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

CIT(Appeals) NFAC, Delhi dated 29.05.2023 pertaining to

assessment year 2018-19.

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.

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.

appellant had advanced Rs. 1.30 Cr to M/s. Rajbir

Enterprises, Proprietorship of one Shri Sanjit S Randhawa,

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

accounts of the appellant with the other family members.

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.

regard to the aforesaid sources of funds. The AO, however,

did not accept the same and made addition of

Rs.1,30,00,000/-. The CIT(A), on the other hand, accepted

the evidence filed by the assessee before the AO and the

addition made by the AO was deleted.

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.

has placed strong reliance on the impugned order and has

contended that the AO had wrongly rejected the evidence

filed by the assessee and that the same has correctly been

taken into consideration by the ld. CIT(A) and on the basis

thereof, the additions wrongly made have rightly been

deleted.

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.

never submitted before the AO that the amount was given by

Smt. Amarjit Kaur out of any agricultural income of hers. In

fact, this position has been reiterated by the assessee before

the AO, vide his reply dated 14.03.2023/16.03.2023 (APB

72-75). The assessee has categorically submitted therein

that the AO had mentioned that Smt. Amarjit Kaur had given

funds to the assessee from her agricultural income. The

assessee stated that this was not correct. He further stated

that Smt. Amarjit Kaur, who was grandmother of the

assessee, had given Rs.40 lacs to the assessee on 14.06.2017

by using her over draft facility of Kotak Mahindra Bank

Account No.565044015115; that as proof thereof, the

assessee had already submitted bank statement and affidavit

of Smt. Amarjit Kaur, vide reply submitted on 09.02.2023;

that in the affidavit and bank statement, it stood clearly

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.)”

reproduced a part of the above reply of the assessee. The AO

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

page 6 of the assessment order and also of the factum of the

assessee having “re-confirmed” the loan taken of Rs. 40 lacs

from Smt. Amarjeet Kaur, his grandmother, vide his written

submission dated 14.03.2023. The AO observed that “the

assessee did not explain or provided documentary evidences

about the remaining amount……”. Still, the AO did not make

any comment on these specific unchallenged entries in the

Bank Accounts of Smt. Amarjit Kaur, creditor and

grandmother of the assessee, the assessee himself and M/s

Rajbir Enterprises, to whom, the amount was advanced by

the assessee. Any objection was also not raised by the AO,

either against Smt. Amarjit Kaur’s Bank Statement of Over

Draft Account, or against Smt. Amarjit Kaur’s affidavit

confirming the transactions with the assessee. Rather, the

AO wrongly stated in the assessment order that document

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 ITA No.1690/Mum/2018 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 ITA No.1690/Mum/2018 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 ITA No.6155/Del/2015 in the case of ‘ITO, Ward 1(3), Ghaziabad Vs Habitat Infrastructure Ltd.’

vi) Decision of the ITAT Kolkata Bench, in ITA No.428/Kol/2012 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

of the facts that in the affidavit and the bank statement

filed, Smt. Amarjit Kaur has clearly stated that these funds

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.

the ld. CIT(A). The AO appears to have drawn the facts from

elsewhere, rather than from the assessee's documents and

the remaining case record. The material cogent documentary

evidence furnished by the assessee before the AO was

wrongly never taken into consideration by the AO. The same

has rightly been considered by the ld. CIT(A). This

documentary evidence, as discussed herein above irrefutably

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

as follows :

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

(relevant portions) as follows :

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. ITA No.71 of 2015 dated 12.08.2015 (Del) vii) ITO Vs Jaidka Woolen & Hosiery Mills Pvt. Ltd. ITA No.5302/Del/2015 (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)

06.02.2023/09.02.2023, the assessee stated that the amount

of Rs.35 lacs was given to M/s Rajbir Enterprises,

proprietorship concern of Shri Sanjit Singh Randhawa from

funds of Rs.35 lacs received on 22.05.2017 from Shri

Sangram Singh; that the amount of Rs.35 lacs was paid back

to Shri Sangram Singh on 23.08.2017 from the assessee's

HDFC Bank Account No.50100069089503. The assessee

attached a copy of the loan agreement (APB 63-65) dated

26.05.2017 between Shri Sangram Singh and the assessee.

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. 2. That the amount is given for a period of six months from today. 3. That the second party hereby undertake to return the said amount within the period of six months with interest @ 8% p.a. The second party has issued security cheque No.000036 dated 26.05.2017 for Rs.36,40,000/- drawn on HDFC Bank, Bathinda for the timely return of the abovesaid amount, in case the 2nd party fails to return the above amount then the first party will present the above cheque in the bank for its encashment.” 21.4 From the above recital in the Agreement, the

undisputed position is that the assessee (the second party to

the Agreement) had approached Shri Sangram Singh (the

first party to the agreement) for a family loan of Rs.35 lacs,

which Shri Sangram Singh had agreed to give to the

assessee. The assessee had, on 26.05.2017, received the

amount of Rs.35 lacs from Shri Sangram Singh vide cheque

dated 22.05.2017, receipt whereof was acknowledged by the

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 28 assessee before two witnesses. The amount was given for six

months from 26.05.2017. The assessee had undertaken to

return the amount within six months, with interest @ 8% per

annum. To ensure a timely return of the amount, the

assessee had issued a post-dated cheque (APB-66)

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.

Vs ITO’, in ITA No. 4974/Del/2023, 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.

Gaganpreet Singh was also filed before the ld. CIT(A). As per

this confirmation, Shri Gaganpreet Singh has confirmed that

he had transferred funds of Rs.5 lacs to his cousin, Shri

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

ITO’ (2015), 43 CCH 0017 (Ahd), held that the assessee's

contention cannot be brushed aside simply on basis of

surmises and conjectures and without bringing on record

material to controvert the explanation of the assessee. In

absence of any material brought by the AO to show that the

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 32 explanation of the assessee was not plausible, no good

reason was found to interfere in the order of the CIT(A).

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

Limited’, in ITA No. 1690/Mum/2018, 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.’, ITA No. 6155/DEL/2015 iv) ITAT Kolkata Bench in ‘ACIT, Circle-23, Kolkata Vs. Sri Rakesh Bhartia’ ITA No. 428/Kol/2012

consideration and relied on by the CIT(A) while deleting the

addition wrongly made. No contrary decision has been cited

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).

Rs.35 lacs by the ld. CIT(A) is found to be correct and the

same is confirmed.

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.

received the amount of Rs.5 lacs from Shri Gaganpreet Singh

on 22.05.2017; that the assessee had returned this loan of

Shri Gaganpreet Singh on three dates, i.e., 23.08.2017

(Rs.1,50,000/-), 24.08.2017 (Rs.1,50,000/-) and 06.09.2017

(Rs.2,00,000/-); that confirmations and bank statements of

Shri Gaganpreet Singh, alongwith copy of HDFC Bank

Statement of the assessee had been filed before the AO to

prove the genuineness of the loan; that this showed that the

onus cast on the assessee to prove the identity and credit

worthiness of the creditor and the genuineness of the

transaction, had been proved by the assessee. It was further

held that the assessee has repaid the loan to Shri

Gaganpreet Singh; that this is clinching factual evidence;

that once the repayment of the loan is established, credit

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.

taken into consideration by the ld. CIT(A) while deleting the

addition of Rs.45 lacs. Again, no contrary decision has been

brought to our notice by the Department.

Rs.5 lacs is also confirmed.

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.

follows :

“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.”

assessee had advanced an amount of Rs.50 lacs to Shri

Sanjit Singh Randhawa on 13.06.2017, by using his Over

Draft facility of HDFC bank account No. 50200007892212.

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.

categoric observations of the ld. CIT(A) in this regard, noting

that the assessee had OD limit of Rs.55 lacs, sanctioned on

12.09.2014; that it was using that fund that the assessee

had advanced Rs.50 lacs to Shri Sanjit Singh Randhawa on

12.06.2017; that as per the sanction letter, this limit was

available; that the limit of OD limit had been reduced on

14.08.2017, from Rs.55 lacs to Rs.50 lacs; that the revised

sanction letter dated 14.08.2017 had been furnished by the

assessee before the AO vide letter dated 16.03.2023; that OD

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.

the AO had erred on facts in observing that the assessee had

availed the OD facility of Rs.55 lacs to advance the amount

to Shri Sanjit Singh Randhawa. In fact, it was the OD

facility of Rs.55 lacs, which had been used by the assessee

for advancing funds to Shri Sanjit Singh Randhawa. Before

the AO, the assessee had duly filed his bank statement and

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 51 the sanction letter of OD facility concerning Bank Account

No. 50200007892212 with HDFC Bank. The Department has

miserably failed to show that the ld. CIT(A) has erred in

making the said observations and findings, in face of the

documentary evidence furnished by the assessee, as

discussed.

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

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.

also, the Department’s contention that the ld. CIT(A) erred in

deleting the addition by taking into consideration the

evidence which was rightly rejected by the AO, holds no

water. The same is, accordingly, rejected. The action of the

ld. CIT(A) in deleting this addition is also confirmed.

Department’s contention, with regard to any of the additions

deleted by the ld. CIT(A), that the ld. CIT(A) went wrong in

ITA 455/CHD/2023 & C.O. 2/CHD/2023 A.Y. 2018-19 53 deleting these additions by accepting the documentary

evidence which was rejected by the AO. Having gone into

each of these documents, we find that as discussed in the

preceding paragraphs, the AO had erred in not accepting

such documentary evidence filed by the assessee and making

the additions. The ld. CIT(A), on the other hand, has

considered these documentary evidences in their right

perspective and has correctly deleted the additions wrongly

made, which additions, if sustained, would cause manifest

injustice and prejudice to the assessee. We, accordingly,

hereby uphold the order passed by the ld. CIT(A). The

grounds raised by the Department are found to be shorn of

merit and they are rejected as such.

Cross Objections

Cross Objection No. 2/CHD/2023 filed by the assessee does

not survive and it is dismissed infructuous.

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

dismissed and the Cross Objection filed by the Assessee

stands as infructuous.

Order pronounced on 18.10. 2024. SD/- SD/-

(KRINWANT SAHAY) (A.D.JAIN ) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar