BHUPATBHAI THAKARSHIBHAI MAVANI,SURAT V. .ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-1(3), SURAT

ITA 724/SRT/2023

AI Insights

The case involves Bhupatbhai Thakarshibhai Mavani, the appellant, who contested the additions made to his income under section 68 of the Income Tax Act, 1961, by the AO, which were confirmed by the CIT(A). The additions were based on the AO's findings that the unsecured loans received by the appellant were not genuine and the lenders lacked creditworthiness. The Tribunal found that the AO had not conducted a proper inquiry and had not provided the assessee an opportunity to rebut the findings, thus violating the principles of natural justice. The Tribunal's decision emphasized the need for a thorough investigation and fair opportunity for the assessee to present his case.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473283 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 20-10-2023
• Other Referred Cases: Manoj Kumar Saraf vs. ITO, PCIT vs. NRA Iron & Steel (P.) Ltd., Kale Khan Mohammad Hanif vs. CIT, Roshan Di Hatti vs. CIT, Nemichand Kothari vs. CIT, Hindustan Tea Trading Co. vs. CIT, CIT vs. Orissa Corporation Pvt. Ltd., DCIT vs. Rohini Builders, CIT vs. Ranchod Jivabhai Nakhava, CIT vs. Durga Prasad More, Sumati Dayal vs. CIT, Kashiram Atmaram vs. DCIT, Baldevraj Jamnuram Ahuja vs. ITO, CIT vs. Smt. P.K. Noorjahan, CIT vs. Apex Therm Packaging P. Ltd., CIT vs. Ranchod Jivabhai Nakhava, DCIT vs. Rohini Builders, CIT vs. Kamdhenu Steels and Alloys Ltd., Kuruvilla P. Keru vs. DCIT, Mumtax Dilawar Gani vs. ITO, Birendrakumar D. Agarwal vs. ITO, ACIT vs. M/s Galaxy Filaments, Sandeep Ishwarlal Patel vs. ITO, ACIT vs. M/s. Manngalmurti Developers
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: KETAN N. VANIAWALA
• Keywords: Set aside; Business income; Corroborative evidences; Unexplained cash credit; Onus to prove; Principle of natural justice; Bogus
• Section: 143(3); 250; 251; 48; 68; 131; 133(6); 13; 264

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.724/SRT/2023 Assessment Year: (2017-18) (Physical Hearing) Bhupatbhai Thakarshibhai Mavani, A-702, Vaikunthdham, Pal Road, Opp – Sanjivkumar Auditorium, Surat - 395009 Vs. The ACIT, Circle – 1(3), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AAVPP7488C (Appellant) (Respondent) Appellant by Shri Ketan N. Vaniawala, CA Respondent by Shri Mukesh Jain, Sr. DR Date of Hearing 27/11/2024 Date of Pronouncement 09/12/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 22.08.2023 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2017-18. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) under section 250 of the Income Tax Act, 1961 is bad, both in the eyes of law as well as on facts of the case. 2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the learned assessing officer of making the addition to the tune of Rs.1,07,00,000/- on the ground of alleged unexplained cash credit u/s 68 of the Income Tax Act, 1961. 2 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani 3. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the learned assessing officer of disallowing interest expenses of Rs.4,54,020/- paid to lenders. 4. The learned Commissioner of Income Tax (Appeals) has wrongly invoked the section 115BBE of the Income Tax Act, 1961 and has taxed the addition made on account of unexplained cash credit amounting to Rs.1,07,00,000/- at higher rate. 5. The appellant craves leave to add, amend, alter, modify, substitute, delete, change or vary all or any of the ground or grounds of appeal.” 3. Brief facts of the case are that the assessee filed his return of income for AY.2017-18 on 22.03.2018, declaring total income of Rs.37,74,370/-. The case was selected for scrutiny under CASS. The assessee had derived business income, income from house property, income from other sources and agriculture income during the year under consideration. Various notices were issued and served upon the assessee. The Assessing Officer (in short, ‘AO’) found that there was unsecured loan of Rs.8,05,25,376/- out of which Rs.1,08,79,000/- pertained to fresh unsecured loans taken during the year. The AO asked assessee to furnish details of all unsecured loan creditors and explain the identity of the creditor, genuineness of transaction and creditworthiness of the parties. The assessee was also asked to explain the nature and source of unsecured loans. The AO further found that assessee has claimed interest on the unsecured loans. During assessment proceedings, the AO has prepared a table at para 7.3.2 regarding creditworthiness of various parties. He has mentioned the amount of loan taken and the returned income of the parties as well as analysis of bank statements of the lenders. Thereafter, he has observed that the so-called lenders have very low total income and 3 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani capacity of such persons to advance unsecured loans is not acceptable. Thereafter, the AO deputed her Inspector/staff to undertake field inquiry regarding the identity, genuineness and creditworthiness of loan givers. The result of spot verification is at page 6 of the assessment order. The Inspector visited the premises of 4 persons and based on his report, the AO observed that most of the lenders were not found at the present address provided by the assessee; that the locality was found to be of low-income group and the persons earned very low income to be able to save money for advancing the loans. The AO also stated at page 9 that no further inquiry was undertaken as it was not necessary, given the pattern of entry operations followed by the assessee. He also observed that there was lack of financial capacity of all lenders. Analysis of the loan received in 4 cases was made at para 7.4, where it was found that the bank account of the lender was credited just a day before it was lent to assessee. Based on these inquiry and analysis, AO concluded that the lenders are person of small means; the tax paid by them are negligible; they are unknown parties; some lenders have no apparent source of income; the loan givers are many who have advanced loans without collateral or securities from the assessee; no formal agreements were entered into with the lenders and the interest rate are also not aligned with the market rate and in many cases, it was not paid. Hence, the transactions cannot be treated as genuine. The creditors also lack creditworthiness to advance huge loans. In response to the show cause notice, assessee furnished information which was considered partial and unsatisfactory by the AO. The AO also observed that 4 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani assessee failed to file confirmation of some parties. He, therefore, observed that the unsecured loan was bogus and was based on paper work only. The cash given by the loan seeker gets layered through initial cash deposit and then series of bank transactions and finally reaches the beneficiary as unsecured loan. The AO relied on various decisions namely, (i) Manoj Kumar Saraf vs. ITO, 5 taxmann.com 63 (Gujarat), (ii) PCIT vs. NRA Iron & Steel (P.) Ltd., 103 taxmann.com 48 (SC), (iii) Kale Khan Mohammad Hanif vs. CIT, 50 ITR 1 (SC) and (iv) Roshan Di Hatti vs. CIT, 107 ITR 938 (SC). The AO stated that confirmation only proves the identity of the lenders but not creditworthiness and capacity of the parties. He also observed that the burden of proof was on the assessee who has not discharged the same. The identity of the creditors, capacity of the creditors to advance the money and genuineness of the transactions have not been established. He also held that the nature and source of the credits have not been explained as required u/s 68 of the Act. The AO held that assessee had funds from unexplained sources which have been routed through layers and channels into the books of the assessee. Receipt of loan through banking channel does not establish the genuineness of loan transaction. Therefore, in conclusion at para 7.14, the AO held as under: “Where the nature and source thereof cannot be explained satisfactorily, it is open to the Revenue to hold that it is the income of the assessee, and no further burden is on the Revenue to show that the income is from any particular source. The assessee has not been able to satisfactorily explain the genuineness, accountability and creditworthiness of the source of such credits. Therefore, rigours of section 68 are applicable to the assessee. Therefore, such amount is added to taxable income u/section 68 of the Income Tax Act, 1961.” 5 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani 3.1 Hence, AO added Rs.1,08,79,000/- as unexplained cash credit u/s 68 of the Act. He also initiated penalty proceedings u/s 271AAC of the Act. Thereafter, he has disallowed interest of Rs.4,54,020/- on the unsecured loan because they are fictitious. He further observed that interest payments are also fictitious entries which was disallowed and penalty u/s 270A(a) and 270A(9)(d) of the Act was initiated. 4. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The CIT(A) has extracted relevant portion of the assessment order and submission of the assessee. The assessee submitted that he has duly submitted all details regarding the unsecured loans taken during the year. He has provided the bank statements reflecting the loan transactions. He has also explained the source of the source. In some cases, notarized affidavits of the lenders, confirming the loan transactions were filed. The statement of accounts and acknowledgement of return was also filed. It was also submitted that Inspector made spot verification of only 4 parties but the AO made addition in case of fourteen parties by applying the observation of the Inspector in respect of the 4 parties only. The AO did not share the report of the Inspector with the appellant. Hence, appellant was not given any chance to rebut the findings of the Inspector. The Inspector had also not recorded any statement of the lender, nor did he inquire about the source of the advance. It was also submitted that assessee had been assessed u/s 143(3) for AYs.2012- 13, 2013-14 and 2014-15 and the Department has accepted the unsecured loans and books of account of those years. The assessee had relied on various 6 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani decisions namely, Nemichand Kothari vs. CIT, 264 ITR 254 (Gauhati), Hindustan Tea Trading Co. vs. CIT, 263 ITR 289, CIT vs. Orissa Corporation Pvt. Ltd., 159 ITR 78 (SC), DCIT vs. Rohini Builders, 256 ITR 360 (Gujarat), CIT vs. Ranchod Jivabhai Nakhava, TA No.50 of 2011 (Gujarat HC). Considering the above, the assessee requested to delete the addition. Since assessee had taken genuine loans, he requested to delete the interests of Rs.4,54,020/- disallowed by the AO. He also requested not to charge tax as per section 115BBE of the Act. After considering submission of the assessee, the CIT(A) at para 7.2.1 onwards has discussed the facts of the case and confirmed addition made by the AO. He observed that burden was on the assessee to prove the nature and source of the unsecured loan satisfactorily before AO. The assessee was required to established identity and creditworthiness of the lenders and genuineness of the transactions. The CIT(A) has discussed individually the case of all lenders and after mentioning the observation of the AO and submission of the assessee held that genuineness of transactions and creditworthiness of the lenders are not established. Therefore, the addition of AO was confirmed. Subsequently, the CIT(A) stated that there are a number of common threads in the manner in which loans were advanced by most of the lenders. These lenders have retail trading business which generate profit below taxable limit. The advance of loan is immediately preceded by transfer in the bank account or cash deposit in some cases. The documents produced do not explain nexus of the funds advanced with the business receipt or other receipt of the lender appearing in the return of the income filed. Most advances were in the last 7 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani week of July, 2016. The CIT(A) further observed that affidavit is not an evidence unless it is corroborated by documentary evidence supporting the averments in the affidavit. He has also relied on the decision in case of CIT vs. Durga Prasad More, 82 ITR 540 (SC) and Sumati Dayal vs. CIT, 214 ITR 801 (SC). In the case of appellant, the documents were examined on the anvil of preponderance of probabilities and it was found to be insufficient to prove the case of the appellant. In conclusion, addition of Rs.1,79,000/- only was deleted and the remaining amount of unsecured loan was confirmed. The CIT(A) has also confirmed the disallowance of interest except interest on loan of Rs.1,79,000/- taken from Sri Arjanbhai Jivrajbhai Sutaria. He also upheld levy of tax u/s 115BBE of the Act. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee has filed two paper books containing details of submissions made before the lower authorities and various case laws as well as written submission before ITAT. The ld. AR submitted that the appellant is a regular assessee and he has filed return for AY.2017-18, declaring total income of Rs.37,74,370/-. The appellant had borrowed Rs.1,07,00,000/- during the year from 13 parties. He has given break-up of the loans taken during the year from the said parties. He has submitted confirmation of loan account, computation of income along with acknowledgement of return of income for AY.2017-18, profit and loss account and balance sheet for the year ended on 31.03.2017, bank passbook, PAN and notarized affidavit from the lender in respect of various parties. He 8 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani further submitted that in many cases the loans have been repaid subsequently. Relying on the decision of the jurisdictional High Court in case of CIT vs. Ayachi Chandrasekhar Narsangi, 42 taxmann.com 251 (Gujarat) and ITAT, Surat in case of Baldevraj Jamnuram Ahuja vs. ITO, ITA No.178/SRT/2017, he argued that where repayment has been accepted in subsequent year, no addition can be made as cash credit u/s 68 of the Act. 5.1 The ld. AR further submitted that lenders are regularly assessed to tax and are filing their returns of income regularly. It was submitted that in some cases money was advanced to the appellant out of the funds received from the previously advanced money and past savings. Therefore, identity, creditworthiness of lenders and genuineness of transactions have been established by the appellant. Thus, assessee has duly discharged the onus cast upon him. If the AO had any doubt about the loans advanced by the lenders, he could have issued summons or notice u/s 133(6) to the said lender to clear her doubts. The AO without proper examination of the assessee submitted by the documents and without providing any cash trail has disallowed the loans received by appellant. The AO has based his finding on basis of report of AO which was in respect of only 4 parties. The finding of this limited inquiry was extrapolated to tax the loans of the remaining parties also. The AO did not provide copy of Inspector’s report to rebut the findings of the Inspector. The CIT(A) has also relied upon the finding of AO without making or any causing further inquiry, which he was required to do in view of elaborate submission made by the appellant before AO and CIT(A). The ld. AR has given lender-wise 9 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani details of submission and documents produced before the lower authorities to show that the assessee had discharged the onus cast upon her. The ld. AR has relied upon the decision of ITAT, Surat Bench in case of Kashiram Atmaram vs. DCIT, ITA No. 236/SRT/2022 and Baldevraj Jamnuram Ahuja vs. ITO, ITA No. 178/SRT/2017. The details of various parties are in para 2.3.1 to 2.3.13 at pages 7 to 62 of the paper book. The ld. AR submitted that the AO, without proper investigation of the documents and evidences produced before him, doubted the creditworthiness of the lenders and alleged that unsecured loans taken from them were not genuine. 5.2 The ld. AR also submitted that there are many judgments of the Hon’ble Supreme Court, jurisdictional High Court and other High Courts as well as jurisdictional Tribunal and other Tribunals to support case of the assessee. The appellant had submitted complete details of all lenders to prove the identity, genuineness and creditworthiness of all lenders. The AO could have issued summons u/s 131 or notice u/s 133(6) of the Act. Without conducting such inquiry, the AO has unilaterally and arbitrarily made the wrong and unwarranted addition. The ld. AR relied upon the following decisions: (i) CIT vs. Smt. P.K. Noorjahan, 103 Taxman 382 (SC), (ii) CIT vs. Apex Therm Packaging P. Ltd., ITA No.1070 of 2013 (Gujarat HC), (iii) CIT vs. Ranchod Jivabhai Nakhava, 21 taxman.com 159 (Guj.), (iv) DCIT vs. Rohini Builders, 256 ITR 360 (Gujarat HC), Gopal Heritage (P.) Ltd., 133 taxmann.com 173 (Gujarat HC), (v) CIT vs. Kamdhenu Steels and Alloys Ltd., 361 ITR 220 (Delhi HC), (vi) Kuruvilla P. Keru vs. DCIT, ITA No.719/SRT/2024, (vii)Mumtax Dilawar Gani vs. 10 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani ITO, ITA No.1442 & 1443/Ahd/2017, (viii) Birendrakumar D. Agarwal vs. ITO, ITA No.1694 & 1671/Ahd/2013), (ix) ACIT vs. M/s Galaxy Filaments, ITA No.35/SRT/2022, (x) Sandeep Ishwarlal Patel vs. ITO, ITA No.28/SRT/2024 and (xi) ACIT vs. M/s. Manngalmurti Developers, ITA No.217/SRT/2020. The ld. AR further submitted that the AO concluded the assessment proceedings without giving the assessee a fair opportunity to explain and clarify his point of view. He has thus violated principles of natural justice. The AO totally ignored the details furnished during assessment proceedings. The assessment was finalized without application of mind. The CIT(A) has also upheld the addition in a routine manner. The ld. AR, therefore, requested to delete the addition. 5.3 Regarding disallowance of interest expenses, the ld. AR submitted that assessee had borrowed loans @ 9% and had paid the same to all lenders. The appellant had submitted ledger accounts and cross-confirmations of the lenders to whom interest was paid. However, AO has not allowed the interest mainly on the ground that the loans were not genuine. He requested to allow the interest expense. 5.4s As regards invocation of provisions of 115BBE of the Act, the ld. AR submitted that assessee had taken unsecured loan from various parties for which complete details have been submitted. The AO has not contested any of the evidence submitted nor has he pointed out any defects in the books of account of the assessee. Hence, provision of section 115BBE cannot be applied. He submitted that the case of appellant does not fall in any category wherein the source of any loan is undisclosed, unverifiable or unascertainable. 11 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani Hence, he requested to delete application of section 115BBE of the Act for tax calculation in the demand notice. 6. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of lower authorities. He submitted that both AO and CIT(A) have elaborately discussed as to why the explanation of assessee is not satisfactory in so far as provisions of section 68 of the Act are concerned. They have discussed all individual lenders and given clear finding that it is a fit case for taxing the cash credit u/s 68 of the Act. He further submitted that subsequent repayment is not to be considered for deletion of Rs.39,15,000/-. 7. We have heard both the parties and perused the materials available on record. We have also deliberated on the decisions relied upon by both sides. There is no dispute regarding the fact that the assessee had received unsecured loans of Rs.1,08,79,000/- during the year under consideration. The CIT(A) has deleted Rs.1,79,000/- and hence issue before us is addition of Rs.1,07,00,000/- u/s 68 of the Act. The AO had asked the assessee to furnish various details and explain the nature and source of these credits. He also asked assessee to prove the identity and creditworthiness of the lenders and genuineness of the transactions. The assessee had submitted the name, PAN, confirmation, bank statement, ITR detail including acknowledgement of return, copy of capital account, balance sheet and P&L account of all lenders. He had also submitted notarized affidavits of some lenders. After receiving these details, AO had deputed his Inspector to make spot verification 12 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani regarding identity, genuineness and creditworthiness of the lenders. The Inspector carried out spot verification of 4 parties, namely, Smt. Alpaben Doshi, Smt. Sangitaben M. Doshi, Shri Virag S. Mehta and Shri Kiritbhai H. Patel. On finding that they belong with low-income group and some of them were not available at the given address, the AO observed that no further inquiry was necessary. We, therefore, find that the AO has not conducted proper inquiry in respect of the other 9 parties. He has also not confronted the finding / report of the Inspector to the appellant. The ld. AR has relied on the decisions in cases of the Hon’ble Supreme Court in cases of Orissa Corporation Pvt. Ltd. (supra) and the decisions of the jurisdictional High Court in case of Rohini Builders (supra), Ranchod Jivabhai Nakhava (supra), Apex Therm Packaging Ltd. (supra), Gopal Heritage Pvt. Ltd. (supra) and decisions of other Hon’ble High Courts and Tribunals where it has been held that once assessee has submitted documents such as PAN of creditors, their confirmations, bank statements, ITRs, computation of income etc., the initial onus lying on the assessee would stand discharged. In such a situation, it is for the AO to make further inquiries by issuing summons or notices u/s 133(6) to the lenders for further verification. The ld. AR has also relied on various decisions of the ITAT, Surat Bench where under similar facts and circumstances, the addition was deleted. 7.1 The unsecured loans received by the appellant may be divided into two categories, i.e., (i) unsecured loans which have been repaid in subsequent years and (ii) the loans which are still outstanding in the books of the assessee. 13 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani As far as the repaid unsecured loans are concerned, the ld. AR has submitted a table where details of the loans taken during the year and dates of subsequent re-payment have been mentioned. Such table is reproduced below for ready reference: It is seen from the details given in the above table that the assessee had repaid various amounts, totalling to Rs.39,15,000/- on various dates from 19.04.2017 to 24.12.2019. This has not been rebutted by the Department. Hence, repayment of loan of Rs.39,15,000/- in subsequent period is undisputed. As per the decision of the Hon’ble Gujarat High Court in case of Ayachi Chandrasekhar Narsangji (supra), when the Department has accepted the repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. The ITAT, Surat in case of Baldevraj Jamnuram Ahuja (supra) has also held that if the assessee has repaid the loan in subsequent years, the genuineness of the transaction should not be doubted and the addition so made should be deleted. Since the impugned loans were repaid, assessee is no more a beneficiary of the said amounts. 14 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani Similar decisions were given in the case of (i) Ayachi Chandrashekhar Narangji, (2023) 42 taxmann.com 251 (Gujarat), (ii) Ojas Tarmake (P.) Ltd., 156 taxmann.com 75 (Gujarat), (iii) Ambe Tradecorp (P.) Ltd., 145 taxmann.com 27 (Gujarat), (iv) Rajhans Construction (P.) Ltd., 140 taxmann.com 370 (Surat Trib.) and (v) Mega Construction (P.) Ltd., (2023) 151 taxmann.com 403 (Surat Trib.). Hence, following the above decisions, AO is directed to delete Rs.39,15,000/-out of total unsecured loan of Rs.1,07,00,000/- 7.2 Regarding the remaining unsecured loan of Rs.67,85,000/- [Rs.1,07,00,000 (-) Rs.39,15,000] outstanding in the books of the assessee, the ld. AR has furnished various details such as name, PAN, bank statements, ITR copy, confirmation affidavit etc. of the lenders, as discussed above. As stated earlier, the AO has also not caused any further inquiry after receiving various details from the assessee. Thus, the AO concluded the assessment proceedings without making proper and complete inquiry, which was necessary in view of the binding decision of the Hon’ble Supreme Court and jurisdictional High Court cited supra. The AO has ignored the details furnished during the assessment proceedings. He has taken the decision mainly on the basis of spot inquiry of 4 creditors, which was extrapolated to arrive at a conclusion that the conditions of section 68 are not fulfilled. As stated earlier, even copy of the Inspector report was not given to the assessee to rebut the same with explanation and supporting evidences. Therefore, addition has been made without making complete inquiry which the AO was required to do. The principle of natural justice was also violated. In view of the above and 15 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani respectfully following the decisions cited supra, we deem it proper to restore the matter to the file of the AO to provide report of Inspector to assessee for his rebuttal with proper and supporting evidences. The AO should also made inquiry in respect of the other creditors of Rs.67,85,000/- by asking the assessee to produce the creditors and/or by issuing summons u/s 131 or notice u/s 133(6) of the Act to the other lenders (i.e. loans of Rs.67,85,000) to examine and appreciate the claim of the assessee made before him. With this direction, the matter is restored to the file of the AO. Accordingly, the ground is partly allowed for statistical purpose. 8. Ground No.3 pertains to disallowance of interest expenses of Rs.4,54,000/- to the lenders. The interest payment is a consequential addition of the unsecured loan. We have partly allowed the ground and deleted the addition of Rs.39,15,000/-. The disallowance of interest on the above loan is deleted. As regards, the interests on remaining loan of Rs.67,85,000/-, the matter is also set aside to the AO for decision on the basis of addition of unsecured loan during the de novo proceedings. The ground is allowed for statistical purpose. 9. Ground No.4 pertains to application of the provisions of section 115BBE of the Act on the addition of Rs.1,07,00,000/-. We have partly deleted the addition to the extent of Rs.39,15,000/- on which provisions of section 115BBE are not applicable. We have set aside the issue of remaining unsecured loan of Rs.67,85,000/- to the file of AO. This issue is consequential in nature and would depend on the addition of unsecured loan u/s 68 of the Act in the de 16 ITA No.724/SRT/2024/AY.2017-18 Bhupatbhai Thakarshibhai Mavani novo proceedings. Hence, this ground is also set aside to the file of AO. Accordingly, this ground is allowed for statistical purpose. 10. In the result, appeal of the assessee is allowed for statistical purpose. Order is pronounced in the open court on 09/12/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 09/12/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "