ARJUN SAWHNY,DELHI V. ACIT CIRCLE 30(1), DELHI, NEW DELHI

SA 302/DEL/2024

AI Insights

The case involves Arjun Sawhny, who appealed against the orders of the National Faceless Appeal Centre (NFAC) and the Assessing Officer (AO), which had confirmed the additions made to his income for the Assessment Year 2017-18. The additions included Rs. 1,00,00,000 for an unsecured loan from his wife and disallowances related to house rent allowance (HRA). The Tribunal found that the CIT(A) had dismissed the appeal without proper consideration of the submissions and evidence provided by the appellant, thus violating principles of natural justice. The Tribunal's decision emphasized the need for the revenue to substantiate its claims when the appellant has discharged the initial burden of proof.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473157 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: AJAY VOHRA
• Keywords: Onus to prove; Source of fund; Deemed to accrue or arise in india; Application of stay
• Section: 143(3); 142(1); 143(2); 68; 13; 234B

Judgement Text

" ITA No.- 3350/Del/2024 Arjun Sawhny. Page 1 of 17 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘A’: NEW DELHI) BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No:- 3350/Del/2024 (Assessment Year- 2017-18) Arjun Sawhny B-23, Third Floor, West End Colony, NewDelhi-110021 Vs. National Faceless Appeal Centre (NFAC), Delhi. PAN No: AAAPS0532R APPELLANT RESPONDENT SA No:- 302/Del/2024 (Arising out of ITA No.- 3350/Del/ 2024) (Assessment Year- 2017-18) Arjun Sawhny B-23, Third Floor, West End Colony, NewDelhi-110021 Vs. ACIT, Circle 30(1), Delhi. PAN No: AAAPS0532R APPELLANT RESPONDENT Appellant by : Sh. Ajay Vohra, Sr. Advocate Sh. Deepesh Jain, Advocate Sh. Shaurya Jain, CA Respondent by : Sh. Amit Katoch, Sr. DR Date of Hearing : 27.12.2024 Date of Pronouncement : 29.01.2025 ITA No.- 3350/Del/2024 Arjun Sawhny. Page 2 of 17 ORDER PER SUDHIR PAREEK, JM The aforetitled appeal arising out of the order dated 24.06.2024 passed by the National Faceless Appeal Centre, New Delhi (for the sake of convenience, hereinafter referred in short as CIT(A)/NFAC] by which the appeal filed by the Assessee/ appellant against the order dated 30.12.2019 passed by the Assessing Officer [(for the sake of convenience, (hereinafter referred in short as Ld. AO)] for A.Y. 2017- 18., dismissed. 2. The grievance of the assessee reflects in the grounds of appeal reads as under :- 1.1 That on the facts and circumstances of the case and in law, the CIT(A) erred in dismissing the appeal filed by the appellant vide the impugned order dated 24.06.2024, without considering the extensive submission/ documents placed on by the appellant and by merely reiterating the allegations made by the assessing officer. 1.2 That the CIT(A) erred on facts and in law in dismissing the appeal without allowing any opportunity of hearing to the appellant in gross violation of statutory provisions and principles of natural justice. 2. That the CIT(A) erred on facts and in law in not deleting addition of Rs.1,00,00,000 made by the assessing officer under section 68 of ITA No.- 3350/Del/2024 Arjun Sawhny. Page 3 of 17 the Act on account of unsecured loan obtained by the appellant from his wife, Ms. Freyan Jamshed Desai (lender), alleging that source of credit is not explained by the appellant. 2.1 That the CIT(A)/ AO erred on facts and in law in not appreciating that contemporaneous evidence has been placed on record by the appellant to prove the identity and creditworthiness of the lender (wife) and genuineness of transaction, ousting applicability of section 68 of the Act. 2.2 That the CIT(A)/ AO erred on facts and in law in not appreciating that identical transactions of receipt of loan by the appellant from his wife have been accepted in the hands of the appellant in preceding assessment years after detailed scrutiny assessments. 3. That the CIT(A) erred on facts and in law in not quashing/ deleting addition of Rs. 1,68,000 made under sub-section (4) of section 23 of the Act alleging the same to be as deemed income from the vacant house property of the appellant. 4. That the CIT(A) erred on facts and in law in not quashing/ deleting addition of Rs.24,09,000 on account of denial of exemption under section 10(13A) of the Act of house rent allowance (HRA) alleging absence of proof regarding payment of actual rent. 4.1 That the CIT(A) erred on facts and in law in not appreciating that the appellant had duly submitted his bank statements demonstrating payment of actual rent made by the appellant. 4.2 That the CIT(A)/AO erred on facts and in law in making aforesaid disallowance by disregarding various other evidence placed on record by the appellant including rent agreement and Form-16 issued by the employer, in respect of exemption towards HRA. ITA No.- 3350/Del/2024 Arjun Sawhny. Page 4 of 17 5. That on the facts and circumstances of the case and in law, the assessing officer erred in levying interest under section 234B and 234C of the Act. The appellant craves leave to add, to alter, amend or vary the above grounds of appeal at or before the time of hearing. 3. Facts of the case may be summarized as that the income tax return declaring income of Rs. 1,39,65,310/- was filed electronically by the assessee / appellant on 28.19.2017 and subsequently, the case was selected for scrutiny under CASS. In the course of proceedings, statutory notices u/s 143(2) of the Act dated 16.08.2018 and thereafter notice u/s 142(1) of the Act alongwith questionery dated 22.04.2019 was issued and served upon the assessee. In compliance of abovecited notices, assessee / appellant filed reply and furnished the details and after completing assessment proceedings the total income of the assessee / appellant computed and assessed at Rs. 2,65,42,310/- on 30.12.2019. Dissatisfied from the above order, the assessee / appellant filed appeal before the Ld. CIT(A), which was dismissed the said appeal by stating that the action of the Ld. AO is justified and confirm the addition made by the Ld. AO vide impugned order. ITA No.- 3350/Del/2024 Arjun Sawhny. Page 5 of 17 By aggrieving with the order of the first appellate order, this appeal is before us. 4. In the course of hearing, the assessee / appellant who is an individual and founder of director of Divitas Capital Private Limited submitted that the Ld. CIT(A) while disposing his appeal mechanically confirmed all the additions / disallowances in question. 5. Whereas per Contra, The Ld. DR heavily relied upon the orders of the both authorities below. 6. Heard rival submissions and perused the material available on record. 7. Regarding Ground no. 2, 2.1 and 2.2., the Ld. AR expressed grievance that the Ld. CIT(A) confirmed the addition of Rs. 1,00,00,000/-, which was made by the Ld. AO under Section 68 of the Act, on account of unsecured loan obtained by the assessee / appellant from his wife Freyan Jamshed Desai by alleging that source of credit is not explained by him and the Ld. CIT(A) while disposing the appeal, not appreciated contemporaneous evidence ITA No.- 3350/Del/2024 Arjun Sawhny. Page 6 of 17 which was placed on record by the assessee / appellant to prove the identity and creditworthiness of lenders (wife) and genuineness of transaction and also not appreciated the identical transaction of receipt of loan by the assessee / appellant from his wife which have been accepted in the hand of the assessee /appellant in preceding assessment years after scrutiny assessments. The Ld. AR further submitted that in the year under consideration, he took loan of Rs. 1,00,00,000/- from his wife Ms. Freyan Jamshed Desai and it is also submitted that in past year also he has taken loan from his wife. During the year under consideration, the assessee/ appellant has also repaid the outstanding loan amount of Rs. 2,00,00,000/- of opening outstanding balance and took a Rs. 1,00,00,000/- loan thereafter, which is being subject matter of the disallowance and repaid another of Rs. 1,00,00,000/- few months thereafter. So, aggregate loan taken during the year was Rs. 1,00,00,000/- and the aggregate loans repaid during the year was Rs. 3,00,00,000/- and all about transactions have been undisputedly carried out through banking channels. ITA No.- 3350/Del/2024 Arjun Sawhny. Page 7 of 17 7.1 The Ld. AR vehemently submitted that the addition of Rs. 1,00,00,000/-, which is made u/s 68 of the Act is beyond jurisdiction, illegal and bad in law for the reasons that in order to establish the genuineness, creditworthiness and identity of the amount received, the assessee / appellant has duely placed on record various documentary evidence which establishes and unequivocally proves all the ingredients of section 68 of the Act and once the assessee furnishes a reasonable explanation, the onus, it is trite law, shifts to the Revenue. 7.2 The Ld. AR further submitted that it is established position of law that the assessee has to provide documents to prove the identity and creditworthiness of the creditor as well as genuineness of the transaction and identity established if any information regarding PAN or other identity / document is furnished and creditworthiness of the investor needs to be proved by the assessee to establish that the creditor was having sufficient source wherefrom credit has been given. However, the assessee is not required to prove source of source and so far as the genuineness of the transaction is concerned, it should be prima facie to establish ITA No.- 3350/Del/2024 Arjun Sawhny. Page 8 of 17 wherein amount has been transmitted through banking channels or undisputable channels. The Ld. AR vehemently argued that once identity and genuineness of transaction is prima facie established by assessee / appellant as aforesaid the burden of proof shifts upon the Revenue and thereafter Revenue, in order to invoke the provision of section 68 has to bring on the record, sufficient material to controvert the evidence furnished by the assessee. 7.3 In the instant case, the Ld. AR submitted that no addition should have been made in provision of section 68 of the Act, since the appellant had, during the course of proceedings before the lower authorities, discharged the primary onus by placing on record various contemporaneous and unrebutted documentary evidences in support of the unsecured loan obntained form his wife, which is mentioned as under: a. Form 3CD of the appellant which clearly discloses the loan transaction, placed at page no. 13-14 on PB. b. ITR of the applicant and the lender, which is well placed on page 42 of the PB ITA No.- 3350/Del/2024 Arjun Sawhny. Page 9 of 17 c. Ledger account of the assessee / appellant in the books of Mrs. Freyan Jamshed Desai alongwith confirmation wherein all the transaction stands recorded which explicitly shows that the appellant has in fact repaid outstanding loan to the extent of Rs. 3,00,00,000/- during this year while was only received Rs. 1,00,00,000/- from here wife and it is sufficient to prove the source of fund placed at page 40-49 of the PB d. Bank account statement of both the lender and the appellant, which is clearly substantiating the loan entries and well placed at page no. 35-39 of the PB. e. The receipt of loan has been fully disclosed in the audited financial statements of the appellant for the year under consideration which is placed PB at page 5. 7.4 The Ld. AR also argued that the unsecured loan obtained by the assessee / appellant from his wife has also been obtained in ITA No.- 3350/Del/2024 Arjun Sawhny. Page 10 of 17 earlier years as well of even larger amounts and transactions have been accepted in earlier assessment after examination. In this regard, also submitted that no adverse inference ever been drawn by the Revenue regarding abovesaid transactions in completed scrutiny assessment of earlier years for which the Ld. AR referred page no. 64-73 of PB, of assessment orders passed in the case of appellant for earlier years and subsequent years, which sufficient to establish the reality. It was also submitted that in this case transaction in question is between wife and husband and not with the third party, the funds received from wife are here own funds. 7.5 The Ld. AO observed in the assessment order that it is found that the lender has disclosed income for AY 2017-18 of mere Rs. 48,99,980/- which is not commensurate with the loan amount forwarded and per contra, the Ld. AR submitted that the creditworthiness of the lender doubted on the basis of above fact. In this context, it is submitted on behalf of the assessee appellant that the Mrs. Freyan Jamshed Desai is a resident individual and is regularly assessed to tax as per the provisions of the Act. For the year under consideration Mrs. Freyan Jamshed Desai filed her ITA No.- 3350/Del/2024 Arjun Sawhny. Page 11 of 17 return of income on 25.07.2017 declaring income of Rs.48,99,980. The said return of income was selected for scrutiny assessment which culminated into assessment order dated 06.12.2019 passed under section 143(3) of the Act accepting the returned income; no adverse inference is drawn qua the loan transaction in the hands of Mrs. Freyan Jamshed Desai- and for which he placed income tax return filed for AY 2017-18 and consequent assessment order AY 2017-18, in which case was said to be selected for limited scrutiny, well placed at page 42-44 of PB. It was further argued that the during the year, the appellant has repaid Rs. 3,00,00,000/- of loan to her wife; out of the same, Rs. 2,00,00,000/- were repaid/ transferred by the appellant till 06.09.2019 i.e. before Rs. 1,00,00,000/- was given as loan to the appellant on 21.11.2019. and it is relevant to mention here that the opening bank balance in Standard Chartered Bank (A/c No.52610099244) of Mrs. Freyan Jamshed Desai as on 01.04.2017 was Rs.1,22,88,257 which was even more than the amount of loan advanced during the year under consideration. ITA No.- 3350/Del/2024 Arjun Sawhny. Page 12 of 17 8. Regarding submissions advanced as hereinbefore, the Ld. CIT(A) mechanically disposed of and dismissed the appeal without even mentioning the submissions of assessee / appellant and it is strange to note that the Ld. CIT(A) while deciding the appeal, simply reproduced the order passed by the Ld. AO whereas the Ld. CIT(A) was supposed to decide the appeal of assessee on its merits in accordance with law. 9. On the basis of foregoing factual position and material placed on record, we find materials substance in the submissions of assessee / appellant by which is crystal clear that the identity of the lender, genuineness of the Transaction and creditworthiness of wife of assessee / appellant is beyond question and by furnishing documentary evidences, the assessee appellant succeeded to discharge primary onus to prove or establish the same and there is nothing on record to controvert which has to bring the necessarily on record by the Revenue as per law, and even the Ld. AO /CIT(A) nowhere doubted about genuineness of the document placed on record by assessee. In above fact situation addition made by the Ld. AO on account of unsecured loan of Rs. 1,00,00,000/- obtained ITA No.- 3350/Del/2024 Arjun Sawhny. Page 13 of 17 by the assessee / appellant from his wife which was affirmed by the Ld. CIT(A) is quite unsustainable in the eye of law and hence ground no. 2, 2.1, and 2.2 is hereby allowed. 10. Ground no. 3 not pressed by the assessee and need not be adjudicated 11. Regarding ground no. 4 to 4.2, the Ld. AR submitted that the addition of Rs. 24,09,000/- on account of denial of exemption u/s 10(13A) of the Act of the HRA alleging absence of proof regarding payment of actual rent and not appreciated that assessee / appellant duly submitted his bank statement demonstrating payment of actual rent made by the appellant and disregarding the various other evidences placed on record by the assessee including rent agreement and Form 16 which was duly issued by the employer, in respect of exemption towards HRA in question. The Ld. AR also submitted that in order to satisfy his claim, he has submitted lease deed dated 02.05.2014 between the applicant and landlords, bank account statements of the applicant, highlighting the rent paid entries, form 16 issued by the employer, calculation of HRA exemption and PAN of the landlords. It is submitted that the ITA No.- 3350/Del/2024 Arjun Sawhny. Page 14 of 17 Ld. AO ignored the above documentary evidences and proceeded to make disallowance of HRA exemption of Rs. 24,09,000/- under section 10(13A) of the Act by stating that there is no any proof regarding payment of actual rent. It is further submitted that he has taken residential property, First Floor of B-6, Westend Colony, New Delhi-21, on lease, from landlords being Mrs. Devika Misra and Misra Family Trust, in accordance with the lease deed the appellant was required to pay Rs. 2,00,000/- to Devika Misra per month from 01.06.2014 to 31.05.2016 and Rs. 25,000/- per month to Misra Family Trust from 01.06.2014 to 31.05.2016 and thereafter w.e.f. 01.06.2016 the appellant was required to pay 2,20,000/- per month to Devika Misra and Rs. 27,500 to Misra Family Trust and in order to corroborate the above mentioned facts, he has duly placed on record the lease deed etc. which is mentioned hereinbefore and on perusal of documents submitted transaction evidencing payment of rent as per the lease deed is clearly visible. It is also relevant that alleging absence of proof regarding payment of actual rent is unwarranted more so when the eligibility to claim HRA exemption is not disputed by the Revenue. It is also submitted that strangely the Ld. CIT(A) while deciding the appeal, ignored the back account ITA No.- 3350/Del/2024 Arjun Sawhny. Page 15 of 17 statement submitted before him and dismissed the plea by stating that in the absence of actual rent paid by the assessee the submissions of him not accepted and above all it is highly relevant that the case of the assessee / appellant for the subsequent assessment years i.e. 2018-19 was also selected for scrutiny assessment wherein identical issue relating to exemption of HRA was examined in detail and thereafter the assessing officer fully allowed the claim to appellant without any deviation / disallowance. We find substance in submissions which is supported with relevant material on record and hence this ground of appeal is allowed. 12. Ground no. 5 is general in nature and need not be adjudicated. 13. In conclusion, we are of the considered opinion that there is a material substance in the submissions advanced on behalf of the assessee / appellant and additions made by the Ld. AO which is upheld by the Ld. CIT(A), deserve to be deleted, hence, the appeal of the assessee is allowed, accordingly. ITA No.- 3350/Del/2024 Arjun Sawhny. Page 16 of 17 14. Since the appeal stands allowed, therefore, the stay application filed by the assessee becomes infructuous. Accordingly, the stay application is rendered infructuous. Order pronounced in open Court on 29th January, 2025 Sd/- Sd/- (S.RIFAUR RAHMAN) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29/01/2025 NEHA, Sr. PS, Pooja, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No.- 3350/Del/2024 Arjun Sawhny. Page 17 of 17 Date of dictation of Tribunal order 14.01.2025, 22.1.25, 28.1.25 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 14.01.2025, 22.1.25, 28.1.25 3. Date on which the typed draft Tribunal order is placed before the other Member 4. Date on which the approved draft Tribunal order comes to the Sr. PS/PS 5. Date on which the fair Tribunal order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr.PS/PS 7. Date on which the final Tribunal order is uploaded by the Sr.PS/PS on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal order 9. Date on which the file goes to the Supervisor (Judicial) 10. The date on which the file goes to the Assistant Registrar for endorsement of the order 11. Date of Despatch of the order "