Now, as clear from the documents placed on record, including the assessee's replies filed before the AO, neither

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 18 the assessee, nor Smt. Amarjit Kaur ever stated that the amount of Rs.40 lacs was given by Smt. Amarjit Kaur to the assessee from any agricultural income of Smt. Amarjit Kaur.

This conclusion of the AO, as discussed, is entirely alien to the record of the case and it is wholly misconceived. It is a result of a complete mis-reading and non-reading of the replies filed and the evidence brought on record by the assessee, as discussed above. The ld. CIT(A) has rightly deleted the addition made on this score.

15.3 Then, the assessee returned the full amount of Rs.40 lacs to his grandmother, Smt. Amarjit Kaur. Rs.35 lacs were returned on 23.08.2017 and Rs.3 lacs were returned on 10.01.2018. Further, an amount of Rs.4,98,000/- was given to her on 10.05.2017. Entry (abridged)(APB 58) dated 14.06.2017 in account No.565044015115, of Smt. Amarjit Kaur, in Kotak Mahindra Bank, Chandigarh reads as follows:

14.06.2017 RTFS-KKBKR52017061400787273 553199/000059534 4,000,000.00 SANBIR SINGH 777 15.4 This entry was wrongly not gone into, much less discussed and questioned by the AO.

15.5 The factum of re-payment of the amount of Rs.40 lacs by the assessee to Smt. Amarjit Kaur was not rebutted by the ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 19 AO. This being so, only the credit entry of Rs.40 lacs in the assessee's account, by itself, was of no meaning and it could have been made the basis of the addition, overlooking the corresponding debit entry of re-payment. In this regard, the ld. CIT(A) has rightly relied on the following decisions : i) Decision of the ITAT Mumbai Bench, dated 20.04.2021 in in the case of ‘ITO-15(1)(1), Mumbai Vs M/s Agripure Tradeware Pvt.Ltd.’ ii) Decision of the ITAT Indore Bench, dated 10.09.2021 in the case of ‘M/s Life Care International Vs JCIT’ iii) Decision of the ITAT Mumbai Bench, dated 20.04.2021 in in the case of ‘ITO-15(1)(1), Mumbai Vs M/s Agripure Tradeware Pvt.Ltd.’ iv) Decision of the Hon'ble Gujrat High Court in ‘PCIT V Ambe Tradecorp (P) Ltd.’, dated 05.07.2022, reported in [2022] 145 taxmann.com 27. v) Decision of the ITAT Delhi Bench in in the case of ‘ITO, Ward 1(3), Ghaziabad Vs Habitat Infrastructure Ltd.’ vi) Decision of the ITAT Kolkata Bench, in in the case of ‘ACIT Vs Sri Rakesh Bhartia’. vii) ‘Anjum M.H. Ghaswala’, 252 ITR 1 (S.C.) viii) ‘CIT Vs Hindustan Bulk Carriers’, 259 ITR 449

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 20 were advanced to the appellant from OD facility with Kotak Mahindra Bank vide Account No.565044015115. In para 7.3(v), it has been taken note that the assessee contested before the AO that he had never mentioned in his reply that Smt. Amarjit Kaur had given the funds to him out of her agricultural income. It is on consideration of these facts that the ld. CIT(A) has found that the AO had not duly considered replies filed, the affidavit of Smt. Amarjit Kaur and the bank statement, before making the addition under Section 68 of the Act. The ld. CIT(A) rightly held that the assessee had discharged the onus cast on him, of proving the identity and credit worthiness of the creditor and the genuineness of the transaction. It was, accordingly, that the addition of Rs.40 lacs was deleted.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 21 goes to prove that the amount was forwarded by Smt. Amarjit Kaur, grandmother of the assessee, to the assessee, from their joint Bank Account in Kotak Mahindra Bank, through the over draft facility. Also, the amount of Rs.40 lacs was returned by the assessee to Smt. Amarjit Kaur. The Department has not been able to prove otherwise before us.

17.1 In view of the above, the deletion of the addition of Rs.40 lacs is hereby confirmed.

Rs.35 lacs from Shri Sangram Singh

B. Shri Sangram Singh - Loan of Rs.35,00,000/-

In this case also, the assessee failed to furnish any documents to prove the identity, genuineness and creditworthiness as requested for. The only thing provided by the assessee was an agreement between the assessee and Shri Sangram Singh wherein he agreed to pay to Sanbir Singh a sum of Rs.35,00,000/- and a zerox copy of cheque in favour of Sangram Singh for Rs.36,40,000/-, being security of return of loan. These documents do not prove the identity, genuineness and creditworthiness of the transactions. In the absence of the requirement, as explained above, and copy lot Income-tax return etc. Such unexplained cash credits are income taxable under the provisions of (section 68 of the Income Tax Act. Therefore, the sum of Rs.35,00,000/- is treated as unexplained cash credit and added to the total income of the assessee. Accordingly tax on such unexplained Income is computed as per the provisions of section 115BBE of the Act.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 22

b) Addition of Rs.35,00,000/- u/s 68 from Sangram Singh i) Appellant received Rs.35,00,000/- from Sangram Singh on 22.05.2017 in his HDFC bank account……. ii) Appellant has returned this loan of Sangram Singh of Rs.35,00,000/- on 23.08.2018……..” iii) Appellant filed loan agreement dated 25.06.2017 executed with Sangram Singh alongwith copy of cheque issued to Sangram Singh of Rs.36.40 lac being security for return of loan and interest to prove the genuineness of the said loans. iv) The above facts show that onus cast on appellant to prove the identity and credit worthiness of creditor and genuineness of transaction was proved by Appellant. ------------ 7.5 a) The AO while considering the explanation filed by appellant and evidences filed has to act reasonably and his satisfaction that a particular transaction is not genuine must be based on relevant factors and on a just and reasonable enquiry. The word "may" used in section 68 gives discretion to AO to treat a particular sum as income or not. Once the documentary evidences with explanation is provided to the AO hence, the question of addition should not arise. b) The AO while exercising his powers u/s 68 is not vested with unfettered powers to reject an explanation as being not to his satisfaction without any substantial reasoning. AO has to act reasonably while framing satisfactory opinion surrounding the explanation offered by Appellant. ………………. (e) No addition u/s 68 can be made if Appellant proves the identity and creditworthiness of lenders from whom majority of funds were received and genuineness of transaction. ………………. 7.6 a) The AO has not pointed out any evidence to show that these parties were entry providers or shell companies used to giving accommodation entries. Neither the name of the appellant nor the names of the two parties from whom amounts have been taken appear in any ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 23 list of accommodation entry Providers and Shell Companies involved in financial manipulation or providing accommodation entries. b) The facts outlined in para 7.3 above show that the appellant has duly discharged the onus cast on it to prove the identity, creditworthiness and genuineness of transactions in respect of these two parties. The notices issued u/s 133(6) by the AO were complied with and the confirmation were filed by these parties. ……………………. ……………………. (e) It is trite law that creditworthiness of a depositor can't be solely assessed on the basis of its present income but it depends upon the means of finance held by it. In other words it depends upon the wealth i.e. net worth of the depositor. It is observed that the AO's inference that the two parties were not creditworthy on the ground that these two parties had shown low income has no force in as much as the capacity to invest funds by an investor depends upon the availability of funds with the investors and not on the tax paid/annual income of the investor. ……………………. f) The intention of law is that unaccounted money should be brought to tax. As per provisions of section 68 of the Act onus is on the person in whose books of account such money has surfaced. If an amount has surfaced in the books of an assessee either in the shape of share application money or a deposit/loan; it is presumed that such money belongs to the person in whose name it has been shown. However, as per provisions of section 68 of the Act, deeming provisions postulates that it is possible that the assessee may circulate its own unaccounted money in the shape of bogus persons and therefore legal onus has been created. What is relevant is the identity, creditworthiness of the depositor and genuineness of the transaction. All these three conditions have been established and onus of the assessee/appellant has been discharged u/s 68 of the Act. The appellant has amply proved and discharged its burden by filing the necessary relevant documentary evidences in support of unsecured loans raised during the year. The AO in the assessment order has held that the amount of Rs. 1,30,00,000/- is held to be appellant's income and was added u/s 68 of the Act. This is a bald assertion by the AO. The AO has to be bridge the gap between suspicion and proof to bring home the allegation. There was neither direct nor circumstantial evidence on record to show that the said loan amount actually belonged to or were owned by the appellant. No material has been placed by the AO to allege that such sums/funds raised by the appellant was from the coffers of the appellant.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 24 In Income Tax Officer Vs. Jaidka Woolen& Hosiery Mills Pvt. Ltd. ITA.No.5302/Del./2015 the Hon'ble ITAT Delhi held that there was no evidence to show that money actually emanated from the coffers of the assessee-company so as to be treated as undisclosed income. Additionally, if the loan taken by the assessee has been repaid to the creditor, then no addition is allowed, even though such transactions are done to square off the entries entered earlier. 7.7 It is now a settled law that initial onus is upon the assessee and if no explanation is given or the explanation given is not satisfactory, the AO can disbelieve the alleged credit transaction. But the law is equally settled that if the initial burden is discharged by assessee by producing sufficient materials in support of credit transactions, the onus shifts upon the AO and after verification he can call for further explanation from assessee. In this process the onus may again shift from AO to assessee. Appellant filed complete details about the transactions before the AO. Identity of Investors is established and all payments are through account payee cheques. There is no evidence to show that transactions are not genuine or that these entries were accommodation entries. There is no finding of AO that documents filed by appellant are untrustworthy or lacked creditability. There is no link between the suspicion and evidence. 7.8 a) It has been held that when the loans received by assessee were bogus then there is no question of repayment of the said loans and if the loans received are from assessee's own income then there is no question of repaying them to lender companies. In the present case, the appellant has repaid the loans to Amarjeet Kaur, Sangram Singh and Gaganpreet Singh as outlined in para 7.3(a)(iii) and 7.3(b)(ii) of this order. This is clinching factual evidence, Once the repayment of loans is established then credit entries cannot be (poked in isolation by ignoring the debit entries of repayment of loans in same FY or subsequent FY. …………………….. Respectfully following the above judgements it is clearly held that genuineness of transaction stands proved in view of repayment of loan in same or subsequent FY. In the present case, the loans of Amarjeet Kaur, Sangram Singh ad Gaganpreet Singh have been repaid back by Appellant as outlined in para 7.3(a)(iii) and 7.3(b)(ii) of this order. 7.9. In view of the above facts and discussion and respectfully following the judgments outlined in para 7.3 to 7.8 of this order it is hereby held that the addition made by AO of Rs.1,30,00,000/- u/s. 68 of Act is not ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 25 sustainable in the eyes of law and same is hereby deleted. Grounds of Appeal

No. 6 to 9 are allowed.

20. The ld. CIT(A) relied on the following case laws : i) CIT Vs Orissa Corporation Ltd. ii) CIT Vs Sushila Devi Khadaria 319 ITR 413 (Bom.) iii) Orient Trading Company Ltd. Vs CIT 49 ITR 0723 (Bom.) iv) CIT Vs Orchid Industries (P.) [2020] 116 taxmann.com 113 (S.C.) v) PCIT Vs Himachal Fibres Ltd. (2018) 259 taxmann 5 vi) CIT Vs Vrindavan Farms P Ltd. of 2015 dated 12.08.2015 (Del) vii) ITO Vs Jaidka Woolen & Hosiery Mills Pvt. Ltd. (ITAT Delhi) viii) ITO Vs M/s Agripure Tradeware P.Ltd. [ITA No.1690/Mum/2018] order dated 20.04.2021 (ITAT Mumbai) ix) M/s Life Care International Vs JCIT, Indore order dated 01.09.2021 (ITAT Indore) x) PCIT V Ambe Tradecorp (P) Ltd. order dated 05.07.2022 (Gujrat High Court) xi) ITO Vs Habitat Infrastructure Ltd., ITA No.6155/Del/2015 (ITAT Delhi Bench) xii) ACIT Vs Sri Rakesh Bhartia, ITA No.428/Kol/2012 (ITAT Kolkata Bench)

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 26 The assessee also filed a copy of the assessee's HDFC Bank statement (APB 21-25) of account No.50100069089503.

21.1 The assessee also submitted explanation/detail of each credit entry exceeding Rs.50,000/- in his bank statement, for the year under consideration, regarding his said HDFC bank account No.50100069089503. The entry of Rs.35 lacs, dated 22.05.2017 was explained as “loan taken of Rs.35 lacs from Shri Sangram Singh and the same was paid back to Shri Sangram Singh on 23.08.2017 from HDFC bank account No.50100069089503 of Shri Sanbir Singh”. A copy of the agreement dated 26.05.2017 between Shri Sangram Singh and the assessee was attached as Annexure-9 to the reply.

21.2 Vide reply (APB 72-75) dated 14.03.2023/16.03.2023, the assessee reiterated before the AO, the afore discussed position, as taken in his reply dated 06.02.2023/09.02.2023, and he again attached therewith, a copy of the loan agreement (APB 63-65) dated 26.05.2017 between Shri Sangram Singh and the assessee, and a copy of the assessee's HDFC Bank statement (APB 21-25) of account No. 50100069089503. The assessee also filed a copy of cheque

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 27 (APB 66) dated 26.11.2017, of the amount of Rs.36,40,000/-, issued by the assessee in favour of Shri Sangram Singh, towards return of the loan of Rs.35 lacs. The AO admits this at page 8, para 13 of the assessment order.

21.3 The loan agreement (APB 63-65) dated 26.05.2017 between Shri Sangram Singh and the assessee states as follows :

“1. That the second party has received a sum of Rs.35,00,000/- (Rupees Thirty Five Lacs only) vide cheque No.000043 dated 22.5.2017 favouring Sanbir Singh, drawn on HDFC Bank Limited Sector 8, Chandigarh A/c No.50100064884311, for which amount the second party hereby acknowledge the receipt in the present of witnesses.

No.000036, dated 26.11.2017, for Rs.36,40,000/- drawn on his account No.50100069089503, in HDFC Bank, Bathinda, in favour of Shri Sangram Singh, account No. 50100064884311. It is this very cheque (APB-66), a copy whereof the assessee filed before the AO, which was acknowledged by the AO in the assessment order.

21.5 A copy of the assessee's bank account statement (APB 21-25) i.e., of bank account No. 50100069089503 with HDFC Bank, Bathinda, was filed by the assessee before the AO.

The relevant narration (abridged)(APB 21) therein regarding the receipt of loan of Rs.35 lacs by the assessee from Shri Sangram Singh on 22.05.2017 reads as follows :

22.05.17 FT-CR-50100064884311-SANGRAM SINGH 3,530,000.00 21.6 The relevant entry (abridged) (APB 22) regarding the outgo of Rs.40 lacs to M/s Rajbir Enterprises on 12.06.2017 is as under :

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 29 12.06.17 FT-DR 50200013459869-RAJBIR KKBKR52017061400 4,000,000.00 21.7 The relevant entry (abridged)(APB 22) concerning the repayment by the assessee, of Rs.35 lacs to Shri Sangrfam Singh, in his account No. 50100064884311, in HDFC Bank, Bathinda on 23.08.2017, vide cheque No.000000000052, runs thus :

14.06.17 IB FUNDS DR-50200007892212 14.06.17 4,000,000.00 21.8 As to how the afore-discussed documentary evidence, undisputedly filed by the assessee before the AO, is not evidence enough, going to prove the identity and credit worthiness of the creditor and the genuineness of the transaction, is beyond comprehension.

21.9 Then, though it was within their power to do so, the AO did not issue any notice under Section 133(6) of the Income Tax Act to carry out any further enquiry, if any such enquiry was required to be made of Shri Sangram Singh.

21.10 Further, the AO did not dispute the fact that on 23.08.2017, as above, the assessee repaid the loan to Shri Sangram Singh through cheque, and pertinently, this came about much before the issuance of notice of scrutiny assessment on 15.03.2022. It was under similar facts and ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 30 circumstances that the Delhi ITAT, in ‘CPL Design Pvt. Ltd. vide order dated 05.04.2023, finding that the assessee therein had repaid the entire amount of unsecured loan before initiation of scrutiny assessment proceedings, the addition was deleted. To prove such repayment, a copy of the relevant bank statement had been filed, as in the present case. The Delhi ITAT followed the Gujrat High Court decision dated 11.07.2022, in Tax Appeal No. 318 of 2022, in ‘The Commissioner of Income Tax (Central), Ahmedabad Vs Ambe Trade Corp. Pvt. Ltd.’. There their Lordships had held, inter-alia, that once the books of account and the facts reflected therein showed the source of the funds and the identity of the party and establish that the books of account of the assessee also reflected the receipt and the amount was repaid by the assessee, it was not open to the AO to raise doubt about the credit worthiness of the creditor; and that the AO had ignored the relevant material.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 31 Sanbir Singh ( the assessee ) through banking channel. The details thereof have been stated as follows :

Date Name of Bank Account from which Mode of Amount Funds Transferred Transaction (inRs.) 22.05.2017 1,50,000/- Axis Bank 913020037448032 NEFT 22.05.2017 2,00,000/- Kotak Mahindra Bank 878010002116 RTGS 22.05.2017 1,50,000/- HDFC Bank 14181000022600 Fund Transfer 22.1 He has further stated that he received back the said amount of Rs.5 lacs from the assessee, as follows, through banking channel ;

Date Name of Bank Account from which Amount (in Mode of Funds Transferred Rs.) Transaction 23.08.2017 1,50,000/- HDFC Bank 14181000022600 Fund Transfer 24.08.2017 1,50,000/- Axis Bank 913020037448032 NEFT 06.09.2017 2,00,000/- Kotak Mahindra Bank 878010002116 NEFT Case Laws

23.1 The Hon'ble Supreme Court in ‘ACIT & others vs Marico Ltd.’, in W SLP (Civil) Diary no. 7367/2020, held that the non-rejection of the explanation in the assessment order would amount to the AO accepting the view of the assessee, thus taking a view/forming an opinion. No addition u/s 68 can be made if the appellant proves the identity and creditworthiness of lenders from whom majority of funds were received and the genuineness of the transaction.

23.2 The Hon'ble Supreme Court, in ‘CIT vs Orissa Corporation Ltd.’, has held that the Revenue did not examine the source of income of the alleged creditors to find out whether they were creditworthy or not, or were such who could have advanced these alleged loans; that there was no effort made to pursue the alleged creditors; that in those circumstances, the assessee could not do anything further; and that the assessee had discharged the burden that lay on him.

23.3 The Hon'ble Bombay High Court, in ‘CIT vs Sushila Devi Khadaria’ 319 ITR 413 (Bom.), has held that all loans

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 33 were taken by account payee cheques and there was no cash payment in the bank account of the lender prior to issue of such cheques; that details of the repayments were also furnished; and that the addition of such loans and interest therefrom had been rightly deleted.

23.4 The Hon'ble Bombay High Court, in ‘Orient Trading Company Ltd. vs CIT’ 49 ITR 723 (Bom.) held that when an entry stands in name of a third party, the assessee satisfies the ITO as to the identity of the third party and also supplies such other evidence which shows, prima facie, that the entry is not fictitious, the initial burden that lay on him can be said to be discharged by him and it will not, thereafter, be for the assessee to explain further as to how and in what circumstances the third party obtained the money, and as to how or why he came to make a deposit with the assessee; that the burden shifts on to the Revenue to show that the entry represented the assessee's suppressed income; and that the Department has to be in possession of sufficient and adequate material for such a conclusion to be reached.

23.5 The Hon'ble Supreme Court in ‘Commissioner of Income Tax Vs. Orchid Industries (P.) Ltd’, 116 taxmann.com

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 34 113 (SC), dismissed the SLP filed by the department against the judgement of the Hon'ble Bombay High Court in the matter of ‘Commissioner of Income Tax Vs. Orchid Industries (P.) Ltd’, 88 taxmann.com 502 (Bombay), wherein it was held that the assessee had produced on record documents to establish the genuineness of the party, such as PAN of all the creditors along with the confirmation and their bank statements showing payment of the said amount. The assessee had also produced the entire record regarding the issuance of shares, i.e., allotment of shares to these parties, their share application forms, allotment letters and share certificates, as also the books of account. The balance-sheet and profit and loss account of those persons disclosed that they had sufficient funds in their accounts for investing in the shares of the assessee. It was held that in view of this voluminous documentary evidence, the only fact that those persons had not appeared before the Assessing Officer would not negate the case of the assessee; and that therefore, the addition was liable to be deleted.

23.6 The Hon'ble Supreme Court, in ‘PCIT Vs. Himachal Fibres Ltd.’ 259 Taxmann 5, it was held that in a case where the assessee has furnished all the relevant facts within their

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 35 knowledge and has offered a credible explanation, the onus reverts to the Revenue to prove that these facts are not correct; and that in such a case, the Revenue cannot draw any adverse inference based on suspicion or doubt or perception of culpability, etc. It is trite law that creditworthiness of a depositor cannot be assessed solely on the basis of its present income. It depends on the net worth of the depositor. It was observed that the AO's inference that the two parties were not creditworthy, on the ground that these two parties had shown low income, had no force in as much as the capacity to invest funds by an investor depends upon the availability of funds with the investor and not on the tax paid or the annual income of the investor.

23.7 The Hon'ble Delhi High Court, in ‘CIT vs. Vrindavan Farms Pvt. Ltd., etc.’, ITA.No.71 of 2015 dated 12th August, 2015, held that the sole basis for the Revenue to doubt the creditworthiness of the lenders was the low income reflected in their returns of income. It was observed by the ITAT that the AO had not undertaken any investigation into the veracity of the documents submitted by the assessee. The department’s appeal was dismissed by the Hon'ble High Court.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 36 23.8 In ‘Assistant Commissioner of Income-tax, Central Circle-25, New Delhi vs. Goodview Trading (P.) Ltd’, 82 taxmann.com 55 (Delhi - Trib.), it was held by the Delhi Tribunal that the assessee, during the proceedings, had discharged its liability by submitting necessary evidence to establish the bona fides of the transactions, whereupon, the onus shifted on to the revenue to prove that the claim of the assessee was factually incorrect; and that simply by pointing out that the applicant companies did not have sufficient income, or that the bank accounts indicated credits and debits in a rapid succession, leaving little balance, does not discharge the burden cast on the Revenue to take an adverse view in the matter.

23.9 In ‘Income Tax Officer Vs. Jaidka Woolen& Hosiery Mills Pvt. Ltd.’, ITA.No.5302/Del./2015, the Delhi Bench of the Tribunal held that there was no evidence to show that the money actually emanated from the coffers of the assessee-company so as to be treated as its undisclosed income; and that additionally, if the loan taken by the assessee has been repaid to the creditor, then no addition is allowed, even though such transactions are done to square

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 37 off the entries entered earlier; that the initial onus is on the assessee and if no explanation is given, or the explanation given is not satisfactory, the AO can disbelieve the alleged credit transaction. However, if the initial burden is discharged by the assessee by producing sufficient material in support of credit transactions, the onus shifts on to the AO, and after verification, he can call for further explanation from assessee; that in this process, the onus may again shift from the AO to the assessee. The appellant filed complete details about the transactions before the AO. Identity of the investors is established and all payments are through account payee cheques. There is no evidence to show that transactions are not genuine or that these entries were accommodation entries. There is no finding of AO that documents filed by appellant are untrustworthy or lacked creditability. There is no link between the suspicion and evidence. When the loans received by assessee were bogus, there is no question of repayment of the said loans, and if the loans received are from the assessee's own income, then there is no question of repaying them to lender companies.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 38 23.10 The ITAT, Mumbai Bench, in the case of ‘ITO- 15(1)(1), Mumbai Vs. M/s Agripure Tradeware Private vide order dated 20-04-2021, held that the entire addition had been made by the AO out of mere suspicion, surmise and conjecture and by ignoring completely all the relevant documents filed by the assessee before him; that the AO had not found any deficiencies/defects in the documentary evidences submitted by the assessee; that the ld.CIT(A) had stated that the AO had issued summons to the lender companies in the course of assessment proceedings to verify the loan transactions and that all the lender parties had duly replied to the summons by submitting the relevant details before the AO; that this factual finding given by the Id CIT(A) had not been controverted by the Id. DR; that the AO had not appreciated the fact that when the loans received by the assessee were bogus, there is no question of repayment of the same to them by the assessee; that admittedly, the assessee had duly repaid the loans to four lender companies; that if the loans received by assessee are its own income, then there is no need to make repayment of the same to the lender companies; that this clinching factual evidence had ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 39 apparently missed the attention of the AO while framing the assessment; that hence, the assessee had duly discharged its onus by proving the three necessary ingredients of section 68 of the Act, ie., the identity and creditworthiness of the lenders and the addition made by the AO had rightly been deleted by the ld CIT(A).

23.11 The decisions in the following cases pertain to the matters where, as in the case at hand, the three ingredients of Section 68 of the Act were proved and the loans taken had been repaid : i) ITAT, Indore Bench, in ‘M/s Life Care International V/s JCIT 3(1), Indore’, vide order dated 01.09.2021 ii) The Hon'ble High Court of Gujarat in ‘PCIT v. Ambe Tradecorp (P.) Ltd’, 145 taxmann.com 27 (Gujarat) vide order dated 05-07-2022 iii) ITAT Delhi Bench in ‘ITO, Ward-1(3), Ghaziabad Vs Habitat Infrastructure Ltd.’, iv) ITAT Kolkata Bench in ‘ACIT, Circle-23, Kolkata Vs. Sri Rakesh Bhartia’ ITA No. 428/Kol/2012

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 40 before us, nor has any of these decisions been shown to have been misapplied by the ld. CIT(A).

Amount of Rs.5 lacs from Shri Gaganpreet Singh 26. Against the addition of this amount of Rs.5 lacs, which had been taken by the assessee from Shri Gaganpreet Singh, the assessee contended before the ld. CIT(A) that the amount of Rs.5 lacs had been received by the assessee from Shri Gaganpreet Singh on 22.05.2017; that the same had been advanced to Shri Sanjit Singh Randhawa on 12.06.2017; that the assessee had returned this amount from his HDFC Bank Account No.50100069089503; that an amount of Rs.1,50,000/-, out of the said amount of Rs.5 lacs had been paid back by the assessee to Shri Gaganpreet Singh on 23.08.2017; that another amount of Rs.1,50,000/- had been repaid on 24.08.2017 and the remaining amount of Rs.2 lacs had been returned on 06.09.2017; that the assessee had submitted bank statements of Shri Gaganpreet Singh (APB 69-70) and the bank statement of the assessee

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 41 qua Bank Account No. 50100069089503 in HDFC Bank (APB 21-25) as documentary evidence to prove the identity, genuineness and credit worthiness of the transaction, before the AO; that the AO, while making the addition, did not take into consideration the reply filed by the assessee to substantiate his claim.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 42 entries cannot be looked at in isolation by ignoring the debit entries of repayment of the loan in the same Financial Year, or in the subsequent Financial Year.

27.1 The assessee's bank account (supra), copy at APB 21- 25, contains the following relevant entries (abridged) qua the return of this sum of Rs.5 lacs by the assessee to Shri Gaganpreet Singh, i.e., Rs.1,50,000/- on 23.08.2017, Rs.1,50,000/- on 24.08.2017 and Rs.2,00,000/- on 06.09.2017 :

22.05.17 FT-CR-14181000022600-GAGANPREET 1,50,000.00 23.08.17 FT-DR-1481000022600-GAGANPREET 1,50,000.00 24.08.17 NEFT-DR-UTIB0000313-GAGANPREET 1,50,000.00 06.09.17 NEFT-DR-KKBK0004076-GAGANPREET 2,00,000.00 27.2 The said Bank Statement of the assessee was filed by the assessee before the AO. The AO has not stated anything as to how this is not going to prove the credit worthiness of the creditor and the genuineness of the transaction. Again, as in the case of Shri Sangram Singh, from whom, loan of Rs.35 lacs was taken by the assessee, as dealt with herein above, the AO did not deem it appropriate to issue any notice under Section 133(6) of the Act to Shri Gaganpreet Singh, to ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 43 make any further enquiry. It was not disputed that the amounts as above, totaling to Rs.5 lacs had been repaid by the assessee to Shri Gaganpreet Singh through cheque, as above. Again, this was much before the issuance of notice of scrutiny assessment on 15.03.2022. Thus, as in the case of the loan from Shri Sangram Singh, the decision of the Delhi Tribunal in ‘CPL Design Pvt. Ltd. Vs ITO’, (supra) is clearly applicable and since the amount of loan, as in that case was repaid in its entirety before initiation of scrutiny assessment proceedings, the addition has rightly been deleted by the ld. CIT(A). To reiterate that the Commissioner of Income Tax (Central), Ahmedabad Vs Ambe Trade Corp Pvt. Ltd., (supra) rendered by the Hon'ble Gujrat High Court, which was followed by the Delhi ITAT in ‘CPL Design Pvt. Ltd.’, (supra), once the books of account and the facts reflected therein shown the source of the funds and the identity of the party and it stands established that the books of account of the assessee also reflect the receipt and the amount was repaid by the assessee, it is not open to the AO to raise doubt about the credit worthiness of the creditor and that the AO had ignored the relevant material.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 44 28. The case laws relied on by us while deleting the addition of Rs.35 lacs pertaining to Shri Sangram Singh, in paras 22 to 22.10 above, are again, squarely applicable to the loan of Rs.5 lacs from Shri Gaganpreet Singh as well.

For brevity, we are not reproducing the contents of those paragraphs here.

Amount of Rs.55 lacs paid out of Over Draft facility to Shri Sangram Singh 31. The assessee stated that this amount was advanced from his two OD facilities of Rs.50 lacs and Rs.200 lacs with HDFC Bank. Copies of bank OD Statements were filed.

Copies of bank OD sanction letters were filed before the AO.

The AO held that there is mismatch in details filed as per earlier submissions and details filed in response to SCN.

The AO held that if credit of Rs.250 lac was available with ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 45 appellant then there was no need of taking loans of Rs.40 lac and Rs.35 lac from other parties. In view of above facts this amount of Rs.55 lac was added u/s. 68 to total Income of appellant r.w.s. 115BBE of Act.

“c) Addition of Rs.55,00,000/- u/s 68 paid from OD facility of Appellant i) Appellant advanced Rs.50,00,000/- to Sanjit S Randhawa on 13.06.2017 using his OD facility with HDFC Bank Account No. 50200007892212 and copy of bank statement was filed before the AO. Sanction letter of OD limits availed by Appellant in FY 2017-18 was also filed by Appellant before the AO. ii) Appellant had OD limit of Rs.55,00,000/- with HDFC Bank sanctioned on 12.09.2014 and using that fund the Appellant advanced Rs.50,00,000/- to Sanjit S Randhawa on 12.06.2017. Sanction letter of said limit was filed. The limit of OD facility was reduced from Rs.55,00,000/- to Rs.50,00,000/- on 14.08.2017. Appellant filed the revised sanction letter of the OD facility dated 14.08.2017 before the AO vide reply dated 16.03.2023. iii) An OD facility of Rs.2,00,00,000/- with HDFC Bank with Account No. 50200026647926 was sanctioned to Appellant on 14.08.2017. Appellant advanced funds of Rs.40,00,000/- on 12.06.2017, Rs.50,00,000/- on 13.06.2017 and Rs.40,00,000/- on 14.06.2017 to Sanjit S Randhawa from the said OD limit. Thus, the finding of AO that why Appellant took loans from others instead of using his own OD limit is factually not correct. Further, the AO cannot step into the shoes of the businessman and cannot direct him how to conduct his business or maximize his profits. iv) AO is factually not correct in holding that Appellant availed Rs.55,00,000/- OD facility to give advance to Sanjit S Randhawa whereas the Appellant used OD facility of Rs.50,00,000/- for advancing funds to Sanjit S Randhawa. As a documentary evidence, the Appellant filed his bank statement , sanction letter of OD facility with HDFC bank with A/c No. 50200007892212 before the AO. Thus, the AO wrongly held that Appellant advanced funds of Rs.55,00,000/- using his OD facility whereas in ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 46 fact the Appellant advanced funds of Rs.50,00,000/- using his OD facility to Sanjit S Randhawa.”

This is available from the HDFC statement of account (APB 26-28). The relevant entry (abridged) (APB 26) dated 13.06.2017 reads as follows :

13.06.17 FT-DR-50200013459869-RAJBIR 5,000,000.00 33.1 This entry was ignored by the AO. Besides, the sanction letter (APB 61-62) of Over Draft facility of Rs.50 lacs with Kotak Mahindra Bank, concerning Over Draft limits availed by the assessee during Financial Year 2017-18, relevant to assessment year 2018-19, i.e., the year under consideration, supports and proves the contention of the assessee in this regard. This contention was submitted before the AO by the assessee in response to a specific query raised in the Show Cause Notice dated 13.03.2013. Still, the same has not been given due weightage by the AO. The AO

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 47 observed that as per letter dated 06.02.2023, the OD sanction letter from HDFC, as submitted by the assessee, was for Rs. 2 Cr and Rs.50 lacs; that the date of sanction of the OD facility1 was 14.08.2017, whereas the loan had been given to Shri Sanjit Singh Randhawa on 12.06.2017; that there was, as such, a mis-match in the details provided by the assessee and so, it could not be held that the amount was from the OD facility, and that so, the source remained unexplained. Here, the ld. CIT(A) has correctly taken into consideration the assessee's contention, duly supported by documentary evidence, that the assessee already had an OD facility with the HDFC Bank, amounting to Rs.55 lacs, which was sanctioned on 12.09.2014. It was using the said fund only, that the assessee had advanced Rs.50 lacs to Shri Sanjit Singh Randhawa on 12.06.2017. The sanction letter by way of proof thereof had been submitted. The limit of the Over Draft facility was, though, later on reduced w.e.f.

14.08.2017. The revised sanction letter (APB 61-62) dated 14.08.2017, concerning the Over Draft limit of Rs.50 lacs, had been submitted by the assessee alongwith reply dated 16.03.2023. The AO, however, erred in not taking into consideration the sanction letters of the Over Draft facility of ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 48 Rs.50 lacs, reduced from Rs.55 lacs to Rs.50 lacs, w.e.f.

14.08.2017 and of Rs.2 Cr, which had been submitted by the assessee, also alongwith his reply. Therein, as correctly contended, it stands mentioned that under special conditions, the pre-disbursed exceeding CC facility of Rs.55 lacs in the HDFC Bank Account No. 50200007892212 stood reduced to Rs.50 lacs. The sanction letter (APB 44-45) dated 12.09.2014, concerning the Over Draft limit of Rs.55 lacs, which facility was later reduced, on 14.08.2017 (APB 49-52), to Rs.50 lacs, were produced by the assessee. From these documents, it is evident that there was no mis-match in the details provided by the assessee.

33.2 Further, whereas the assessee advanced the amount of Rs.40 lacs, Rs.50 lacs and Rs.40 lacs to Shri Sanjit Singh Randhawa on 12.06.2017, 13.06.2017 and 14.06.2017, respectively, the Over Draft limit of Rs.2 Cr with the HDFC Bank Account No. 50200026647926 was sanctioned on 14.08.2017.

33.3 Then, the assessee had also filed before the AO, as above, letter (APB 49-52) dated 14.08.2017, concerning sanction of credit Over Draft limit of Rs.50 lacs of Shri

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 49 Sanbir Singh, the assessee, from HDFC Bank, of the assessee's Account No. 50200007892212, along with the concerned Bank Statement (APB 26-28). This amply disproves the AO’s observation that the assessee had availed Over Draft limit of Rs.55 lacs for giving advance to Shri Sanjit Singh Randhawa. The said documentary evidence was wrongly overlooked by the AO while making the addition. It was, thus, in sheer oblivion, or due to stark non-reading the cogent documentary evidence furnished by the assessee before the AO, that the AO wrongly arrived at their ill- founded conclusion.

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 50 limit of Rs.2 Cr was with HDFC Bank Account No.50200026647926; and that the assessee had advanced amounts of Rs.40 lacs on 12.06.2017, Rs.50 lacs on 13.06.2017 and Rs.40 lacs on 14.06.2017, to Shri Sanjit Singh Randhawa from the said OD limit only. It is on considering all these facts, that the ld. CIT(A) held and, in our considered opinion, correctly so, that the AO had gone wrong in holding that it was not comprehensible as to why the assessee took loan from others, instead of using his own OD limit. As correctly observed by the ld. CIT(A), from the above facts, it is evident that the assessee had, in fact, had utilized his own OD limit to advance the sums to Shri Sanjit Singh Randhawa. The AO had erred in holding that his OD limit had not been utilized by the assessee.

However, as per provisions of section 68 of the Act, deeming provisions postulates that it is possible that the assessee may circulate its own unaccounted money in the shape of bogus persons and therefore legal onus has been created.

What is relevant is the identity, creditworthiness of the depositor and genuineness of the transaction. All these three conditions have been established and onus of the assessee/appellant has been discharged u/s 68 of the Act.

The appellant has amply proved and discharged its burden

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 52 by filing the necessary relevant documentary evidences in support of unsecured loans raised during the year.

36.1 The AO in the assessment order has held that the amount of Rs.1,30,00,000/- is held to be appellant's income and was added u/s 68 of the Act. This is a bald assertion by the AO. The AO has to be bridge the gap between suspicion and proof to bring home the allegation. There was neither direct nor circumstantial evidence on record to show that the said loan amount actually belonged to or were owned by the appellant. No material has been placed by the AO to allege that such sums/funds raised by the appellant was from the coffers of the appellant.

Cross Objections

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 54