ASIT SOMABHAI PATEL,UNJHA V. THE ITO, WARD-1, PATAN

ITA 695/AHD/2025

AI Insights

The case involves an appeal by Asit Somabhai Patel against the order of the Commissioner of Income Tax (Appeals), which upheld the addition of Rs. 1,75,000/- as unexplained credit under Section 68 of the Income Tax Act. The amount was claimed to be a loan from Govindbhai S. Patel. The Assessing Officer initially doubted the creditworthiness and genuineness of the loans based on the financial activities of the lenders. However, during the appellate proceedings, it was demonstrated that the loan was advanced from a regular business account and through proper banking channels, which led the Tribunal to conclude that the assessee had adequately substantiated the source of the funds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774949 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 01-04-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENKUMAR M VASAVDA
• Assessee Lawyers: S.N. DIVETIA; SAMIR VORA; ARS
• Keywords: Unexplained cash credit; Principle of natural justice; Assessment record
• Section: 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.695/Ahd/2025 (Assessment Year: 2013-14) Asit Somabhai Patel, 5, Netaji Nagar, Bahar Madh, Unjha-384170 Vs. Income Tax Officer, Ward-1, Patan [PAN No.AGEPP3207C] (Appellant) .. (Respondent) Appellant by : Shri S. N. Divetia & Shri Samir Vora, ARs Respondent by: Shri Rajenkumar M Vasavda, Sr. DR Date of Hearing 13.08.2025 Date of Pronouncement 02.09.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 20.02.2025 passed for A.Y. 2013-14. 2. The assessee has raised the following grounds of appeal: “1.1 The order passed by U/s.250 passed on 20-02-2025 for AY 2013-14 by NFAC[CIT(A)], Delhi (for short CIT(A)\" upholding the addition of Rs.1,75,000/- towards the amount taken from Govindbhai S. Patel as unexplained credit u/s 68 made by A.O. is wholly illegal, unlawful and against the principles of natural justice. 2.1 The ld. CIT(A), has grievously erred in law and or on facts in not appreciating that the appellant had fully discharged the burden cast upon him to prove the impugned amount of Rs. 1,75,000/- from Shri Govindbhai Patel and the onus did not extend to prove the source of the source thereof. 3.1 The ld. CIT(A) has grievously erred in law and or on facts in upholding the addition of Rs.1,75,000/- towards the amount taken from Govindbhai S. Patel as unexplained credit u/s 68 made by A.O. Printed from counselvise.com ITA No. 695/Ahd/2025 Asit Somabhai Patel vs. ITO Asst. Year –2013-14 - 2– 3.2 That the in the facts and circumstances of the ld. CIT(A), ought not to have upheld the addition of Rs.1,75,000/- towards the amount taken from Govindbhai S. Patel as unexplained credit u/s 68 made by A.O.” 3. The brief facts of the case are that during the course of assessment proceedings, the assessee was asked to explain the source of a cash deposit of Rs. 3,50,000/- made during the impugned assessment year AY 2012-13. The assessee claimed that the amount had come from withdrawals made from his own bank account, which was funded by loans received from two individuals: Govindbhai Shankerlal Patel and Balchandbhai Hargovandas Patel, each providing a sum of Rs. 1,75,000/- to the assessee. However, when the Assessing Officer verified these claims, he had doubts regarding the contention of the assessee. The Assessing Officer noted that in Govindbhai Patel’s case, his bank statements showed a very low average balance and there was no evidence of his capacity to lend such an amount to the assessee. Similarly, the Assessing Officer noted that Balchandbhai Patel’s bank statement also showed a cash deposit of Rs. 1,75,000/- just one day before transferring the amount to the assessee. The source of this cash deposit could not be explained, and no response was received from him, though the assessee later submitted his death certificate. As a result, the Assessing Officer held that both the creditworthiness and genuineness of the loans of these parties from whom loan was taken by the assessee was not proven. Accordingly, the Assessing Officer treated the full amount of Rs. 3,50,000/- as unexplained money under Section 69A of the Act and added it to the income of the assessee. 4. The assessee filed appeal before Ld. CIT(A), who partly allowed the appeal of the assessee. During the course of appellate proceedings, the assessee submitted that he, along with other co-owners, had paid a total premium of Rs. 27,71,160/- for converting agricultural land into non-agricultural land, and his Printed from counselvise.com ITA No. 695/Ahd/2025 Asit Somabhai Patel vs. ITO Asst. Year –2013-14 - 3– share was Rs. 3,46,395/- which was paid in cash after withdrawing the same from his bank account. Regarding the sum of Rs. 1,75,000/- stated to have been received by the assessee from Sri Govindbhai Shankerlal Patel, the assessee submitted the bank statement showing that the amount was transferred through cheque. However, the CIT(A) noted that while the transaction occurred through proper banking channels, the creditworthiness of the lender was not established, especially since the return of income of the lender showed a loss and no further documentary proof of financial capacity was provided by the assessee. As a result, the addition of Rs. 1,75,000/- in this regard was upheld by Ld. CIT(A). On the other hand, for the second amount of Rs. 1,75,000/- which was said to have been received from Sri Balchandbhai Hargovandas Patel, the assessee submitted a bank statement and a death certificate that the lender had since passed away. The legal heir stated that the funds came from cash in hand and sale of agricultural produce. Ld. CIT(A) was of the view that the return filed by the deceased lender showed a reasonable income, and the bank account showed regular activity. Based on this, the CIT(A) found the explanation of the assessee to be satisfactory and directed the Assessing Officer to delete the addition of this sum of Rs. 1,75,000/-. Accordingly, Ld. CIT(A) appeal partly allowed the appeal of the assessee. 5. The assessee is in appeal before us against the order passed by CIT(Appeals) partly allowing the appeal of the assessee. We have carefully considered the facts of the case, the documents placed on record, and the rival contentions. The sole dispute before us relates to the addition of Rs. 1,75,000/- made under Section 69A of the Act, in respect of the loan stated to have been received by the assessee from Shri Govindbhai Shankerlal Patel. On perusal of the assessment records and material furnished by the assessee, it is noted that Printed from counselvise.com ITA No. 695/Ahd/2025 Asit Somabhai Patel vs. ITO Asst. Year –2013-14 - 4– Shri Govindbhai Patel, in response to notice issued under Section 133(6) of the Act, submitted a reply dated 16th February 2021 enclosing his income tax return and ledger account. It has also been brought on record that Shri Govindbhai Patel is the proprietor of M/s. Shankerbhai Nagardas Patel and Co., a registered business entity having VAT and CST registrations, and that the said loan of Rs. 1,75,000/- was advanced from his regular business account through banking channels. We are of the considered view that these facts demonstrate not only the identity and genuineness of the transaction but also support the creditworthiness of the lender, especially when viewed in the context of the nature of his business and supporting documentary evidence furnished before the Assessing Officer. In light of these facts, we are of the considered opinion that the assessee has satisfactorily explained the source of the sum of Rs. 1,75,000/- received from Shri Govindbhai Patel, and the addition made under Section 69A of the Act is not sustainable. Accordingly, we direct the Assessing Officer to delete the remaining addition of Rs. 1,75,000/-. 6. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 02/09/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 02/09/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "