CONVENICA TEXTILES VILLAGE HEERAN AT HEERAN KOHARA LUDHIANA,PUNJAB V. THE NFAC DELHI JURISDICTIONAL ASSESSING OFFICER INCOME TAX OFFICER WARD 3(1) LUDHIANA, PUNJAB

ITA 615/CHANDI/2024

AI Insights

The case involves an appeal by Convenica Textiles against the order of the CIT(A), which confirmed the addition of Rs. 1,20,86,000 as unexplained creditor under section 68 of the Income Tax Act, 1961. The primary contention was regarding the addition of Rs. 1,18,61,000 received from M/s Woodstow Apparels and Rs. 2,25,000 from another party. The Tribunal focused on the transactions with M/s Woodstow Apparels, where the assessee provided substantial evidence including bank statements and confirmations, proving the transactions were genuine and through banking channels. The CIT(A) had dismissed the appeal primarily due to the non-furnishing of the ITR of M/s Woodstow Apparels, which the Tribunal found insufficient to uphold the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652678 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Other Referred Cases: Vivek Nagpal in ITA No.2501/Del/2013, Sh. Chunni Lai in 2111TR11, Malbros International Pvt. Ltd. in ITA No. 676/Chd/2024, M/s Ganeshay Overseas Industries in ITA No.361/Chd/2023, CIT Vs Jeeta Khan in 292ITR 597, Smt. Nirmal Rani in (2017) 79 taxmann.com 180, Ambe Trade Corpn. Pvt. Ltd. in 145 taxmann.com, CIT, Bathinda Vs Karaj Singh in [2011] 15 taxmann.com 70
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Bogus
• Section: 133(6)

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी राजपाल यादव, उपाȯƗ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No. 615/Chd/2024 िनधाŊरण वषŊ / Assessment Year : 2020-21 Convenica Textiles Village Heeran at Heeran Khohara, Ludhiana, Punjab- 141003 बनाम The NFAC Delhi Jurisdictional AO ITO, Ward 3(1), Ludhiana, Punjab- 141001 ˕ायी लेखा सं./PAN NO: AAKFC9017H अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राजˢ की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 08/05/2025 उदघोषणा की तारीख/Date of Pronouncement : 16.06.2025 आदेश/Order PER KRINWANT SAHAY, AM: This is an appeal filed by the assessee against the order of CIT (A), NFAC, Delhi vide order, dated 30.03.2024 pertaining to Assessment Year 2020-21. 2. In the present appeal Assessee has raised following grounds: \"1. That the Ld. CIT(A) has erred in confirming the action of the Ld. Assessing Officer in making an addition of Rs. 1,20,86,000/- by treating the unsecured loans as alleged \"unexplained creditor\" under 68 of the income Tax Act, 1961. 2. a) That the Ld. CIT(A) has erred in ignoring the facts and evidences that the copy of Permanent Account Number of the creditor, confirmation of the creditor or his letter paid vide letter dated 06.09.2022, bank statement of M/s Woodstow Apparels Which prove that amount of Rs. 1,18,61,000 and Rs. 2,25,000/- had been transferred from the creditor's account through banking channel and which has been ignore without assigning any reasons. 2 b) That the Ld. CIT(A) has not appreciating the facts that all the amount of credits have been repaid by the appellant during the financial year 2021-2022. 3. That finding of Ld. CIT(A)in para 5 of the order that no confirmation, bank statement & Pan had not been submitted is contrary to the finding of the Ld. Assessing officer in Para 10 that all such documents had been furnished except copy of the ITR of creditor and, thus, confirmation of addition is not valid. 4. That the detailed submission as submitted during the course of appellate proceedings have not been considered properly the additions as confirmed by the Ld. CIT(A) is against the facts and circumstances of the case. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.\" 3. As per grounds of appeals, two additions have been challenged in respect of the amount borrowed from \"M/s Woodshow Apparels\" amounting to Rs. 1,18,68,000/- and Rs. 2,25,000/-from some other party. The Ld. Counsel of the assessee submitted that the addition on account of cash credit to the tune of Rs. 2,25,000/- is not being pressed and that leaves us with only one ground of appeal with regard to addition of Rs. 1,18,61,000/- on account of amount received from M/s Woodstow. Apparels during the year under consideration and, thus, the ground of appeal with regard to addition of Rs. 2,25,000/- is being dismissed. 4. The facts as borne out from the order of the AO/CIT(A) are that the Assessing Officer noticed that an amount of Rs. 1,18,61000/- had been received by the assessee on various dates through banking channel. The assessee was asked for the necessary confirmation from the party concerned, and copy of the bank statement of M/s Woodstow Apparels. The assessee furnished ledger account of M/s Woodstow Apparels in the books of accounts and copy of the bank account of that party and also submitted confirmation from the lender, 3 duly signed and stamped by the partner of the lender, alongwith PAN card of lender.. 5. Even the copy of bank statement of lender, substantiating the credit worthiness and genuineness of the transactions had been submitted. From the perusal of the bank statement of M/s Woodstow Apparels, i.e. lender, it had been noticed that the amount has been received by the said lender from M/s Kelly Impex. It was also noticed by the Assessing Officer that the assessee had to repay the amount due to 'M/s Kelly Impex' on account of purchases made and on such remittance of the amount for purchases by the assessee to M/s Kely Impex was transferred to M/s Woodstow Apparels through banking channel and which in turn was advanced to the assessee. 6. The Assessing Officer has also mentioned in the order that the bank statement of 'M/s Kelly Impex has also been submitted, which proves the above said fact. Further, we find that the AO has drawn a tabular chart at page 7 to 9 of the assessment order, wherein, he has reproduced all the remittances of amount from assessee on account of purchases to M/s Kelly Impex and purchases through banking channel and the amount was then remitted by Kelly Impex to M/s Woodstow Apparels, through banking channel and finally, the amount had been lent by M/s Woodstow Apparels to assessee on various rates through banking channel. 7. The Assessing Officer after reproducing said chart at pages 7 to 9 of the order has stated at page 10 of the order that this sequence proves that the assessee has routed his unexplained income in the form of unsecured loan and further has stated that the copy of the ITR of M/s Woodstow Apparels, has not been furnished and therefore, made an addition of Rs. 1,18,61,000/-. 4 8. The assessee filed an appeal before the CIT(A) NFAC and the submissions of the assessee have been recorded by the CIT(A) at pages 5 to 10 of his order. It has been stated therein that the assessee had duly proved the identity, credit worthiness and genuineness of transactions and the assessee filed the confirmation from the lender and all the transactions are through banking channel. Merely non- furnishing of ITR, cannot prove that the unsecured loan was bogus and in genuine and, as such, the addition u/s 68 was not called for. However, the CIT(A) dismissed the appeal of the assessee stating therein that since the copy of ITR return had not been furnished so he confirmed the addition in a summary manner. 9. During proceedings before us, the Ld. Counsel of the assessee argued vehemently that the identity and genuineness and credit worthiness of the lender, namely M/s Woodstow Apparels clearly proves the genuineness and creditworthiness of the lender and even the PAN card of lender had also been furnished. It was also argued that the copy of the bank statement of 'M/s Kelly Impex' had also been furnished, which proves that the amount was received by the lender, through banking channel from the above said concern. The amount was given to the assessee as per the chart reproduced in the assessment order by the AO. It was argued that the source of source have also been proved beyond any doubt. Since all the transactions are through banking channel, the finding of the Assessing Officer at page 10, that the assessee had routed its unaccounted income in the form of unsecured loan is misplaced. It was further stressed by the Ld. Counsel that if the copy of the ITR of M/s Woodstow Apparels have not been filed that should not go against the assessee, in as much as, the existence, identity, creditworthiness and genuineness of transaction stood proved beyond any doubt. The Ld. Assessing Officer could have 5 made enquiries by issuance of notice u/s 133(6) or otherwise for reason best known to the AO. 10. Further, it was argued that the amount was repaid to the lender after two years through banking channel, for which, the necessary evidence was filed before the CIT(A) and copy of the same has been placed in the Paper Book at pages 72 to 75. Thus, it was stressed that the finding of CIT(A) that ITR of M/s Woodstow Apparels had not been filed should not go against the assessee. The Ld. Counsel of the assessee relied upon the judgment of ITAT, Delhi Bench in the case of Vivek Nagpal in ITA No.2501/Del/2013, (Copy placed in the judgement set) for the preposition that where the identity and source of source and genuineness of transactions have been proved, merely that the copy of the ITR return of lender has not been furnished, would not go against the assessee. The reliance was also made in the judgment of Hon'ble Apex Court in the case of Sh. Chunni Lai, reported in 2111TR11 (Statute), in which, the SLP of the department was dismissed, since the assessee had proved the source of source. Similarly, reliance was placed on the case of Malbros International Pvt. Ltd. in ITA No. 676/Chd/2024 vide order, dated 30.12.2024 of Chandigarh Bench in the same context that once the source of source is proved, no addition can be made by invoking the provisions of section 68. Similarly, reliance has been placed in the case of M/s Ganeshay Overseas Industries bearing ITA No.361/Chd/2023 order, .dated 11.04.2025 of Chandigarh Bench of ITAT and of the Punjab & Haryana High Court in the case of CIT Vs Jeeta Khan reported in 292ITR 597 for the same preposition.. 11. Lastly, the reliance was also placed on the Judgement of 'Smt. Nirmal Rani', reported in (2017) 79 taxmann.com 180, wherein, it was held that, when the assessee having adequately discharged the onus 6 of proving the identity of the donor, capacity of donor and genuineness of transaction, merely non-filing of income tax return of lender, the addition could not be made u/s 68. It was also argued that the loan has been returned back through banking channel in subsequent year as per evidence furnished before the CIT(A) and before us. Reliance was placed on the judgment of Gujarat High Court in the case of 'Ambe Trade Corpn. Pvt. Ltd.', reported in 145 taxmann.com, order dated 05.07.2022, in which, it has been held that if the three ingredients have been proved and the amount had been repaid through banking channel in the subsequent year, addition u/s 68 could not be made. Similar reliance was placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT, Bathinda Vs Karaj Singh, reported in [2011] 15 taxmann.com 70. Besides that, some other judgments of Ahmadabad Bench, Surat Bench, Chandigarh Bench were cited in this context. 12. The Ld. Sr. CIT (DR) relied upon the order of the Assessing Officer/CIT(A) and stated that since no evidence of ITR has been filed of the' Lender' party namely M/s Woodstow Apparels, it could not be established that whether the lender is genuine or not. Further the nature of transaction as per the order of the AO, created a doubt and suspicion and, thus, argued for confirmation of addition as made by the CIT(A). 13. We have gone through the order of the CIT(A)/AO, arguments of both sides and the Paper and 'judgment set,', as filed by the counsel of the assessee and find that the facts are not disputed at all. Since the assessee could not furnish any evidence with regard to the amount of Rs. 2,25,000/- thus, the addition to that extent is confirmed. Regarding the amount received from Lender, namely M/s Woodstow Apparels, 7 we have gone through the confirmation, copy of account of the lender in the books of assessee, alongwith bank account of the lender and also the bank account of M/s Kelly Impex, who had remitted the amount to lender, namely M/s Woodstow Apparels on different dates and that amount has further been lent to the assessee. It is a fact that the amount was remitted to M/s Kelly Impex on various dates on account of purchases made from that party by the assessee and thereafter, through banking channel, M/s Kelly Impex was remitted this amount to M/s Woodstow Apparels who in turn, advanced the amount to assessee concern. Thus, the assessee has established the source of source and no case has been made out by the Revenue that it is unaccounted income of the assessee, which have been routed through M/s Woodstow Apparels. The assessee has proved the three ingredients i.e. identity, creditworthiness and genuineness of transactions and merely that ITR of the Lender was not furnished would not go against the assessee as per the judgment of Chandigarh Bench of the ITAT in the case of SmtNirmal Rani as cited supra. The assessee has discharged his onus of proving the source of source. Law in this respect is well settled. Reliance by the Ld. Counsel of the assessee on various judgments, as cited, before us are quite apt and further, we also find that the amount has been repaid in the subsequent years. The judgment of Hon'ble Gujarat High Court in the case of 'Ambe Trade Corpn. Pvt.Ltd.' is also applicable to the facts and circumstances of the case, in which, it has been held that once the identity, creditworthiness and genuineness of loan transactions have been established and the amount has been repaid by the assessee in subsequent years, no addition could be made u./s 68 of the Income Tax Act. Thus, the addition of Rs. 1,18,61,000/- as sustained by the CIT(A) deserves to be deleted. 8 14. In the result, appeal of the Assessee is partly allowed. Order pronounced in the open Court on 16.06.2025 Sd/- Sd/- राजपाल यादव क ृणवȶ सहाय (RAJPAL YADAV) (KRINWANT SAHAY) उपाȯƗ/VICE PRESIDENT लेखा सद˟/ ACCOUNTANT MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "