ACIT CIRCLE-22(1), MUMBAI V. RAHEJA LEGACY TRUST, MUMBAI

ITA 2826/MUM/2024

AI Insights

The case involves cross appeals by the Raheja Legacy Trust and the ACIT against the order passed by the National Faceless Appeal Centre concerning the assessment year 2018-19. The primary issue was the addition of unsecured loans amounting to Rs. 2,57,28,54,346 as unexplained cash credit under Section 68 of the Income Tax Act. The Tribunal examined the evidences and submissions made by both parties, including the remand report from the assessing officer, and found that some loans were genuine and others were not, based on the documentation provided.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37303 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Other Referred Cases: Bharat Explosive Ltd. vs. ACIT, Ivan Singh vs. Asst. CIT, V.R. Global Energy (P) Ltd. vs. ITO, Kinetic Capital Finance Ltd. vs. ACIT, Royal Manor Hotels & Industries Ltd. vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANYOGITA NAGPAL
• Assessee Lawyers: BHARAT RAICHANDANI; BHAGRATI SAHU
• Keywords: Set aside; Additional evidence; Retrospective amendment; Corroborative evidences; Unexplained cash credit; TDS; Accommodation entries; Bogus
• Section: 143(3); 143(2); 250; 68; 131; 43; 133(6); 113; 73

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.2268/Mum/2024 Assessment Year: 2018-19 Raheja Legacy Trust 5th Floor, Raheja Centre Point, 294, C.S.T. Road, Santacruz (East), Mumbai-400098. PAN: AABTR 4447 F vs. ACIT, Circle-22(1), Mumbai (Appellant) (Respondent) ITA No.2826/Mum/2024 Assessment Year: 2018-19 ACIT, Circle-22(1), Mumbai vs. Raheja Legacy Trust 5th Floor, Raheja Centre Point, 294, C.S.T. Road, Santacruz (East), Mumbai-400098. PAN: AABTR 4447 F (Appellant) (Respondent) Present for: Assessee by : Shri Bharat Raichandani & Bhagrati Sahu Revenue by : Smt. Sanyogita Nagpal, CIT/DR Date of Hearing : 25.11.2024 Date of Pronouncement : 28.01.2025 O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER: These cross appeals filed by the assessee and the Revenue are directed against the order u/s 250 of the I.T. Act, 1961 passed by the National Faceless Appeal Centre dated 19.03.2024. Since common issue on identical facts are involved in these appeals therefore, both these appeals are adjudicated together as follows: ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 2 ITA 2826/M/2024 (Revenue Appeal) 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs. 179,20,66,090/- out of total addition of Rs. 182,85,48,590/- as suggested by the JAO on various ground in his remand report without appreciating that during the remand proceeding sufficient opportunities have been provided to the assessee and after carefully considering and verifying the details submitted by the assessee and the details submitted by the loan parties, the JAO has reported the addition in the cases only where the assessee or loan parties have failed to prove the genuineness of the transactions and/or credit worthiness of the parties along with sufficient documentary evidences. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the JAO to exclude the loans amounting to Rs. 164,22,99,347/-which have been merely renewed during the year from the scope of addition to be made under section 68 on the ground that these represent book adjustment and not having any actual receipt of money without appreciating that as per Tax Audit Report [Form No. 3CB, col. 31(a)), said amount has been reported under the category of particulars of loan or deposit accepted during the year and no details to explain identity, creditworthiness and genuineness of transaction have been furnished. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that provision of Section 68 applies to all the entries in whomsoever name they may stand found credited in the books of the assessee during the relevant previous year and the amount of Re 164,22,99,347/- was duly certified by the Auditor in Column No.31(0) of Form 3CD as fresh credits and therefore it was the obligation of the assessee to prove the identity and credit worthiness of the lender and genuineness of the transaction pertaining to the amount of Rs. 164,22,99,347/- found credited during the previous year as required as per the provision of section 68 of the IT Act. 4 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the decision of the Bharat Explosive Ltd. vs. ACIT (ITA 385/Agra/2012) to hold that for claim of FD renewal, no further verification is required whereas the Hon'ble ITAT in the said case has set aside the matter relating to the FD renewal to the file of the AO for verification and therefore, the Ld. CIT(A) has wrongly relied on the decision in case of Bharat Explosive Ltd. vs. ACIT in favor of the assessee whereas the same is in favor of the revenue. 5 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that loans amounting to Rs. 164,22,99,347/-represents FD renewal and thus out of scope of section 68 of the Act when the assessee has during the assessment as well as remand proceedings failed to furnish complete ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 3 details in support of claim of renewal of FD and thus rendering the claim of renewal of FD as unexplained loan transaction. 6 On the facts and in the circumstances of the case and in law, the Ld, CIT(A) erred in holding that no addition can be made in respect of enhancement of addition of Rs.2,09,67,235/-, proposed in the remand report relating to repayment against renewal of FD which was not shown in tax audit report, as the same represents error in reporting the repayments of the loans in tax audit report and not the loans taken during the year without appreciating that no specific details have been filed pertaining to the identity, creditworthiness or genuineness of the transaction and thereby making the unreported transaction in tax audit report as unexplained cash credit. 7 On the facts and in the circumstances of the case and in law, the L.d. CIT(A) erred in holding that no addition can be made in respect of enhancement of addition of Rs.37,50,000/-, proposed in the remand report as the lender Shri Sudhir Kanji Thakker confirmed loan given to the assessee at Rs.1,22,50,000/- against receipt of loan from said party reported in tax audit report at Rs.85,00,000/-, as the loan from this party was accepted genuine by AO in the assessment order, when nature of amount of Rs. 37,50,000/-received from said party remained unexplained transaction to be considered as unexplained cash credit u/s 68 of the Act. 8 On the facts and in the circumstances of the case and in law, the Ld. CTT(A) erred in directing the JAO not to enhance the addition under section 68 by an amount of Rs. 3,25,27,267/-, proposed by the JAO in his remand report, as the AO had already considered these amounts as genuine in nature while passing the assessment order originally, ignoring that during the remand report proceeding on enquiry made by the AO these loan have been found non- genuine. 9 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs.5,38,90,000/-, proposed by the JAO in his remand report (in respect of 30 parties), mentioning that the source of source cannot be inquired without appreciating that the assessee failed to substantiate creditworthiness of the lender parties which is must in order to discharge the primary onus which is lies on the assessee. 10 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs.2,56,06,000/-/-, proposed by the JAO in his remand report (in respect of 44 parties), in the cases where only confirmations have been submitted by assessee ignoring that except confirmations no other evidences have been submitted by the assessee and thus the primary onus lies on the assessee has not been discharged to prove the genuineness of transaction and creditworthiness of the lender parties. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 4 11. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting addition of Rs. 11,50,000/-, proposed by the JAO in his remand report, in the case where Lender has not furnished bank statement without appreciating that in absence of lenders bank statement the genuineness of transaction remained unverified. ITA 2268/Mum/2024 (Assessee Appeal) “1. The Ld. CIT (A) erred in ignoring the fact that out of loans aggregating to Rs.3,64,82,500/- which have been confirmed under section 68 of the Income Tax Act, 1961; a significant portion of such loans have been fully repaid before the commencement of assessment proceedings and the remaining loans have also been repaid to the extent of 52.50% or more on or before 10/01/2024 and the balance loan to the extent of 47.50% or less is to be repaid according to the Schedule of repayment. 2. The Ld. CIT (A) erred in confirming additions to the appellant's income under section 68 of the Income Tax Act, 1961, by applying provisions relating to \"Source of Source,\" which were not applicable for AY 2018-19. The appellant pleads that it is a settled law that what is not permitted directly cannot be permitted indirectly. 3. The Ld. CIT (A) erred in ignoring the fact that the appellant has consistently submitted Form-15G and Form-15H and TDS Returns on time for the relevant and preceding years, which were recorded in the Income Tax Department's database well before assessment proceedings began. This ensured the identification and confirmation of each lender's details, including their Name, Address, and PAN, with the Income Tax Department, due to which the revenue authorities could give credit to each of such lender for their TDS amounts. Thus prima facie, onus is duly discharged by the appellant for such lenders. 4. The Ld. CIT (A) has erred in confirming addition to the appellant's income under section 68 without considering the peculiar facts and circumstances faced by the appellant, including the impact of the unprecedented Covid pandemic on the business and resulting delays in loan repayments consequently leading to non-co-operation by the lenders as well as filing of legal cases by lenders against the appellant. 5. The Ld. CIT (A) erred in ignoring the fact that in case of such large number of lenders, it was not practical to obtain each and every lender's all the information as asked by the AO/JAO. Further the AO/JAO selected and verified lenders of high value loans, and amongst such lenders, substantial number of lenders were found genuine. 6. The Ld. CIT (A) erred in confirming additions u/s. 68 of the Income Tax Act, 1961 wherein no materially adverse fact finding is given by the AO/JAO. Such ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 5 additions are made solely on JAO's notings and opinions and the appellant was not given any opportunity to make its submission or cross-examine such lenders. The proceedings have been conducted against principles of natural justice. 7. The Ld. CIT (A) has erred in adding unsecured loans totalling to Rs.3,64,82,500/- as unexplained cash credit under Section 68 although there is no conclusive evidence on record to show that even a single loan out of the additions made is attributable to the appellant. 8. The appellant craves leave to add, alter, amend, vary and / or withdraw any or all the above grounds of appeal. 2. Fact in brief is that return of income declaring loss of Rs. 3,17,86,674/- was filed on 26.10.2018. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 22.09.2019. During the course of assessment, the assessing officer noticed that assessee had obtained unsecured loans of Rs. 3,04,18,92,727/- from various parties. The assessee was asked to furnish copies of income tax returns for the last 3 years and copies of bank statements of the borrowers to prove the identity, creditworthiness and genuineness of the transactions. The AO stated that assessee failed to satisfactorily explained the nature and source of the sums credited in the books of accounts of the assessee even after providing adequate opportunities. On the basis of information filed by the assessee, the assessing officer observed that loan obtained from 76 lenders were genuine, however, the AO observed that assessee failed to establish the genuineness and creditworthiness of the remaining unsecured loans from 3020 lenders/depositors, therefore, the AO has made addition of Rs. 2,57,28,54,346/- u/s 68 of the Income Tax Act. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 6 3. The assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal filed by the assessee. The relevant extract of the order of ld. CIT(A) is reproduced as under: “6.2 Ground of Appeal No. 3 to 15 and Ground No. 18 These grounds are dealing with the common issue regarding addition made of Rs.2,57,28,54,346 which has been made under Section 68 representing unexplained unsecured loans taken by the appellant. 6.3 The appellant in this case is a private trust. It has borrowed unsecured loans from a number of lenders during the year under consideration. The appellant’s case was selected for scrutiny assessment for several reasons which included taking of unsecured loans from persons who have not filed their return of income and substantial loans taken or loan repayment shown in the name of a company whose registration has been cancelled by MCA. During the course of the assessment proceeding, from the financial statements of the appellant, the AO observed that the closing balance of the unsecured loans of the appellant was Rs.3,04,18,92,727. The AO asked the appellant to furnish copy of lenders’ ITRs for the last 3 years and copy of bank statements of the borrowers to prove the identity, creditworthiness and genuineness of the loans so taken. However, the appellant could not furnish the copy of ITRs, copy of bank statement and the confirmations from all the lenders so as to prove the identity, creditworthiness and genuineness of the transactions. On the basis of the replies received from few of the lenders in response to the notices issued by the AO and also on the basis of documents which were submitted by the appellant in limited cases, the AO considered the unsecured loans from 76 lenders whose closing balance aggregated to Rs.46,90,38,381 to be genuine in nature and no addition was made in this respect. The closing balances of the unsecured loans taken from the balance 3,020 lenders aggregating to Rs.2,57,28,54,346 were added as unexplained cash credit under section 68 of the Act. 6.4 During the course of the appellate proceeding, the appellant made several submissions from time to time and also filed the additional evidences under Rule 46A in the form of supporting evidences to substantiate the identity, creditworthiness and genuineness of the unsecured loans which could not be submitted to the AO. The appellant has moved an application vide its letters dated 13-9-2022 and 20-9-2022 which have been kept on record. Primarily, the appellant’s plea is that the second wave of pandemic of covid-19 was at its peak during the time when the assessment proceeding was going on and, therefore, the office of the appellant was closed for the substantial period of time. Therefore, it had become difficult for the appellant to obtain necessary documents from large number of lenders and considering strict lockdown protocols, retrieving its own records from its office which was shut, was also not possible. Considering this genuine reason, the additional evidences were accepted and also sent to the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 7 jurisdictional AO (also referred as JAO hereafter) granting him the opportunity to examine them and submit the remand report. In response to the notices issued by the JAO to the appellant calling for various information, the appellant has made from time to time detailed written submissions to the JAO, copies of which have been submitted by the appellant to my office through the ITBA portal and the same are on record. While making the assessment originally, the AO had considered the closing balance of the unsecured loans as the basis for the purpose of making the additions. To the extent the satisfactory documents were not available to the AO, the closing balances of the unsecured loans taken from the concerned lenders were added as unexplained cash credit in the hands of the appellant. As against this, vide Para 4.4 of the remand report, the JAO has accepted the contention of the appellant in this regard that it is a well settled law that only the amount found credited as loans during the year under consideration which can only be considered as falling within the purview of section 68. In the facts of the appellant’s case, the closing balance of unsecured loans amounting to Rs.3,04,18,92,727 included partly the loans taken during the earlier years and, therefore, standing as the opening balance of the unsecured loans for the year under consideration. Therefore, the first and foremost issue which needs to be decided is whether the opening balances of the unsecured loans can be added as unexplained cash credit of the year under consideration. 1. 1. In so far as this issue is concerned about the opening balance of the unsecured loans, I agree with the contentions of the appellant and also the view which is fairly accepted by the JAO as per his remand report. The provisions of section 68 provides that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Thus, it is very clear that the credits found in the books of an assessee in any year can be charged to tax as the income of the assessee but only in respect of loans accepted during that very same previous year. The amount credited in one year cannot be assessed as income in the nature of unexplained cash credit of another year. Any contrary interpretation would result into giving unbridled powers to the Assessing Officer to inquire about the credits of any past year (although the time limit for making the assessment of such year has already expired) and tax the same in the hands of the assessee if satisfactory explanation has not been provided in respect thereof. It is a settled principle that the income can be taxed only in the year to which it pertains. The Hon’ble jurisdictional Bombay High Court in the case of Ivan Singh vs. Asst. CIT [2020] 116 taxmann.com 499 (Bombay) has categorically held that the old outstanding sundry credit balance cannot be assessed under section 68 as they were not the amounts credited during the year. Thus, during the assessment proceeding, the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 8 AO had unlawfully burdened the appellant to establish the identify, creditworthiness and genuineness of all the creditors having closing balances at the end of the year disregarding the fact that they were inclusive of the balances which were outstanding at the beginning of the year and in respect of which there were no credits in the books of the appellant during the year under consideration. Consequentially, the addition made by the AO as per the assessment order was not justified to the extent it included the opening balances of the unsecured loans. This error which had been committed at the time of making the assessment has been now rectified by the JAO in the remand report and it has been fairly accepted that the opening balances of the unsecured loans should be kept out of the purview of the inquiry to be made under section 68. Although, in principle as per the remand report, the JAO has accepted this position that the opening balances of the loan outstanding in the books of the appellant could not have been assessed as income of the appellant under Section 68 for the year under consideration, he has considered the loans which had fallen due for repayment during the year under consideration and had been renewed instead of repaying, as also the sum credited in the books of the appellant so as to fall within purview of Section 68. Therefore, the next issue which is required to be decided is whether the loans which had fallen due for repayment and were further renewed during the year under consideration can also be charged to tax as unexplained cash credit of the appellant if no satisfactory explanation has been provided in respect thereof proving the identity, creditworthiness and genuineness. 1. 1. The appellant submits that the JAO, in his remand report, has relied upon the information furnished in the tax audit report of the appellant filed along with the return of income wherein the loans aggregating to Rs. 2,50,33,21,074 were reported to have been accepted during the year under consideration. It has been submitted that the said amount was inclusive of the loans amounting to Rs. 164,22,99,347 which had fallen due for repayment during the year and renewed. As per the appellant, the fresh loans taken during the year were Rs.86,10,21,727 only. On this basis, it has been contended that the inquiry as required by Section 68 with respect to the nature and source as well as the additions to be made upon the appellant’s failure to provide satisfactory explanation, if any, should be restricted to Rs.86,10,21,727 only representing the fresh loans taken during the year under consideration. The appellant has made written submissions and has also vehemently argued during the VC that there was no inflow of money in respect of the balance loans amounting to Rs.164,22,99,347 and it was representing mere accounting entry to record the renewal of the loans, essentially for internal control and reference, which otherwise had fallen due for repayment as per its original tenure. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 9 With respect to this issue, firstly it is imperative to examine the correct facts of the appellant’s case before analyzing the legal position about applicability of Section 68 to such kind of transaction. The appellant has submitted voluminous data and several details in the form of tabular statements during the course of the appellate proceeding as well as remand proceeding before the JAO. One of the statements submitted to JAO was in the form of Annexure-14 which has been submitted by the appellant vide its letter dated 23-09-2023 wherein details of each and every loan were provided running into 28 different columns. In this statement, each of the loans shown to have been accepted in the tax audit report aggregating to Rs. 2,50,33,21,074 have been broken up into two columns; the fresh loans accepted and credited to the bank account of the appellant during the previous year (column no. 7) and the loans which were shown as accepted by merely renewing the old loans which had become due for repayment during the previous year (column no. 8). As per this Annexure-14, the total of fresh loans accepted during the year comes to Rs. 86,10,21,727 only (total of column no. 7) and the total of the loans which were renewed comes to Rs. 164,22,99,347. The JAO has also confirmed this factual position at Para 4.8 of the remand report wherein he has stated that “it is undisputed facts that during the year under consideration Rs. 2,50,33,21,074/- was credited to the books of account of the assessee, which was inclusive of fresh loan received during the year of Rs. 86,10,21,727/- and the balance of Rs. 164,22,99,347/- was on account of renewal of FDs.” Thus, there is no dispute as far as these facts are concerned. Although the JAO has accepted the veracity of the claim of the appellant about the bifurcation of the total loans accepted into fresh loans accepted through banking channel and loans accepted by renewing the old loans which had otherwise matured, he has disagreed to accept the preposition that the loans matured and renewed should be kept out of the purview of inquiry warranted under Section 68. The concern as raised by the JAO in this regard is that the appellant has not furnished any evidence about the consent given by the lender for renewal of his loan on its maturity. It is mainly on this basis that the JAO has considered the amount of Rs. 164,22,99,347 as also the fresh or new credits covered under Section 68. The fact as to whether the consent of the lender has been obtained or not for the purpose of renewing the loan would not make a difference in so far as the applicability of Section 68 is concerned. The JAO however seems to be of the view that if the old loan has been renewed with the consent of the lender during the year, then it won’t fall within the purview of Section 68. However, if the loan has been renewed by the appellant suo moto without obtaining the consent of the lender, then it will tantamount to fresh credits during the year and, therefore, subject to the provisions of Section 68. This conclusion drawn is illogical and not having any sanctity. If the view as expressed by the JAO is accepted then it will be resulting into situation wherein Section 68 would be invoked in every case of loan or deposit which has not been repaid on the date of its maturity. In my opinion, whether the consent of the lender has been obtained or not is irrelevant for the purpose of deciding whether the renewed loans would amount to fresh credits for the purpose of Section 68. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 10 Even if it is assumed that the appellant has not been able to establish that it has obtained the consent of the concerned lenders while renewing their loans upon maturity, it won’t alter the fact that the amount of Rs.164,22,99,347 pertained to the loans in respect of which no fresh funds were received during the year under consideration and they were forming part of the opening balances of the loans which had been renewed at the time when they had fallen due for repayment during the year. Further, in response to the claim so made by the JAO about the absence of evidences showing the consent for renewal, the appellant has submitted that JAO has inadvertently not taken on record the letter dated 9-11- 2023 which was submitted during the remand proceeding along with a sample set of 30 receipts vide Annexure 24 wherein the lenders had expressly given the written consent for renewal. It has also been contended that there was an implied consent for renewal when no objection had been raised for not receiving the repayment and the interest for the further period is also being accepted by the lenders. On this basis, the contention of the JAO that the renewed loans should be treated at par with the fresh loans merely on account of absence of evidence showing the consent for renewal is being rejected. Further, during the remand proceeding, the JAO had asked the appellant to furnish evidence of FDs held by the lenders on the end of the previous financial year along with the respective bank statement highlighting entries, showing the lender had first/initially invested as loan/FD with the appellant. The JAO has stated that the appellant has failed to furnish these details and, therefore, he has inferred that the appellant has nothing to submit in this regard. On this basis, the JAO has rejected the contention of the appellant that the fresh loan received during the year was Rs.86,10,21,727 only and he took the total amount of loan received during the year as Rs.2,50,33,21,047. However, the appellant has claimed that all the required details were submitted by it to the JAO in Annexure 29 vide letter dated 21.11.2023 (and the JAO has submitted his remand report on 24.11.2023) wherein it has submitted the lender wise details of the opening balances of the loans which were outstanding at the beginning of the year under consideration, date wise details of when these loans were originally received in the past years and also the bank statements of the relevant past years reflecting the receipt of the amount from the concerned lenders with respect to these loans. The copies of the documents so submitted have also been kept on record of this appellate proceeding. In fact, the JAO himself has taken the cognizance of these details along with the bank statements of the past years which were submitted by the appellant. This is evident from the fact that the JAO has mentioned in the remand report that merely submitting copies of assessee’s own bank statements, earlier years’ audit reports and summary of balance sheet to prove the closing balances of unsecured loans (as submitted by the assessee vide letter dated 20/21.11.2023 which has been verified) cannot prove the identity and creditworthiness of the lender and genuineness of the transaction entered into by the lender with the assessee. Therefore, on one hand the JAO has claimed that he has not been given any evidences of the loans being taken in the earlier years and they are being renewed during the year. On the other hand, the JAO himself ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 11 has confirmed that the appellant has submitted the bank statements of the earlier years reflecting the loans which were taken in those years and which were renewed during the year. Thus, there is a contradiction in the findings recorded at different places in the remand report. Be that as it may, the appellant has submitted all the necessary details including the bank statements of the earlier years, bank statements of the year under consideration, the financial statements, the details of each loan with the dates on which it was being taken etc. On the basis of these details, the appellant has proved the fact that the fresh loans which have been borrowed during the year and in respect of which the money had been received in its bank account during the previous year was Rs.86,10,21,727 only. Nothing has been brought on record by the JAO to disprove this particular fact. The JAO’s claim that the appellant has not been able to prove the fact of renewal of loans and, therefore, all the loans aggregating to Rs. 2,50,33,21,047 should be considered as received during the year so as to bring them under the purview of Section 68 is found to be not acceptable. Having factually concluded that the fresh loans taken by the appellant during the year under consideration were Rs.86,10,21,717, it is imperative to adjudicate the issue of applicability of the provisions of Section 68 to the balance amount of the loans aggregating to Rs. 164,22,99,347 which are representing the loans which were originally taken in the earlier years, have fallen due for repayment during the year and were renewed during the year. The appellant has in its written submissions as well as in the VC, vehemently contended that renewal of such loans during the year are representing mere accounting entries in its books of account and there was no corresponding fresh inflow of money in its hands. On this basis, relying upon several decisions, it has been claimed that the provisions of Section 68 do not apply to such loans at all and no part of such loans could have been assessed as unexplained cash credit for the year under consideration. Further, the appellant has also submitted that these loans were appearing as the closing balance for the immediately preceding assessment year which has been already assessed under Section 143(3) and no addition has been made whatsoever in respect of these loans. 1. 1. With respect to these loans which have been merely renewed during the year, it is very clear that the appellant has not received any fresh funds in its bank account during the year under consideration. Therefore, effectively, it could not have been considered as the ‘credits’ within the meaning of section 68 of the Act. If the provisions of Section 68 do not apply to the opening balances of the loans as discussed above, then it won’t be justified to apply the provisions to the same opening balances of the loans under the guise of renewal of such loans during the year. The objective of section 68 is to ensure that the assessee doesn’t evade the tax by routing any money in its books of account in any form which is not explainable. If the assessee hasn’t received any money at all then there is no question of applying the provisions of section 68 merely on the basis that there are some credits which are appearing in the accounts of the assessee. The appellant has relied upon numerous decisions in support of its contention that the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 12 provisions of section 68 do not apply to credit arising from mere accounting entries unless it involves receipt of money in some form in the hands of the assessee. One of the leading decisions on this principle is that of Madras High Court in the case of V.R. Global Energy (P) Ltd. vs. ITO [2018] 96 taxmann.com 647 (Mad.) wherein it was held that where the assessee allotted shares to a company in settlement of pre-existing liability of assessee to the said company by way of adjustment and since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credit u/s 68 of the Act. It was held that since the cash credits towards share capital were only by way of book adjustment and not actual receipts, therefore, the same could not be treated as receipt towards share subscription money. Since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits u/s 68 of the IT Act. The Revenue had challenged this decision of the Hon'ble Madras High Court before the Hon'ble Supreme Court and the Hon'ble Supreme Court dismissed the SLP filed by the Revenue which is reported as ITO v. V.R. Global Energy (P.) Ltd. [2020] 113 taxmann.com 31/268 Taxman 392. Further, the appellant has also relied upon the decisions in the case of Bharat Explosive Ltd. vs. ACIT (ITA 385/Agra/2012), DCIT vs. Amtek India Ltd. (ITA 283/Del/2010) and Kinetic Capital Finance Ltd. (14 taxmann.com 150) wherein the FDs renewed were held to be not falling within the purview of section 68. Respectfully following these decisions, I direct the JAO to exclude the loans amounting to Rs. 164,22,99,347 which have been merely renewed during the year from the scope of addition to be made under section 68 for the simple reason that they were also book adjustment and not having any actual receipt of money as held by Honourable Madras High Court in the case of V.R. Global Energy (P) Ltd. (supra). Now, the issue which remains is with respect to the fresh loans of Rs.86,10,21,727 which have been borrowed by the appellant during the year under consideration. Firstly, out of these fresh loans, the AO had already considered the loans of Rs.26,61,01,009 as genuine in nature while passing the assessment order originally and there has been no dispute with regard to it. However, during the remand proceeding, the JAO once again made the inquiry with respect to some of the same loans and proposed that the loans of Rs.3,25,27,267 should be added under section 68 on the ground that in some cases no replies were received from the lender and in some cases the source has remained to be explained. The appellant has argued during the VC that the AO has exceeded his jurisdiction during the remand proceeding by extending the scope of inquiry with respect to the parties with respect to which there had been no dispute at all and which were not the subject matter of this appeal. It has been submitted that the addition has been proposed in respect of two of the parties only on the ground that they have not responded to the notices issued by the JAO u/s. 133(6) during the remand proceeding. However, the fact is that the same parties were thoroughly verified by the AO in the original assessment proceeding and a categorical finding was given that the loans obtained from these parties are ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 13 genuine in nature. If that be the case, then the JAO has erred in proposing to add the loans taken from such parties only on the ground that they have not replied to the notices issued to them once again during the remand proceeding. There is plethora of decisions wherein the courts have held that mere non-receipt of the reply from the parties in response to the notices issued cannot be the sole ground to make the addition. With respect to the balance parties, the JAO did receive the replies but he has found certain issues with respect to the previous credits which have appeared in the bank statement of the lenders as were submitted to him. It is not the case of the JAO that the parties have denied the transactions or are found to be not having enough creditworthiness to lend the concerned amount to the appellant. The JAO has expected the explanation with respect to the source of source by referring to the immediate credit entries appearing in the bank statements of the lenders which is not permissible in accordance with the law as it was in existence for the assessment year under appeal. It is only with effect from 1-4-2023 that the law requires even the creditor to offer an explanation with regard to the nature and source of the amount in his hands. Therefore, not only for the reason that the JAO has exceeded his jurisdiction but also for the reason that there is no valid basis with the JAO in order to propose the fresh addition of the loans taken from the parties which were already considered to be genuine in nature, I direct the JAO not to enhance the addition under section 68 by an amount of Rs. 3,25,27,267 as proposed by him. With respect to the balance loans amounting to Rs.59,49,20,718 (i.e. after excluding the fresh loans of Rs.26,61,01,009 which were already accepted to be genuine in nature and no addition was made in the assessment order) which have been added under section 68 in the assessment order, the JAO vide his remand report has proposed to retain the addition of Rs.52,52,55,718. The balance loans amounting to Rs.6,96,65,000 have now found to be genuine by the AO as a result of the verification carried out during the course of the remand proceeding. These figures have been determined by the appellant on the basis of the party wise details which have been provided by the JAO in the attachment to his remand report and cross tallied with the total amount of the additions as proposed in the remand report. Since the JAO has made detailed inquiry with the concerned lenders and accepted the genuineness with respect to the these loans, dispute does not remain and, therefore, I direct the JAO to delete the addition of Rs.6,96,65,000 made under section 68 in respect of these parties which were not considered to be genuine originally at the time of assessment but now considered to be genuine by the JAO. 1. 1. Now, with respect to the balance of fresh loans amounting to Rs.52,52,55,718, the followings are the crucial points which are also discussed and explained by the appellant during the VC, which are required to be considered while adjudicating the issue of its addition under section 68 – ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 14 • 1. It is not the case of the JAO that there are any materials which are in his possession on the basis of which any adverse inference can be drawn against the appellant that it has routed its own money under the garb of accommodation entries in the form of these loans. • There is even no adverse information which has been received in consequence of any third-party investigation with respect to even a single transaction of loan of the appellant. • • There were in all 1,314 parties from whom the appellant has borrowed the loans during the year ranging from the amount as low as Rs.25,000 to the amount as high as above Rs.1 crore. Many of the lenders have been verified by the JAO not only during the remand proceeding but also by the AO during the original assessment proceeding and even during the assessment proceeding of the earlier years. Out of the lenders so examined by the JAO, not a single lender has denied to have lent money to the appellant. It is also not the case where the JAO has found that the lender is not in existence or the lender is not a genuine lender. • Having insufficient documents to prove the identity, creditworthiness and genuineness is one thing and having adverse materials with the revenue proving laundering of assessee’s own money under the garb of loans is another thing. Based on the information on record, the appellant’s case is certainly not falling under the other category. Whether the appellant has been able to discharge its primary onus to establish identity, creditworthiness and genuineness or not is to be dealt with separately. But, what is transpiring from the records is that there has been no case of the JAO that he had any evidences with him which can prove positively that the appellant’s loans are bogus and in the nature of accommodation entries. • It is not the case where the appellant has not submitted PAN of any of the lender. • It is not the case where the appellant has obtained the loans from the shell entities and attempted to hide the reality within the web of inter-related transactions within the group of such entities having existence only on paper. • More than about 60% of the lenders are such which were common in the past assessment years with respect to which the regular assessment has been made under Section 143(3) without making any addition. • The loans taken from all of the lenders have been repaid either in full or in part in the subsequent years. In fact, on account of the delay and rescheduling of the repayment, few of the lenders have initiated the legal proceedings against the appellant in the form of filing civil suits for recovery or by filing complaints before the EOW. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 15 • It in the backdrop of these facts, one needs to examine the issue under consideration as to whether the appellant has failed to explain the nature and source of the relevant credits in the form of unsecured loans and, therefore, whether the amount of such loans obtained is required to be added as unexplained cash credit under section 68 in the hands of the appellant. The AO in the assessment order has stated that the appellant has failed to provide the copy of the ITRs, copy of bank statement and confirmations from the lenders and, on that basis, he has made the addition under Section 68. Subsequently, the appellant has provided several documents to discharge its primary onus which have been admitted as additional evidences and also have been verified by the JAO in the remand proceeding. In some of the cases, the appellant has provided all the documents like copy of the ITR, copy of the bank statement and confirmation from the lenders. In some of the cases, the appellant has provided few of these documents but not all of them. There are 841 lenders out of total 1314 lenders, wherein the loan amount by any single lender is Rs.5,00,000 or below and in such cases the appellant has provided only the copies of the application forms which were filled up while tendering the amount of loan. On the basis of the documents provided by the appellant, the AO has categorized the loans into different categories vide Para 8 of his remand report and has accordingly dealt with each of these categories at length. I would like to first deal with the issue as to whether the submission of the application form should be considered as discharging of primary onus by the appellant. There are about 871 parties having loans amounting to Rs.36,55,77,500 in respect of which the JAO has proposed the addition on the ground that the appellant has been able to furnish only the application forms and no other documents have been provided in order to substantiate the identity, creditworthiness and genuineness. It is the practice of the appellant to obtain the application form from the concerned lenders while obtaining the loans from them which as explained during the VC is named as ‘Application Form for Fixed Deposit Scheme’ for the sake of easy understanding. The JAO has reproduced a sample copy of one of such filled up application form in his remand report. The appellant submits that this application form bears the complete details of the lenders which include name, address, PAN, date of birth, contact numbers, e-mail id, bank account details (bank, branch, account type and account number), the details of payment of money to the appellant (cheque no., date, bank on which it has been drawn). Further, it also contains important terms and conditions spread over 19 different clauses. Additionally, it also includes a confirmatory statement of the lender confirming the fact that he has deposited the concerned amount with the appellant. On this basis, it has been contended that the application form itself is a confirmation of the lender. The primary onus is on the assessee to explain the nature and source of the credits appearing in its books of account as required under the provisions of Section 68. The Supreme Court in the land mark case of CIT v. Orissa Corporation ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 16 (P) Ltd. [1986] 159 ITR 78 (SC), Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) and other cases relied upon by the appellant has 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 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. However, the law does not provide expressly as to when it can be said that the assessee has discharged his onus of explaining the nature and source of the credits. No standard set of documents have been defined either in the Act or in the jurisprudence which the assessee is required to provide and only then it will be considered that the assessee has discharged his primary onus. In the facts of the appellant, there were about 1,314 lenders from whom the total loans of Rs.86,10,21,727 were taken during the year under consideration. Out of which, the appellant has not been able to obtain the specific documents as required by the AO and JAO i.e. copy of the ITR of the lender, copy of the bank statement of the lender and confirmation in about 878 cases. However, the appellant has submitted the copies of the application forms which were filled up by the respective lenders in all the cases and, therefore, the appellant has relied upon these application form in these 878 cases contending that it has discharged its primary onus of explaining the nature and source of the credits and also the confirmation. In the balance cases, the appellant has submitted the further documents as required either fully or partially. It is not the case where the appellant is relying upon the application form in all the cases of the loans which it has obtained. Also, the appellant has explained the valid reasons for its inability to obtain the documents like ITR, bank statements etc. from all of the lenders. Firstly, it has been submitted that the number of lenders were as large as 1,314 and it had become practically difficult to reach out to each of them for obtaining the required documents. Further, many of these lenders were already repaid in full and, therefore, they were least bothered to address the request of the appellant to share their documents. The documents like ITR and bank statements were basically personal documents of the lenders and every lender won’t be comfortable in sharing his personal documents with the appellant. Another crucial point was that the relationship between the appellant and the lender was strained as a result of the delay in repayment of the loans and also the consequential legal proceeding which had been initiated by few of them against the appellant on that account. Therefore, as contended, there were justifiable reasons with the appellant for not being able to obtain the personal documents of the lenders. It is also contended that in so far as the confirmation is concerned, the application form itself serves as the required confirmation which bears all the details of the loan transaction. It is a trite law that the assessee cannot be expected to do which is impossible. In the case of Life Insurance Corp Ltd. v. CIT (1996) 219 ITR 410, the Supreme Court held that the law does not contemplate or require the performance of an impossible act and the same principle has been followed in number of other cases. The issue whether the appellant has ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 17 discharged its primary onus or not by submitting the details of the loan and copies of the application forms in respect of part of its loans is required to be decided on the touchstone of these facts and the law as applicable. The appellant has relied upon the decision of Delhi ITAT in the case of ACIT vs Amtek Auto Ltd. [2007] 112 TTJ 455 (Delhi) which squarely applies to the facts of the case. In this case also, the assessee had obtained loans from almost over 1,300 lenders. The assessee could not submit the confirmation from each of the creditors but had submitted the copies of the application forms which contained similar details viz. name of the depositor, address, period of deposit, details and mode of payment, nomination details, status of the applicant, income-tax particulars, etc. Under such facts, the ITAT held as follows – 1. 1. The parameters to explain the nature and source of a credit are regarding the identity, creditworthiness of the creditor and the genuineness. However, the above said conventional parameters have to be applied keeping in mind the peculiar circumstances of the case. We may hasten to add here that what we are suggesting is not that the onus is not on the assessee to explain the nature and source of the deposits\" in question. We are only pointing out the difference in approach in evaluating the evidence, adduced by the assessee in support of his explanation for the nature and source of the deposits in question, that is required under the circumstances. On this basis, the ITAT considered the application form as the sufficient document discharging the primary onus on the part of the assessee. Further, the ITAT also observed that the AO himself was satisfied that the assessee had discharged the onus cast under Section 68 on the basis of the application forms in few of the creditors. On that basis, the ITAT held that nothing prevented the AO from being satisfied with the rest of the creditors also more particularly when no suo moto steps were taken by him for making independent inquiries although the assessee had made a written request in this behalf. The appellant has also relied upon another decision of Delhi High Court in the case of CIT v. Kinetic Capital Finance Ltd. [2011] 14 taxmann.co m 150 (Delhi) wherein a similar issue was involved and the question was whether the application forms submitted by the assessee which were not filled up properly and were clumsy should be considered as sufficient. Also, the AO had accepted contention of the assessee that the FDs renewed during the year were not falling within the purview of section 68. The Court had considered the application form as the sufficient document discharging the primary onus on the part of the assessee. I have also considered the appellant’s detailed submission showing comparison of its own facts verses the facts of the Kinetic case which is on record. 1. 1. The appellant has also relied upon another decision of Ahemdabad ITAT in the case of ACIT v. Royal Manor Hotels & Industries Ltd. (ITA No. 2577/Ahd/2003 – order dated 24-7-2009) wherein a similar issue was involved and the question was whether the application forms submitted by the assessee ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 18 should be considered as sufficient. In this case also, the loans were taken by the assessee from 1,462 depositors. The assessee filed the application forms in respect of the depositors of Rs. 20,000 and above. It was also mentioned in the reply that if the AO had any doubt, he may make enquiries from the addresses given in the application forms. However, the AO did not consider it necessary to make any enquiries in this regard. The ITAT held that the task of obtaining the confirmation in respect of 1,462 parties was arduous one and submission of the application forms was considered to be the reasonable compliance on the part of the assessee. Considering the fact that the AO did not make any further inquiries although the assessee requested him to do so, the ITAT deleted the addition made in this regard under Section 68. The appellant’s case stands on a stronger footing as compared to all the above cited cases as it is not the case where the appellant relies upon only on the application forms in all the cases of the lenders and not submitted any other documents in respect of any of the lenders. In fact, out of total 1,314 lenders from whom the fresh loans of Rs.86.10,21,727 have been taken, this issue is arising only in respect of 878 lenders having fresh loans of Rs.37,60,27,500. Thus, in respect of the balance lenders, the appellant has been able to submit more documents in addition to the application forms. 1. 1. The JAO in his remand report has stated that the appellant has failed to prove that the signature of the lender on the application form is of the same person from whom the appellant has received credits in its bank account. The appellant has submitted during the VC that this is merely a bald statement without having any basis to doubt. It is submitted by the appellant that if the JAO had any doubt with regard to forgery of the signature, then he was equipped with all the required powers under the Act to prove the same and bring the evidences thereof on record. In fact, as mentioned in the remand report, the JAO has verified 131 lenders by issuing notices to them and he has not been able to identify a single case of the lenders wherein it could be established that the appellant has submitted the application forms or other documents of the lenders having signature of a person other than the lender or having forged signature. Based on the facts on record, I concur with this contention of the appellant. Such presumptive statement by JAO cannot be a basis to disregard the application form as confirmation in support of the loans being obtained by the appellant. 1. 1. In light of the above, I hold that the submission of application forms in 878 cases out of 1,314 lenders has resulted into discharging of primary onus by the appellant as required under the law and no addition is warranted only for the reason that no other documents have been submitted by the appellant in this regard. If the loans obtained from these lenders are required to be added for any other reasons, then the same would be dealt with appropriately in the remaining part of this order. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 19 1. Coming to the other category of the loans where the JAO confirms that the appellant has submitted the other documents in addition to the application forms like confirmation from the lender, ITR of the lender, bank statement of the lender etc. The total of the loans taken falling under this category is Rs.17,63,56,000, out of which the JAO has proposed to make the addition of Rs.11,86,81,000 as per the attachment to the remand report. For the purpose of making this addition, the JAO has discussed few reasons in general in the body of the main remand report as well as several reasons in specific in the attachment to the remand report against each individual lender. With respect to the general comments given by the JAO in the remand report, mainly the JAO has mentioned that the source through which the lenders has advanced loan to the appellant was not explained or proved by the appellant or the lender. It is well settled that the assessee can be asked to prove the source of credits in his hands but the assessee cannot be asked to prove the source of the funds in the hands of the creditor. Inquiry about the source of source was impermissible at least for the year under consideration. It is only from 1-4- 2023 that the first proviso to Section 68 requires the creditor to explain the source of the amounts in his hands and this requirement cannot be made applicable from retrospective effect. The jurisdictional Hon’ble Bombay High Court in the cases of CIT vs. Gangadeep Infrastructure Pvt. Ltd, 394 ITR 680 and PCIT vs. Veedhata Tower Pvt. Ltd. (ITA No. 819 of 2015 dated 17-4-2018) has held that provisions inserted under the law imposing additional burden on the assessee cannot be made applicable with retrospective effect. Duly following this decision, I hold that the JAO has erred in considering the non-availability of explanation on source of money in the hands of the lenders as the basis for making the addition of the loan received in the hands of the appellant. Another reason which has been stated by the JAO in the remand report for the purpose of proposing the addition under Section 68 with respect to the loans falling under this category is that the lender had miniscule income which did not match with the loans given by the lender to the appellant. However, the fact remains that the said lenders have at least filed their returns of income and they are the assessees before the revenue. What is the amount of income which the lenders have offered to tax is something which is beyond the control of the appellant. The appellant has argued that penalizing borrower by levying tax upon it if the lender has not shown his income properly or there is an underreporting of the income by the lenders, will not be justified. If required, the JAO could have passed over this information to the AO of the lenders for the necessary actions. But, no addition should be made in the hands of the appellant merely on this account. Further, it would be illogical to compare the amount of loan given merely with the amount of income declared in the return of income in just one year. Also, the JAO has no other contrary materials with him on the basis of which he could justify the addition proposed by him in such cases. Based on facts of the case and various judgments of the appellate authorities, I therefore accept the contentions of the appellant. With respect to the specific reasons which have been mentioned by the JAO against the individual lenders and the data and ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 20 information furnished by the appellant in Para 83 of its submission dated 17-1- 2024, and considering the same, decision as to whether any addition should be made with respect to the concerned loans or not is given herein below – Reasons provided by AO No of parties Amount Decision Reasons of decision No explanation of source has been provided 30 5,38,90,000 Proposed addition by JAO to be deleted Source of source cannot be inquired Only confirmation submitted by assessee 44 2,56,06,000 Proposed addition by JAO to be deleted Refer Para 6.19 to 6.28 No reply received 3 68,00,000 To be added Since no reply has been received hence the addition made needs to be sustained No details of any sort of the lender have been submitted by the assessee. Even no application form has been submitted by the assessee 2 17,00,000 To be added Since even no application form has been submitted Lender has not furnished bank statement 1 11,50,000 Proposed addition by JAO to be deleted The fact remains that the lender has confirmed the loan and the appellant’s bank statement is on record Application form verified 2 12,50,000 Proposed addition by JAO to be deleted Refer Para 6.19 to 6.28 Reply cannot be seen on system 2 16,00,000 Proposed addition by JAO to be deleted The addition cannot be made due to such system issues The lender has explained the source of the loan given to the assessee 1 7,00,000 Proposed addition by JAO to be deleted In fact, this is a positive remark confirming genuineness Loan entry is not appearing in the bank statement 1 5,00,000 To be added As the loan entry is not appearing in the bank statement hence the addition made needs to be sustained No Application Form 1 25,000 To be added Since even no application form has been ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 21 submitted Partially allowed for one of the lenders (Rashmi Kailash Choudhary) 1 15,00,000 Proposed addition by JAO to be deleted Addition is proposed only because no bank statement was provided in respect of one of the two transactions of loan. However, the fact remains that the lender has confirmed the loan and the appellant’s bank statement is on record Apart from the above, there are few cases of the lenders in respect of which the JAO has made specific comments which the appellant has dealt with individually in Attachment-1 to Attachment-9 of its submission dated 17-1-2024. The relevant facts and the decision thereon are presented in a tabular format as follows – Name Loan Amount proposed for additio Remarks Aditi Tracking Support Pvt. Ltd. 1,20,00,000 The JAO has proposed the addition on the ground that the party was not found at the address provided by the appellant. It has been explained that the lender had changed its address. However, from the reply letter which has been submitted by this party during the remand proceeding the copy of which has been submitted by the appellant, it is found that the address of the lender stated therein is the same at which the JAO had sent his inspector for the purpose of making the inquiry. Therefore, the explanation provided by the appellant is not acceptable and direct the AO to add the amount of loan taken from this party. Leon Sunil D’Souza 50,00,000 The JAO has proposed the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 22 addition of this loan on the ground that he found that there were credits of the similar amounts in the bank statement prior to the debits of the loans lent to the appellant and the closing balance maintained was always below one lakh. As the closing balance was always below Rs. One Lakh and there are suspicious credit entries which the appellant has not been able to explain hence the addition made needs to be sustained. Rakhee Kishore Gandhi 26,10,000 The JAO has made comments with respect to the source of source. It is already held that the source of source cannot be inquired. Also, the JAO has not brought on record any contrary evidence and therefore, no addition should be made in respect of loan of this party. Chandru Sanwaldas Belani 10,00,000 The JAO has made comments with respect to the source of source. It is already held that the source of source cannot be inquired. Therefore, no addition should be made in respect of loan of this party. Mohini Lulla 10,00,000 The addition was proposed merely on the basis that the JAO had found extra credit of repayment of Rs.50,00,000 from the appellant in her bank statement not matching what was reported by the appellant. However, the appellant has explained that it was pertaining to Parasram Lulla, husband of Mohini Lulla and the said amount was deposited ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 23 in their joint account. Therefore, no addition should be made in respect of loan of this party. Meena Haridas 5,00,000 The JAO has made comments with respect to the source of source. It is already held that the source of source cannot be inquired. Therefore, no addition should be made in respect of loan of this party. Rohit Madan Shetty 6,00,00,000 No addition should be made as it pertains to the renewal of loans during the year. Further, the appellant has duly submitted a confirmation of the party stating that the loan renewed during the year was 6 cr only and not 12 cr as stated by the JAO. Sudhir Kanji Thakker (referred in para 10.4 of remand report) 37,50,000 No addition should be made as the loan from this party was already accepted as genuine by the AO while passing the assessment order. Prakash Dwarkadas Rajdeo (referred in Para 10.4 of remand report) 4,90,000 This addition has been proposed on the basis that the lender has reported the amount of loan given which is higher than the amount stated to have been borrowed by the appellant. No valid explanation has been offered by the appellant in this regard and, therefore, the addition as proposed by the JAO in this regard is being sustained. Now, we are left with only the last category of the loans amounting to Rs.4,25,37,218 in respect of which the JAO has stated that no documents have been provided by the appellant whatsoever and, therefore, the addition has been proposed in respect of this loan. The appellant has submitted that the amount of Rs.3,25,69,718 is pertaining to the accrual of interest on the loans which had been reported as fresh loans taken during the year. This being once again journal ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 24 entry by nature, has not resulted into any inflow of money in the hands of the appellant. For the same reasons as stated in respect of the renewal of loans, no addition can be made in respect of such mere accrual of interest which has been added to the principal amount of the loans. With respect to the balance loans, the appellant has claimed that it had submitted the documents like lender’s statement of account only. However, the appellant has failed to substantiate the same and, therefore, the balance amount of Rs.99,67,500 is hereby added as unexplained cash credit of the appellant under Section 68. The JAO has also proposed the addition of Rs.2,09,67,235 representing the discrepancy in the amount of repayment of loans reported in the tax audit report. The appellant has duly explained the reasons of this discrepancy which has arisen with respect to the figure of repayment of the loans which had been reported in the tax audit report. Be it as may, no addition can be made only because of any such discrepancy found in the audit report. What needs to be seen is that, is there any income which has remained to be included in the books of account or the return of income. Further, it is not the case where this amount represents the loans taken during the year and remained to have been reported in the tax audit report and, therefore, the appellant was required to explain the nature and source of this amount. The JAO himself has stated that it was an amount of repayment of the loans which had remained to be reported in the tax audit report which the appellant fairly accepted and included the same in the party wise working of the loans which was provided during the course of the remand proceeding. This being the case, no addition can be made with respect to this error in reporting the repayments of the loans in the tax audit report. I have dealt with all the submissions and contentions of the appellant made from time to time and in response to the remand report and the attachment thereto as well as of the AO and JAO in so far as the addition of loans under Section 68 are concerned as covered by Ground of Appeal No. 3 to 15 and 18. I have also considered the appellant’s detailed submissions vis-à-vis the comments made by the AO in the assessment order dated 21.9.2021 distinguishing facts of the case laws relied by the AO and clarifying non-applicability of the same to the facts of the appellant’s case. To summarise and conclude, it is reiterated that, while passing the assessment order, the AO had erred in considering the whole of the closing balance of the loans which included not only the fresh loans accepted by the appellant during the year but also included the opening balances of the loans which were already obtained in the past years. Further, in the remand report, the JAO had once again erred in not excluding the loans which have merely fallen due for repayment and renewed during the year from the purview of inquiry to be made under Section 68. In respect of both these, the appellant never received any money in its bank account during the year under appeal and, therefore, they were not representing the credit of money which could have been converted into income of this year on the ground of unsatisfactory explanation by the appellant. ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 25 With respect to the fresh loans, the appellant has submitted several documents like confirmation, bank statement of the lender, ITR of the lender etc. in respect of several lenders. With respect to the balance of the lenders, the appellant has submitted the copies of the application forms which were obtained while accepting the loans from them and had expressed its inability to obtain the other documents from them. Further, it has been stated in Table 4 of the appellant’s submission dated 17.01.2024, made in response to the remand report as well as vehemently contended during the VC that approximately 69% of the number of lenders and 77% of the loans having amount of Rs.25 lakhs and above were found to be genuine by the AO and JAO. Considering these peculiar facts of the appellant’s case where it had obtained the loans from large number of parties as large as 1,314, the AO and JAO erred in adopting a stringent approach by insisting for all of the documents like confirmation, ITR/bank statement of the lender etc. in respect of all the lenders. As held by the tribunals in several decisions which have been considered above, the application forms submitted by the appellant in respect of balance of such lenders should be considered as sufficient in so far as discharging of primary onus of the appellant is concerned and no addition should be made only on that account. In the case of the appellant as well, the AO while making the assessment under Section 143(3) for AY 2012-13 has duly accepted the submission of application form as sufficient in so far as discharging of primary onus of the appellant was concerned. The appellant has drawn the attention to the relevant observation in this regard as can be found in the assessment order dated 31-3-2015 which is reproduced hereunder :- Further, due to large number of depositors in the so called Fixed Deposit scheme launched by the assessee, the assessee expressed his inability to produce the confirmations for them. The assessee, instead provided, the receipts of Fixed Deposit forms filed by the depositor with the assessee as confirmations. On this basis, the AO has accepted the unsecured loans for AY 2012-13 as genuine in nature except for the loans amounting to Rs.74,80,000 taken from few parties in respect of which the appellant had failed to provide PAN of the lenders. There are no such cases for the year under consideration where the basic details like PAN etc. have not been provided in respect of any of the lenders by the appellant. In that year i.e. AY 2012-13, the AO had chosen to examine 43 parties by issuing summons u/s. 131 of the Act. With respect to the remaining parties (leaving aside the parties in respect of which PAN was not available), no addition was made under Section 68 on the ground that the appellant has not submitted the documents like ITR and bank statement of the lenders and has submitted PAN of all lenders and the application forms. However, for the year under consideration, the JAO has taken a contrary view and has made the addition in respect of all the parties in respect of which the appellant has provided only the application forms, which were duly verified but no further inquiries were made by the JAO. It is also worth noting that in this category of the lenders where only the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 26 application forms were submitted, the JAO has made inquiries only in 7 cases having the loans of Rs. 1,05,00,000 and he is satisfied with the genuineness of the loans in all the cases except for one case having the small amount of the loan of Rs. 50,000 only. In the balance cases of the lenders, the JAO chose not to make any inquiries at all. Therefore, as held by the Delhi ITAT in the case of Amtek Auto (supra) the JAO is not justified to make the addition solely on the basis that the appellant has provided only the application forms in the year under appeal whereas in appellant’s own case in earlier assessment years the AO had accepted such application forms of the lenders as sufficient and no addition was made on that basis. 1. With respect to the cases where the JAO has provided specific reasons for the purpose of proposing the addition as stated in the remand report along with its detailed attachment, they are appropriately dealt with and the addition has been confirmed to the extent of Rs. 3,64,82,500/- for the reasons stated as above. I direct the JAO to delete its addition made with respect to the balance loans. These grounds of appeal are thus partly allowed.” 4. During the course of appellate proceeding before us, the ld. Counsel referred the lender-wise details as placed in the paper books filed before the lower authorities. The ld. Counsel also referred the copies of documents placed in the paper book showing that major parts of the loans were received/renewed in earlier previous years. The details of loan repayment filed was also referred. The ld. Counsel also referred party-wise details and copies of documents i.e. loan confirmation, bank details, ITR details, loan confirmation etc. placed in the paper book as filed before lower authorities, the assessee has already paid the significant part of the loan. He also mentioned that assessee has filed confirmation of each lender along with PAN etc. before the assessing officer therefore, the action of the ld. CIT(A) in sustaining the part of the addition is not justified. In respect of sustaining the addition to the amount of Rs. 3,64,82,500/-, the ld. Counsel vehemently contended that ld. CIT(A) has not considered the relevant supporting documentary evidences and detail filed in support of the genuineness of the loan transaction. The ld. Counsel further submitted that assessee has filed relevant supporting ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 27 documentary evidences of identification and confirmation of each lender including their name, address and PAN with the Income Tax Department and the copy of income tax return filed etc. In this regard, the ld. Counsel has referred the paper book filed giving various details of each lender along with copies of documents which has not been controverted by the lower authorities. 5. On the other hand, ld. DR referred the assessment order and submitted that assessee has not submitted the complete information to establish the genuineness and creditworthiness of the unsecured loan and the ld. DR supported the order of assessing officer. 6. Heard both the sides and perused the material on record. During the course of assessment, the assessing officer noticed that assessee has raised unsecured loan of Rs. 3,04,18,92,727/- from various parties. The assessing officer has disallowed the unsecured loan to the amount of Rs. 2,57,28,54,346/- on the ground that assessee failed to furnish complete confirmation from all lenders and copies of bank statements to prove the amount of loan raised. Before the ld. CIT(A), the assessee had also filed additional evidences under Rule 46A to substantiate the identity, creditworthiness of the parties and genuineness of the unsecured loan amount which could not be provided to the AO due to prevailing of Covid 19 during the assessment proceedings as discussed in the findings of ld. CIT(A). The ld. CIT(A) has accepted the additional evidences filed under Rule 46A of the Income Tax Rule and also called Remand Report from the assessing officer. The ld. CIT(A) discussed at page 115 of his order that the AO has accepted in the remand report that only the loan amount found credited as loans during the year under consideration can only be considered as falling within the purview of section 68 of ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 28 the Act. The ld. CIT(A) has also referred statement submitted before the AO in the form of Annexure – 14 running into 28 different column wherein details of each and every loans have been provided. The total fresh loans accepted during the year comes to only Rs. 86,10,21,727/-. The assessee trust had only raised loan amount to the extent of Rs. 86,10,81,726/- only and the amount of Rs. 3,04,18,92,727/- was the total outstanding loan amount as on 31.03.2018 including the loan which were continuing from earlier years and renewed during the previous years. The assessee demonstrated with the supporting evidences that during the previous year, the assessee had only obtained loan amount to the extent of Rs. 86,10,81,726/- only. The assessee also explained that all the transactions of receiving and payment of loan were made through account payee cheques or through NEFT/RTGS/ECS only. The assessee has also explained that the cases of the assessee were also subject to scrutiny assessment for A.Y. 2011-12, A.Y. 2012-13, A.Y. 2013-14, A.Y. 2014-15 and A.Y. 2017-18. The assessee has also filed copies of application form for unsecured loan obtained from the lenders/depositors and also explained that due to prevailing Covid 19 a large number of lenders including senior citizens and women were not in a position to submit all details asked by the assessing officer during the course of assessment proceedings. The assessee has also filed a certificate from chartered accountant who have verified and cross checked with all the relevant record and books of account in respect of genuineness of the fresh loan received by the assessee during the F.Y. 2017-18. The ld. CIT(A) has obtained remand report from the assessing officer. In the remand report, the assessing officer has proposed the addition of Rs. 1,82,85,48,590/- as against the addition amounting to Rs. 2,57,28,54,346/- originally made in the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 29 assessment order. We have perused the various details submitted by the assessee before the assessing officer as placed in the paper book filed before us. As per Annexure 14 submitted vide letter dated 23.09.2023, the assessee has filed detail of each and every loan in the 28 different columns. The assessee has also provided detail showing the amount of loan which was taken as a fresh during the year under consideration and the loan which were shown as carry forward old loan after renewing the same on the due date for repayment. It is demonstrating from the Annexure 14 filed by the assessee that fresh loan to the amount of Rs. 86,10,21,727/- was only accepted during the year under consideration. It is also established from the detail filed that total loan to the amount of Rs. 1,64,22,99,347/- was renewed. Looking to the above facts, therefore, the decision of ld. CIT(A) in excluding the loan amount of Rs. 1,64,22,99,347/- out of the addition made on the ground that same were the old loan which were renewed during the year is fully justified. In respect of fresh loan of Rs. 86,10,21,727/- borrowed by the assessee during the year under consideration the assessing officer himself has considered loan amount to the extent of Rs. 26,61,01,009/- as genuine in nature. The ld. CIT(A) has sustained the addition of loan to the extent of Rs. 3,64,82,500/- only. 7. On perusal of the order of the ld. CIT(A) it is noticed that at page no. 139 of the appeal order, the ld. CIT(A) has sustained the loan amount to the extent of Rs. 3,64,82,500/- on the ground that AO has provided specific reasons. 8. We have perused the copies of document placed in the paper book filed by the ld. Counsel from page no. 1 to 595 of the paper ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 30 book wherein the assessee has placed relevant supporting documentary evidences of each lender in respect of whom the ld. CIT(A) has sustained the addition without giving any specific reason and controverting the details and documentary evidences filed by the assessee. In this regard, we have gone through the detail of each lender as under: Aditi Tracking Support Pvt. Ltd.:- The assessee has obtained the loan amount of Rs. 1,20,00,000/-. The assessee has placed in the paper book various documents which were submitted before the lower authorities from page no. 1 to 73 of the paper book. The assessee has filed copy of confirmation by lender together with covering letter of copy of acknowledgement of income tax return filed by the lender for the A.Y. 2018-19. The assessee has also filed copies of details of the bank account of the assessee and the lender with details of loan transaction reflected in the bank account. The assessee has also filed the copy of bank statement of J&K Bank where the account of the assessee was maintained and also filed copy of the Kotak Mahindra Bank where the bank account of the lender was maintained. Further the assessee has made various submission on the online portal of the Income Tax Department during the course of assessment and appellate proceedings showing submission of various details in support of the genuineness of the loan transaction. It is noticed that the ld. CIT(A) has ignored this evidences filed by the assessee in support of genuineness of the loan transaction. The lower authorities have neither controverted the material as referred brought on record by the assessee nor brought any material on record to disprove the claim of the assessee. Considering the relevant supporting documentary evidences and the ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 31 facts as discussed we do not find any merit in the decision of ld. CIT(A) in sustaining this addition, therefore, the same is deleted. 9. Similarly, in the case of another lender namely Leon Sunil D’souza from whom the assessee has obtained the total loan amount of Rs. 50,00,000/-. As evident from the paper book, the assessee has also filed all the relevant supporting evidences, similar to the detail as referred above in the case of Aditi Tracking Support Pvt. Ltd. However, neither the evidences filed disproved nor any other material brought on record, therefore, for the same reason as discussed in the case of Aditi Tracking Support Services Pvt. Ltd. as supra, we do not find any justification in the action of the ld. CIT(A) for sustaining the addition and the same is deleted. 10. Similarly, in the case of other loan party, Mrs. Mithali Suryanarayanan from whom the assessee has taken loan of Rs. 10,00,000/-, it is found from the paper book that all the relevant supporting details and evidences as referred above in the case of above other lenders has been filed in this case which has not been disproved by the lower authorities therefore, for the similar reason this addition is not sustainable. 11. In the case of Chandrika Vidyasagar Menon, the assessee has shown the loan amount of Rs. 35,00,000/- as obtained during the year under consideration. However, like other cases the assessee has not filed copies of bank details and income tax return filed by the lender as evident from the copies of documents placed in the paper book. Even in the loan application no bank account detail of the lender was filed. Therefore, we do not find any reason to interfere in ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 32 the decision of ld. CIT(A) in sustaining the addition to the extent of Rs. 35,00,000/-. 12. In the case of Gita Hakumit Sarin, it is noticed that assessee has obtained loan amount to the extent of Rs. 25,00,000/- from this lender and similar to the case of Aditi Tracking Support Pvt. Ltd., the various details like loan confirmation letter and detail of bank account of the lenders in the loan application was filed. The detail of cheque book number, bank account and amount received in bank account were also provided. The assessee has also provided the detail of repayment of loan on 16.10.2017 and 15.11.2017 made to the lender. Considering the above facts and material placed on record. We do not find any justification in the action of ld. CIT(A) in sustaining this addition, therefore, the same is deleted. 13. In respect of other lenders namely, Mrs. Sayali Avinash Shinde, Lata Mukesh Narsian, Rekha Arun Pagnis, Prakash Dwarkadas Rajdeo and Sachin D Mahadik, the assessee has also placed similar detail of loan confirmation letters, the detail of bank transactions and the detail of repayment of loans etc. as in the other cases referred above however, the lower authority neither disproved these supporting evidences nor brought any material on record to disprove the loan transactions from the aforesaid parties, therefore, we direct the assessing officer to delete the aforesaid additions relating to the above referred lenders. 14. However, no copy of loan confirmation letter, copy of bank statement and income tax return, acknowledgement of the lender etc. filed in the case of remaining lenders therefore do not find any reason ITA Nos. 2268 & 2826/Mum/2024 Raheja Legacy Trust A.Y. 2018-19 33 to interfere in the decision of the ld. CIT(A) in sustaining the addition in cases of such lenders. Accordingly, the appeal of the assessee is partly allowed and appeal of the Revenue is dismissed. 15. In the result, the appeal of the assessee is partly allowed and appeal filed by the Revenue is dismissed. Order pronounced in the open court on 28.01.2025. Sd/- Sd/- (SAKTIJIT DEY) (AMARJIT SINGH) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai,Date: 28.01.2025 Biswajit, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent: 3. The CIT, 4. The DR //True Copy// [ By Order Assistant Registrar ITAT, Mumbai Benches, Mumbai "