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Facts
The assessee's cross objection challenges the validity of reopening/reassessment proceedings initiated under Section 148A(d) and Section 148 of the Income Tax Act, 1961. The Revenue's appeal contests the CIT(A)'s order which reversed the Assessing Officer's additions concerning alleged unexplained cash credits and cash deposits.
Held
The Tribunal held that the reopening/reassessment proceedings were not sustainable in law as the requisite approval under Section 151 was not obtained. Regarding the appeal, the Tribunal found that the additions made by the AO were not sustainable, particularly concerning the loan from Mukesh Khurana due to the possibility of double addition, and the cash deposit due to sufficient cash-in-hand explained by withdrawal from the bank.
Key Issues
1. Whether the reopening/reassessment proceedings were validly initiated without proper approval under Section 151. 2. Whether the additions for alleged unexplained cash credits and cash deposits were justified, especially considering potential double addition and explained cash-in-hand.
Sections Cited
143(3), 147, 148, 148A, 151, 68, 69A, 158BC
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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
ORDER
PER SATBEER SINGH GODARA, JM
This Revenue’s appeal and assessee’s cross objection C.O. No. 106/Del/2025 for assessment year 2016- & C.O. No. 106/Del/2025 17, arises against the Commissioner of Income Tax (Appeals)-3 [in short, the “CIT(A)”], Noida’s order dated 18.11.2024 passed in case no. CIT(A), Delhi-7/10340/2018-19, involving proceedings under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case files perused.
For the reasons stated in the assessee’s condonation averments, delay of 10 days in filing of instant cross objection is hereby condoned in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC).
It transpires during the course of hearing that there arises the first and foremost issue of validity of the impugned reopening/reassessment itself as the learned lower authorities have set into motion the amended section 148 proceedings against the assessee in assessment year 2016-17; vide show-cause notice dated 23rd May, 2022 under section 148A(d) of the Act; for the purpose of assessing its alleged unexplained transactions. The Revenue could hardly dispute the clinching fact that the learned lower authorities had obtained the necessary approval of the learned Principal Commission of Income Tax -7, Delhi, under 2 | P a g e & C.O. No. 106/Del/2025 section 151(i) of the Act than under the latter clause (ii) thereto applicable in such an instance wherein a time bar of more than three years has elapsed from the end of the relevant assessment year.
Faced with the foregoing factual position, we are of the considered view that the impugned reopening itself is not sustainable in law as the learned lower authorities have not obtained the necessary approval under section 151(ii) of the Act in light of Union of India Vs. Rajeev Bansal [2024] 167 taxmann.com 70, deciding the same against the department as under: “73. Section 151 imposes a check upon the power of the Revenue to reopen assessments. The provision imposes a responsibility on the Revenue to ensure that it obtains the sanction of the specified authority before issuing a notice under Section 148. The purpose behind this procedural check is to save the assesses from harassment resulting from the mechanical reopening of assessments. 128 A table representing the prescription under the old and new regime is set out below: Regime Time limits Specified authority Section 151(2) of Before expiry of four Joint the old regime years from the end of the Commissioner relevant assessment year Section 151(1) of After expiry of four years Principal Chief the old regime from the end of the Commissioner or relevant assessment Chief years Commissioner or Principal Commissioner or Commissioner Section 151(i) of the Three years or less than Principal new regime three years from the end Commissioner or of the relevant Principal Director assessment year 3 | P a g e & C.O. No. 106/Del/2025 or Commissioner or Director Section 151(ii) of More than three years Principal Chief the new regime have elapsed from the Commissioner or end of the relevant Principal Director assessment year General or Chief Commissioner or Director General
The above table indicates that the specified authority is directly co-related to the time when the notice is issued. This plays out as follows under the old regime: (i) If income escaping assessment was less than Rupees one lakh: (a) a reassessment notice could be issued under Section 148 within four years after obtaining the approval of the Joint Commissioner; and (b) no notice could be issued after the expiry of four years; and (ii) If income escaping was more than Rupees one lakh: (a) a reassessment notice could be issued within four years after obtaining the approval of the Joint Commissioner; and (b) after four years but within six years after obtaining the approval of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
After 1 April 2021, the new regime has specified different authorities for granting sanctions under Section 151. The new regime is beneficial to the assessee because it specifies a higher level of authority for the grant of sanctions in comparison to the old regime. Therefore, in terms of Ashish Agarwal (supra), after 1 April 2021, the prior approval must be obtained from the appropriate authorities specified under Section 151 of the new regime. The effect of Section 151 of the new regime is thus: (i) If income escaping assessment is less than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining PART E the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) no notice could be issued after the expiry of three years; and (ii) If income escaping assessment is more than Rupees fifty lakhs: (a) a reassessment notice could be issued within three years after obtaining the prior approval of the Principal Commissioner, or Principal Director or Commissioner or Director; and (b) after three years after obtaining the prior approval of the Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General.
Grant of sanction by the appropriate authority is a precondition for the assessing officer to assume jurisdiction under Section 148 to issue a reassessment notice. Section 151 of the new regime does not prescribe a time limit within which a specified authority has to grant 4 | P a g e & C.O. No. 106/Del/2025 sanction. Rather, it links up the time limits with the jurisdiction of the authority to grant sanction. Section 151(ii) of the new regime prescribes a higher level of authority if more than three years have elapsed from the end of the relevant assessment year. Thus, non- compliance by the assessing officer with the strict time limits prescribed under Section 151 affects their jurisdiction to issue a notice under Section 148.
Parliament enacted TOLA to ensure that the interests of the Revenue are not defeated because the assessing officer could not comply with the pre- conditions due to the difficulties that arose during the COVID-19 pandemic. Section 3(1) of TOLA relaxes the time limit for compliance with actions that fall for completion from 20 March 2020 to 31 March 2021. TOLA will PART E accordingly extend the time limit for the grant of sanction by the authority specified under Section 151. The test to determine whether TOLA will apply to Section 151 of the new regime is this: if the time limit of three years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(i) has an extended time till 30 June 2021 to grant approval. In the case of Section 151 of the old regime, the test is: if the time limit of four years from the end of an assessment year falls between 20 March 2020 and 31 March 2021, then the specified authority under Section 151(2) has time till 31 March 2021 to grant approval. The time limit for Section 151 of the old regime expires on 31 March 2021 because the new regime comes into effect on 1 April 2021.”
We find merit in the assessee’s instant first and foremost legal grievance raised in the cross-objection C.O. No. 106/Del/2025 which goes to the root of the matter. The impugned reopening is hereby quashed in above terms therefore.
We further wish to emphasize here that although not strictly required to deal with the Revenue’s appeal on merits herein anymore, it would indeed be in the larger interest of justice to decide the same for the sake of completeness of the proceedings. Learned CIT(DR) vehemently argues the CIT(A) herein
1. 5 | P a g e & C.O. No. 106/Del/2025 has erred in law and on facts in reversing the Assessing Officer’s action treating the amount in question of Rs.20,25,63,469/- as unexplained cash credits vide following detailed discussion: “5. BRIEF FACTS The assessee has filed the appeal against the assessment order dated 31.03.2023 in which the Assessing Officer has made an addition of Rs. 20,25,63,469/-. The said addition has been made on two counts. First addition has been made in respect of amount received from Mukesh Khurana representing the outstanding balance of Rs. 19,75,63,469/- as on 31.03.2016. The AO in the assessment order has observed that the assessee has raised funds to the tune of Rs. 43,85,36,469/-from Sh. Mukesh Khurana out of which, a sum of Rs. 19,75,63,469/- was outstanding as on 31.03.2016. Thus, the AO has made the addition u/s 68 to the extent of amount outstanding from Mukesh Khurana of Rs. 19,75,63,469/-. Secondly, the AO has also made addition of Rs. 50,00,000/- deposited as cash in Axis Bank account number 914020023711938 on 21.03.2016. As per AO, the assessee was not able to explain the source of cash deposit and as such, the addition of Rs. 50 lac was made on account of cash deposit. Thus, the AO made total addition of Rs. 20,25,63,469/- in the hands of the appellant. FINDINGS, OBSERVATIONS & DECISION 6. In the light of the above submissions and documents filed by the appellant during the course of appellate proceedings and findings of the AO in the assessment order, the various grounds of appeal are adjudicated as below: 6.1 Ground of Appeal No.
1. This ground of appeal has been withdrawn by the appellant during the course of appellate proceedings, hence this ground of appeal is dismissed being withdrawn. 6.2 Ground of Appeal No. 2: In this ground, the appellant has contested the addition of Rs. 19,75,63,469/- made by the AO on account of loan received from Mukesh Khurana. The said addition has been made by the Assessing Officer by pointing out that Sh. Mukesh Khurana has filed an ITR for Rs. 9,81,020/- which is not commensurate with the amount of loan given to the assessee. Also the 6 | P a g e & C.O. No. 106/Del/2025 AO has stated that there is movement of money in the accounts on the same day. The appellant during the appellate proceedings submitted that the assessment of the assessee was completed on 31.05.2023 by making the addition of Rs. 19,75,63,469/- in respect of unsecured loan outstanding from Sh. Mukesh Khurana. The appellant submitted that assessment in the case of "Sh. Mukesh Khurana" was already completed by the same AO u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 on 28.03.2022 where all credit entries in the bank account of Sh. Mukesh Khurana were already subjected to addition. Consequently, as per appellant, the amount advanced by Sh. Mukesh Khurana to the appellant results into double addition as the same amount has been advanced out of the credit already taxed in the hands of Sh. Mukesh Khurana. Without prejudice to the above contentions, the appellant further submitted copy of ledger account of Sh. Mukesh Khurana in the books of accounts of the appellant company. It is seen that ITR, confirmation and bank account statements of lender were furnished during the assessment proceedings. Further, it was explained that the closing balance of Rs. 19,75,63,469/- can be closely co-related to the last three credit entries dated 28.03.2016, 29.03.2016 & 30.03.2016 in the ledger account of the appellant company. Explanation regarding funds received from Sh. Mukesh Khurana amounting to Rs. 12.08 crore on 28.03.2016 The appellant explained that total amount of Rs. 12.08 crore was received by the appellant from Sh. Mukesh Khurana on 28.03.2016 and relied upon a flow chart which is reproduced at page no. 6 of written submissions. From the said flow chart, it was explained that the sum credited in the bank account of appellant was sourced from Sh. Mukesh Khurana who received the said sum from the AR Landcraft LLP. It was also emphasized that the amount received by Sh. Mukesh Khurana from AR Landcraft LLP has been accepted as genuine during the appellate proceedings in the case Sh. Mukesh Khurana where in order of CIT(A) in Appeal No. CIT(A), Kanpur-4/10756/2015-16 dated 27.06.2024, the relevant findings are placed at page no. 67 to 68 and 76 &
79. The same are reproduced as under for ready reference: "It is seen that in entities mentioned at Serial No. 2, 4, 5, 6, 8, 9, 12 & 17in the table at Page No. 64, there is an advance given by the assessee during the earlier years/during the year which has been 7 | P a g e & C.O. No. 106/Del/2025 returned back. The copies of accounts of all the above said entities are reproduced below:
8 | P a g e & C.O. No. 106/Del/2025
9 | P a g e & C.O. No. 106/Del/2025 The discussion is as per table below: Sr. Name of the Remarks No. entity 1 AR Landcraft LLP The assessee had an opening advance given to the said entity on 01.04.2015 of Rs. 2.77 crore. By the end of Financial Year, the said advance has increased to Rs. 12.56 Cr. and credits of Rs. 12.52 cr. have been received by the assessee during the year. The assessee has filed the ITR, Bank account statement and confirmation of the entity in support of the credits received. Also, the assessee has advanced more money to the said entity during the year than the amount received back, the said payments are being made through regular bank accounts of the assessee wherein, there are transfer & receipt of funds to/from the group companies.
In all the above cases, the money was advanced by the assessee in earlier years/during the year and quantum of money received back in the current year has been added to the income by the AO. Once, the money which has been credited is the same money which has been advanced in earlier years/during the year, the same cannot be treated as unexplained money in the hands of the appellant. The AO has applied Section 69A to the case of the appellant. Once, the money has been advanced out of regular bank accounts of the assessee which are shown in the ITR, the said money once returned back or credited into the bank accounts of the assessee cannot be considered as unexplained u/s 69A of the Income Tax Act, 1961. If the AO had any doubt, then the sources of the said investments/advances in the years to which they pertained should have been investigated by the AO but the same was never done. It is further seen that the amount received by Sh. Mukesh Khurana was earlier advanced to AR Landcraft LLP. The relevant copy of account has already been scanned above. Thus, the amount received back by Sh. Mukesh Khurana was advance given to M/s. AR Landcraft LLP which has been received back and further transferred to the appellant. Under these circumstances, the funds advanced by Sh. Mukesh Khurana to the appellant company out of the funds already advanced to M/s. AR Landcraft LLP which were received back, cannot be said to be unexplained within the domain of Section 68. It was also submitted that the amount raised by the appellant was returned back in the subsequent years and complete ledger account 10 | P a g e & C.O. No. 106/Del/2025 of Sh. Mukesh Khurana in the books of the appellant for the period 01.04.2016 to 31.03.2020 was submitted. On the issue of unsecured loans which have been squared-off or returned back, the Hon'ble Supreme Court in the case of Assistant Commissioner of Income-tax vs. Gujarat Television (P.) Ltd. reported at [2024] 159 taxmann.com 739 (SC) has held as under: "SLP dismissed against order of High Court that where unsecured loans given to assessee were squared up on same date and nothing remained outstanding at end day, much less at end of financial year, Impugned reassessment proceedings to tax same under section 68 deserved to be quashed" Further, in the Judgment of Hon'ble High Court of Punjab & Haryana in the case of Principal Commissioner of Income-tax, Bathinda vs. Amravati Infrastructures Developers (P.) Ltd. reported at [2020] 117 taxmann.com 152 (Punjab & Haryana), it has been held as under: "Section 68 of the Income-tax Act, 1961-Cash credit (Share Capital) - Assessment year 2009-10-Assessing Officer made addition in hands of assessee-company on account of failure of assessee to prove identity and genuineness of persons who had introduced share capital and on account of failure to prove capacity of loan creditors as well as genuineness of transactions Commissioner (Appeals) found that shareholders were all private limited companies who had made investments out of their share capital and reserve through banking channels and assessee had filed a confirmation from loan creditors, regarding advancing of loan by them along with confirmation date, cheque No. and other relevant information along with PAN of companies - Accordingly, he deleted additions - Whether since question of genuineness of investors who introduced share capital and capacity of persons from whom loan was borrowed and genuineness of transactions, had been considered at length by first appellate authority and revenue had failed to point out any infirmity in fact or law, no question of law arose for consideration - Held, yes [Para 8] [In favour of assessee)" Further, the Hon'ble High Court of Delhi in the case of CIT vs. Dwarkadhish Investment Pvt. Ltd. reported at [2010] 194 Taxman 43 (Delhi) has held as under: "Section 68 of the Income-tax Act, 1961-Cash credits - Assessment year 2001-02-Whether though in section 68 11 | P a g e & C.O. No. 106/Del/2025 proceedings, initial burden of proof lies on assessee, yet once he proves Identity of creditors/share applicants by either furnishing their PAN numbers or income-tax assessment numbers and shows genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then onus of proof would shift to revenue and just because creditors/share applicants could not be found at address given, it would not give revenue right to invoke section 68 - Held, yes" In the judgment of Hon'ble Apex Court in the matter of Commissioner of Income Tax vs. Orchid Industries (P.) Ltd [2020] 116 taxmann.com 113 (SC) dismissed the SLP filed by the department against the Judgment of Hon'ble Bombay High court in the matter of Commissioner of Income Tax Vs. Orchid Industries (P.) Ltd [2017] 88 taxmann.com 502 (Bombay), where it was held as under: "The assessee had produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. Therefore, the addition was liable to be deleted." Further, reliance is also placed on decision of Hon'ble Apex Court in PCIT s. Himachal Fibres Ltd. (2018) 259 Taxmann 5 In which the decision of Hon'ble Delhi High Court was confirmed in case of PCIT vs. Himachal Fibres and it was held under: "In a case where the assessee has furnished all the relevant facts within the knowledge and offered a credible explanation, then the onus reverts to the Revenue to prove that these facts are not correct. In such a case, Revenue cannot draw inference based on suspicion or doubt or perception of culpability etc. Also, reliance is also placed on the order dated 24th August 2022 of Ld. ITAT Mumbai Bench in case of Raw Pressery Pvt. Ltd Vs ACIT [2022] 143 taxmann.com 158 (Mumbai - Trib.) where it was held that: "Where assessee received share premium from founder promoter and had discharged its burden of proving his identity, genuineness and creditworthiness, and both lower authorities could not find any defects or fault therein, addition made under section 68 was directed to be deleted."
12 | P a g e & C.O. No. 106/Del/2025 Further, reliance is also placed on the judgment of Ld. ITAT Chennai D Bench in KP Manish Global ingredients (P) ltd. vs. ACIT where it was held as under: "Section 68 of the Income-tax Act, 1961 Cash credit (Unsecured loans) Assessment year 2009-10 During year assessee company received an unsecured loan of certain amount from three parties Assessing Officer made addition towards said amount received on grounds that loan transactions were nothing but accommodation entries of assessee's own unaccounted income Inform of unsecured loan It was noted that assessee had produced various details including financial statement and bank statements of creditors and their confirmation letters Assessee had also produced source of income of said creditor firms which was commission received by them from certain companies -Further, all these transactions of receiving loan by assessee were routed through proper banking channel Thus, assessee had proved identity and credit-worthiness of parties and genuineness of transactions Further, Assessing Officer had not brought on record any evidence to prove that said sum was undisclosed income of assessee Whether, on facts, impugned addition made undersection 68 on account of said amount received by assessee was unjustified and same was to be deleted - Held, yes [Paras 9 and11] [In favour of assessee)" Further, the Hon'ble High Court of Bombay in the case of Principal Commissioner of Income-tax-1 vs. Ami Industries (India) (P.) Ltd. reported at [2020] 116 taxmann.com 34 (Bombay) has held as under: Section 68 of the Income-tax Act, 1961 Cash credit (Share application money) Assessment year 2010-11-Assessing Officer noted that assessee had disclosed funds from three Kolkata based companies as share application money But, since where about of above companies were doubtful and their identity could not be authenticated, Assessing Officer treated aforesaid funds as money from unexplained sources and added same to income of assessee as unexplained cash credit under section 68-However, it was found that assessee- company had furnished PAN, coples of Income tax returns of creditors as well as copy of bank accounts of three creditors through which share application money was deposited in order to prove genuineness of transactions -Further, insofar as creditworthiness of creditors were concerned, Tribunal recorded that bank accounts of creditors showed that creditors had funds to make payments for share application money and in this regard, resolutions were also passed by 13 | P a g e & C.O. No. 106/Del/2025 Board of Directors of three creditors - Thus, first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of creditors, genuineness of transactions and creditworthiness of creditors which finding of fact stood affirmed by Tribunal Revenue had not been able to show any perversity in aforesaid findings of fact by authorities below Whether therefore, Tribunal was right in confirming order passed by Commissioner (Appeals) and holding that no addition could be made under section 68- Held, yes [Paras 21, 23 and 24] [In favour of assessee) The Hon'ble High Court of Patna in the case of Addl. CIT v. Hanuman Aggarwal (1985) 151 ITR 150 (Pat.) has held as under: "It can never be within the exclusive knowledge of the debtor to know the sources of income of the creditor. Once he is supplied the credit that he wants, he is satisfied. Once he has furnished the true identity, the correct address and the correct GIR number of the creditor, fulfils his obligation under the Act. The assessee is not supposed to know the capacity of the money-lender or the cash creditor. It is within the exclusive domain of the creditor. It is for that specific purpose that section 131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the power of a civil court under that provision and call upon the creditor concerned to prove his capacity to pay and the genuineness of the transaction. Once the ITO or the authority concerned is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay, by cross-examining him." Further, in the judgment of Ld. ITAT Delhi Bench in the case of ACIT vs. Enrich Agro Food Products (P.) Ltd. reported at 2022] 141 taxmann.com 309 (Delhi - Trib.), it has been held as under: Where assessee-company received share capital including share premium and furnished various documentary evidences in form of confirmation from investor, statement of bank account of investor etc. so as to substantiate identity and creditworthiness of investor and genuineness of transaction and revenue falled to bring on record anything adverse to these evidences, Impugned addition made under section 68 in respect of such share capital amount was unjustified"
14 | P a g e & C.O. No. 106/Del/2025 The facts outlined in paras 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 the lenders. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it has been decided by the Hon'ble Calcutta High Court in the case of Commissioner of Income Tax, Kolkata-III Versus Dataware Private Limited ITAT No. 263 of 2011 Date: 21st September, 2011 as under: "The Tribunal, in our view, has correctly appreciated the position in law which is that when an unexplained credit is found in the books of account of an assessee the Initial onus is placed on the assessee. The assessee is required to discharge this oner of initial onus. Once that onus is discharged, it is for the revenue to prove that the credit found in the books of accounts of the assessee is the undisclosed income of assessee. In the circumstances obtaining in the present case, in our view, the assessee has discharged that initial onus. The assessee is not required thereafter to prove the genuineness of the transactions as between its creditors and that of the creditors source of income, i.e., the sub- creditors [See Nemi Chand Kothari K vs. CIT & Anr. (2003) 264 ITR 254 and judgment of this court in Mod Creations Pvt. Ltd. vs. Income Tax Officer decided on 29.08.2007]" Discharge of burden 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. What is relevant is the identity, creditworthiness of the depositor and genuineness of the transaction. 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 rigors of Section 68 were not satisfied. The Ld. ITAT Kolkata Bench in in the case of M/s. Brightstar Vincom Pvt. Ltd. vs. ITO-3(3), Kolkata in para 6.1 to 7 of its order held as under:
15 | P a g e & C.O. No. 106/Del/2025 6.1 The Assessing Officer, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the assessee could not produce the directors of the subscriber companies before the Assessing Officer, even then, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. The Ld. Counsel for the assessee has rightly placed rellance upon the decision of the Hon'ble Bombay High Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon'ble High Court has held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Further the Jurisdictional Calcutta High Court in the case of "Crystal networks (P) Ltd. vs CIT" (supra) has held as under: "We find considerable force of the submissions of the leamed counsel for the appellant that the Tribunal has merely noticed that since the summons Issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been stablished the Tribunal should not have ignored this fact finding."
So far as the reliance of the Ld. DR on the decision of the Hon'ble Supreme Court in the case of "PCIT v/s NRA Iron & Steel (P) Ltd." (supra) is concerned, we note that the Hon'ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the "the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the 16 | P a g e & C.O. No. 106/Del/2025 assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before Invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." Thereafter the Hon'ble Supreme Court in the case of PCIT v/s NRA Iron & Steel (P) Ltd. summed up the principles which emerged after deliberating upon various case laws as under: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit- worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit- worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act." The Hon'ble Supreme court, thus, has held that once the assessee has submitted the documents relating to Identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound to conduct an independent enquiry to verify the same. However, as noted above, the Assessing Officer in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the Assessing Officer and the Assessing Officer has not pointed out any discrepancy or insufficiency sufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the 17 | P a g e & C.O. No. 106/Del/2025 burden shifted upon the Assessing Officer to examine the evidences furnished and even make independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting the same to the assessee. In view of this, even applying the ratio laid down by the Hon'ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd., impugned additions are not warranted in this case." Further, in a case similar to the case of the appellant, the Hon'ble Supreme in the case of Principal Commissioner of Income Tax, Central- 1 vs. Adeline Construction (P.) Ltd. reported at [2018] 99 taxmann.com 45, held as Section 68 of the Income-tax Act. 1961 Cash credits (Burden of proof) A search in premises of 'B' Group led to survey in premises of assessee herein. Thereupon Assessing Officer completed assessment wherein addition was made to assessee’s income under section 68- Commissioner (Appeals) as well as Tribunal deleted said addition holding that relevant enquiry based upon materials furnished by assessee had not been made High Court also found that assessee had discharged onus initially cast upon it by providing basic details which were not suitably enquired into by Assessing Officer - Accordingly, High Court upheld order passed by Tribunal Whether, on facts, SLP filed against order of High Court was to be dismissed Held, yes [Para 4] [In favour of assessee] The Ld. Tribunal Bench of Delhi in the case of ITO vs. Jaidka Woolen & Hosiery Mills Pvt. Ltd. in has held as under: "There is no finding that material disclosed was untrustworthy. No evidence has been brought on record, if investment made by the Investor Company actually emanated from the coffers of the assessee company so as to enable the total investments to be treated as undisclosed income of the assessee. No interference is called for in the matter. Ground No. 3 of the appeal of the Revenue is dismissed. No other point is argued or pressed." 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 investor was not creditworthy on the ground that he had shown low income has no force in as much as the capacity 18 | P a g e & C.O. No. 106/Del/2025 to Invest funds by an investor depends upon the availability of funds with the investor and not on the tax paid/annual income of the investor. Similar view is also taken by Ld. ITAT Delhi Bench in its recent judgment in the matter of Assistant Commissioner of Income-tax, Central Circle-25 New Delhi vs. Goodview Trading (P.) Ltd 2017] 82 taxmann.com 55 (Delhi - Trib.) in which it was held as under: "The assessee during the course of proceedings has discharged its liability by submitting necessary evidence available to establish the bona fide of the transactions. Thereafter, the onus shifted on to the revenue to prove that the claim of the assessee was factually incorrect. Simply by pointing out that the applicant companies did not have sufficient income or that the bank accounts indicated credits and debits in rapid succession leaving little balance does not discharge the burden cast upon the revenue to take an adverse view in the matter. Further, the Ld. ITAT Kolkata Income Tax Appellate Tribunal in its judgment dated 22.01.2021 in the matter of I.T.O., Ward-4(1), Kolkata vs. M/s. R. k. b. Services Pvt. Ltd. made the following observation: "It would be worthwhile to take note of the observation by Hon'ble Justice A. K. Sikri while delivering the judgment in CIT vs. Mayawati when His Lordship then was in Hon'ble Delhi High court reported in 338 ITR 563 (Del) observed that- "The capacity of any person does not mean how they earn monthly or annually but the term capacity is a wide term and that can be pursued by how wealthy he is. All the formalities, as per the law are made by the assessee and donors as well." Three criteria of Section 68 Section 68 speaks of three criterias of the Identity, genuineness and creditworthiness of the lender for justifying the credit as acceptable. There are plethora of judgments which clarify the extent to which the assessee is supposed to justify the above three criterias. (On identity) The Hon'ble High Court of Mumbai in the case of Orient Trading Company Ltd. vs. CIT 49 ITR 723 held as under:
19 | P a g e & C.O. No. 106/Del/2025 "When the entry stands in the name of the third party and the assessee establishes the identity of the creditor and produces evidence showing that the entry is not fictitious, initial burden lying on the assessee stands discharged; the burden shifts on to the Revenue to show that the entry represented assessee's suppressed Income." (On Capacity) It has been held by the Ld. Mumbai Tribunal Bench in the case of ACIT vs. Krishna Sheet Processors Pvt. Ltd. [2015] 44 CCH 0280 as under: "Where the assessee furnished the bank statements of the loan creditors, evidencing their credit worthiness, the assessee has discharged its burden. No additions can be made unless a contrary finding is established by the AO." (On Genuineness) It has been held by Hon'ble High Court of Calcutta in the case of CIT vs. Sahibganj Electric Cables (P) Ltd. reported at [1978] 115 ITR 408 (Cal.) as under: "Amounts of loan were received by cheques and repayment also made by cheques through assessee's bankers. The creditors gave confirmation letters mentioning therein their Income-tax file numbers. ITO without making any further enquiry, disbelieving the evidence of the assesse made addition. ITAT held the addition not justified as the assessee discharged the onus. High Court held that the Tribunal was justified in deleting the addition. Similar view was expressed in the case of ACIT vs. Divine (India) Infrastructure (P) Ltd. reported at [2014] 42 CCH 0022 (Del Trib.) The receipt of funds by Sh Mukesh Khurana from AR Landcraft LLP has already been held to be genuine in hands of Mukesh Khurana in the Appellate order discussed above. The same funds which were further transferred by Sh Mukesh Khurana to assessee company can't be held to be ingenuine, In view of above discussion, there appears no reason to consider the said credits in the bank accounts of the assessee as unexplained credit u/s 68 of the Income Tax Act, Explanation regarding funds received from Sh. Mukesh Khurana amounting to 9.54 crores on 29.03.2016. The appellant explained that there was total amount of Rs. 9.54 crore which was received by the appellant from Sh. Mukesh Khurana on 20 | P a g e & C.O. No. 106/Del/2025 29.03.2016 and relied upon a flow chart which is reproduced at page no. 10-11 of written submissions. From the said flow chart, it was explained that the sum credited in the bank account of appellant was sourced from Sh. Mukesh Khurana who received the said sum from Evergreen Synfab Pvt. Ltd. which in turn received the funds from AR Landcraft LLP. It was also explained that from the flow chart that a fixed amount was rotated multiple times among various entities. It was also submitted that the same funds received by Sh. Mukesh Khurana from Evergreen Synfab Pvt. Ltd. has already been confirmed in his taxable income as per the appellate order dated 27.06,2024 in Appeal No. CIT(A), Kanpur-4/10756/2015-16. Perusal of the order of the CIT(A) reveals that an amount of Rs. 17.04 crore received from M/s. Evergreen Synfab Pvt. Ltd. by Sh. Mukesh Khurana has been confirmed in the hands of Sh. Mukesh Khurana. The said funds have been further transferred to the accounts of the appellant company. Accordingly, these credits originate from the money which has already been added and taxed in the hands of Sh. Mukesh Khurana. As the same money cannot be taxed twice, the addition made in the hands of the appellant company is deleted. Explanation regarding funds received from Sh. Mukesh Khurana amounting to Rs. 7.5 crore on 30.03.2016 The appellant explained that there was total amount of Rs. 7.5 crore which was received by the appellant from Sh. Mukesh Khurana on 30.03.2016 and relied upon a flow chart which is reproduced at page no. 12-13 of written submissions. From the said flow chart, it was explained that the sum credited in the bank account of appellant was sourced from Sh. Mukesh Khurana who received the said sum from Evergreen Synfab Pvt. Ltd. which in turn received the funds from AR Landcraft LLP. It was also explained that from the flow chart, it is noticed that the amount was rotated multiple times among various entities. It was also submitted that the same funds received by Sh. Mukesh Khurana from Evergreen Synfab Pvt. Ltd. has already been confirmed in his taxable income as per the appellate order dated 27.06,2024 in Appeal No. CIT(A), Kanpur-4/10756/2015-16. Perusal of the order of the CIT(A) reveals that an amount of Rs. 17.04 crore received from M/s. Evergreen Synfab Pvt. Ltd. by Sh. Mukesh Khurana has been confirmed in the hands of Sh. Mukesh Khurana. The said funds have been further transferred to the accounts of the appellant company. Accordingly, these credits originate from the money which has already been added and taxed in the hands of Sh. Mukesh Khurana. As the same money cannot be taxed twice, the addition made in the hands of the appellant company is deleted. 21 | P a g e & C.O. No. 106/Del/2025 Conclusion From the above facts & circumstances, it is noticed that the AO has made the addition to the tune of Rs. 19,75,63,469/- in respect of amount outstanding towards Sh. Mukesh Khurana. It is noticed that sum of Rs. 17.04 crore has already been added and confirmed in the hands of Sh. Mukesh Khurana who in turn has raised funds from Evergreen Synfab Pvt. Ltd. Thus, the observation of the AO that the creditworthiness of Sh. Mukesh Khurana is not in line with the outstanding amount has duly been addressed as the amount stands added in the hands of Sh. Mukesh Khurana and confirmed in appeal. It is also noticed that the same funds were given to the appellant and once the said addition has been made in the hands of Sh. Mukesh Khurana, then it can't be added again in the hands of the appellant as the same would result in duplicate addition. Accordingly, this ground of appeal is allowed. 6.3 Ground of Appeal No.
3. In this ground, the appellant has contested the addition of Rs. 50 lacs made by the AO on account of cash deposit. The AO while making the addition has noticed that the assessee has deposited a sum of Rs. 50 lacs in Axis Bank Account Number 914020023711938. As per AO, the source of cash deposit was not explained. The appellant during the course of appellate proceedings has submitted that the assessee has withdrawn a sum of Rs. 75 laes in cash from Account Number 912020013484817 with Axis Bank on 04.01.2016 and the same amount was deposited with Axis Bank Account Number 914020023711938. The AR also submitted the copy of bank statement along with the ledger account to substantiate the source of cash deposit. The assessee vide note sheet entry dated 13.11.2024 was asked to submit the copy of bank account along with the cashbook for the period 01.04.2015 to 31.03.2016. The Appellant in response to the above submitted that the copy of cashbook along with the relevant bank statements have duly been submitted during the course of assessment proceedings before AO vide reply dated 17.02.2023 vice acknowledgement number 958716451170223. From the cashbook enclosed with reply dated 18.11.2024, it has been noticed that the there is a sufficient cash in hand in the cashbook as on 21.03.2016, thus the contention of the appellant that the cash doner of as deposited out of regular sources is acceptable. The relevant page of the cash book is scanned below for ready reference:
22 | P a g e & C.O. No. 106/Del/2025 From the above, it is apparent that the assessee had available cash in hand before the same was deposited in the bank account of the assessee. The Hon'ble High Court of Gujarat in the case of Principal Commissioner of Income-tax vs. Vishal Exports Overseas Ltd. reported at [2024] 164 taxmann. com 286 (Gujarat) has held as under: "Where Assessing Officer made addition on account of unexplained cash deposit in bank on ground that assessee did not have sufficient cash balance and there was no conclusive proof as to how such huge amount came into possession of assessee in form of cash, since cash was duly accounted for in cash book and audited bank accounts, impugned addition was to be deleted" Further, the Ld. Tribunal Bench of Delhi in the case of Rajesh Mangla vs. Deputy Commissioner of Income-tax reported at [2024] 162 taxmann.com 324 (Delhi - Trib.) has held as under: "Where Assessing Officer had made an addition treating cash deposits as income from undisclosed sources, since cash deposits were made out of cash withdrawals, impugned addition was to be deleted" Further, the Hon'ble High Court of Delhi in the case of Kulwant Rai vs. CIT (Central)-II, reported at [2007] 163 Taxman 585 (Delhi)/291 ITR 36 (Delhi), has held as under: "Assessee's explanation that cash found was out of withdrawals made by him from bank from time to time, was not accepted by Assessing Officer Cash-flow statement furnished by assessee was also rejected by Assessing Officer 23 | P a g e & C.O. No. 106/Del/2025 on basis of suspicion that assessee must have spent amount for some other purposes - Assessing Officer, accordingly, made addition by treating aforesaid cash as unexplained cash Tribunal found that as per cash book maintained by assessee, assessee had withdrawn from bank certain amount which was far in excess of cash found during course of search proceedings and that no material had been relied upon by assessing authority to support its view that entire cash withdrawals must have been spent by assessee - Accordingly, Tribunal held that addition made was not legally sustainable under section 158BC and same was ordered to be deleted - Whether order of Tribunal was justified - Held, yes" Further, the Hon'ble High Court of Karnataka in the case of S.R. Venkata Ratnam vs. Commissioner of Income-tax reported at [1981] 6 Taxman 263 (Kar.) has held as under: "Once the assessee disclosed the source emanating from the withdrawal made on a given date from a given bank, the revenue was not concerned with what the assessee did with that money. Without proper investigation as to the genuineness of such deposits or documentary evidence, the ITO could not merely surmise that it would be improbable for the assessee to keep Rs. 15,000 unutilized for a period of two years. He should have given the assessee an opportunity to substantiate his assertion as to the source, of his capital outlay. Since the Commissioner also did not approach the problem in this manner, it could not be said that he exercised his revisional jurisdiction judicially and properly." Further, the Ld. Tribunal Bench of Lucknow in the case of Shri. Pawan Agarwal vs. Dy. CIT in has held as under: "5. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the Assessing Officer has made addition on the basis AIR information. Though cash flow statement was furnished before him, but he has not looked into while making the addition; whereas the Id. CIT(A) has examined all the entries in the cash flow statement, which is available on record. In the cash flow statement, the movement of cash was disclosed and it is evident that on all dates whenever cash was deposited in the bank, the assessee was having sufficient cash balance. Nothing has been brought on record to demonstrate that the cash withdrawn by the assessee was exhausted or utilized for other purposes and the deposits were made out of undisclosed sources. In the light of these facts, we are of the 24 | P a g e & C.O. No. 106/Del/2025 considered opinion that the assessee has properly explained the source of deposits in the bank, which was properly appreciated by the Id. CIT(A). Accordingly, we find no Infirmity in the order of the Id. CIT(A) and we confirm the same." Further, the Ld. Tribunal Bench of Chandigarh in the case of Gurpreet Singh vs. Income-tax Officer in Appeal No. 221 (CHD.) OF 2014, has held as under: "8. The assessee has stated specifically that the amount was redeposited on withdrawal from the bank and sufficient cash was available. Therefore, it was the duty of the Assessing Officer to examine this fact. Further nothing is brought on record that the amount was utilized by the assessee on withdrawal from the bank account. Considering the facts of the case in the light of the decision of the hon'ble Punjab and Haryana High Court in the case of Shivcharan Dass (supra), we set aside the orders of the authorities below and restored the issue to the file of the Assessing Officer with directions to redecide this issue by giving reasonable sufficient opportunity of being heard to the assessee and the Assessing Officer shall pass a reasoned order on the submissions of the assessee." Further, the Ld. Tribunal Bench of Delhi in the case of Smt. Perminder Kaur Matharoo Vs. The I.T.O in No. 840/DEL/2021 has held as under: 17. In our considered opinion, once cash flow statement is not controverted by the -Assessing Officer as well as the Id. CIT[A], when it was specifically submitted that the same is based on the entries made in the cashbook, then the source of cash deposit in the bank account cannot be discarded by the authorities below." Is the Ld. Tribunal Bench Bangalore in the case of Shri. Narayana Shibaroor Shibaraya vs. ITO In has held as under: 5. I have considered the rival submission. I am of the view that the explanation offered by the Assessee with regard to the source of deposit of Rs. 15.00 lakhs in his bank account is satisfactory and therefore, no addition can be made on account of unexplained cash. As rightly contended by the Id. Counsel for the Assessee, the withdrawal of cash from the bank account prior to deposit of cash is not disputed by the revenue. The fact that the Assessee did not explain the reasons for withdrawal of cash from his bank account cannot 25 | P a g e & C.O. No. 106/Del/2025 be the basis to hold that the source of deposit of cash was not explained by the Assessee. The legal position in this regard is that if the deposit of money in the bank account is preceded by withdrawal of money from the very same bank account, then the source of funds is prima facie demonstrated or explained by the Assessee. The Honorable Karnataka High Court in the case of S. R. Ventakaratnam Vs CIT, Karnataka- 1 & Others 127 ITR 807 has held that once the Assessee discloses the source as having come from the withdrawals made on a given date from a given bank, it was not open to the revenue to examine as to what the Assessee did with that money and cannot chose to disbelieve the plea of the Assessee merely on the surmise that it would not be probable for the Assessee to keep the money unutilized. The decision of the Hon'ble Karnataka High Court supports the plea of the assessee. It is seen that the cash deposits in the bank account are preceded by withdrawal from the very same bank account. I am of the view that the ratio laid down in the aforesaid judgment will apply to the facts of the present case. If the revenue wants to disbelieve the plea of the Assessee, then it must show that the previous withdrawal of cash would not have been available with the Assessee on the date of deposit of cash in the bank account. The AO and CIT(A) have proceeded purely on assumption and surmises that cash withdrawn was not available to the Assessee on completely. extraneous factors. In our view, the Assessee has satisfactorily explained the source of funds out of which deposit of cash was made in the bank account. I therefore delete the addition made in this regard. Consequently, the appeal of the Assessee is allowed. In view of the facts of the case, submissions of the AR and judicial pronouncements, the addition made by the AO is not found sustainable as the assessee had cash-in-hand available with him before making the said deposits. Hence, the addition made on this issue is deleted and this ground of appeal is allowed.”
This is what leaves the Revenue aggrieved. 7. The assessee on the other hand has filed a detailed paper- book running into 66 pages comprising of the entire case records including the assessment order passed in case of M/s. AR
26 | P a g e & C.O. No. 106/Del/2025 Landcraft LLP dated 29th March, 2022 under section 147 r.w.s. 144B proceeded by section 143(3) assessment completed in its case on 29.12.2018 along with books of account etc. It further places strong reliance on learned CIT(A)’s detailed discussion deleting the impugned addition.
We have given our thoughtful consideration to the Revenue’s and the assessee’s foregoing vehement rival submissions. We are of the considered view that the learned CIT(A)’s foregoing detailed findings deleting the impugned section 68 unexplained cash credit addition warrant no interference on our part. Suffice to say, the assessee had admittedly received a sum of Rs.12.08 crores on 28.03.2016 coming from yet another group entity M/s. AR Landcraft LLP; through Mr. Mukesh Khurana (common director) which already stands held as genuine as per the relevant material discussed hereinabove in the CIT(A)’s order extracted in the preceding paragraphs.
Mr. Rohit Kapoor further takes us to page 44 of the CIT(A)’s order that the sum of Rs.9.54 crores received by Sh. Mukesh Khurana, the assessee’s director, already stands assessed in his hands as per the CIT(A)’s order in preceding assessment year 2015-
27 | P a g e & C.O. No. 106/Del/2025
The factual position is hardly any different regarding further sum of Rs.7.5 crores received by Sh. Khurana which also stands held as taxable in the CIT(A)’s very order. 10. Be that as it may, it is thus clear that the assessee has received its impugned loan sum for Sh. Khurana who has already been assessed in the relevant financial year and the preceding assessment year; as the case may be, and, therefore, any further addition herein would amount to an instance of double addition only. Learned counsel further clarifies at the end that all these are group entities assessed in the same jurisdiction all along. We thus deem it appropriate to refer to the hon’ble Gujarat high court’s decision in Tax Appeal No.1180 of 2018 PCIT Vs. Gyscoal Alloys Ltd., dated 1st October, 2018 that section 68 unexplained cash credits addition in an instance involving group entities and directors etc. assessed in the same jurisdiction who satisfy the corresponding three limbs of identity, genuineness and creditworthiness, is not sustainable in law. We accordingly conclude in light of the CIT(A)’s comprehensive findings having discussed both the relevant facts as well as law at length that the Revenue’s sole substantive ground seeking to revive the impugned