DCIT, CENTRAL CIRCLE-3, SURAT, SURAT V. M/S. R B & CO., SURAT

ITA 700/SRT/2025

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against the order of the Commissioner of Income Tax (Appeals)-4, Surat, which had allowed the appeal of M/s. R B & Co. The primary issue was the addition of Rs.1,01,49,000 as unexplained credit in the assessee's income for the Assessment Year 2017-18. The Assessing Officer had initially treated this amount as unexplained due to insufficient details on the creditworthiness and genuineness of the loan creditors. However, the CIT(A) reversed this decision after the assessee provided additional evidence, which the Tribunal partly upheld, except for two loans which required further verification of their genuineness and creditworthiness.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 825188 (ITAT-SURAT)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 27-06-2025
• Other Referred Cases: CIT vs. Ayachi Chandrashekhar Narsangji [42 taxmann.com 251], ITO vs. Computer Force in ITA No.1636/Ahd/2009, M/s Jindal (India) Textiles in ITA No.125/Ahd/2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY UKE
• Assessee Lawyers: RASESH SHAH
• Keywords: Set aside; Additional evidence; Unexplained cash credit; TDS
• Section: 143(3); 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT (Conducted through E-Court at Ahmedabad) BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.700/SRT/2025 Assessment Year: 2017-18 Deputy Commissioner of Income Tax, Central Circle – 3, Room No.516, Aaykar Bhavan, Majura Gate, Surat – 395 001. (Gujarat). Vs. M/s. R B & Co., 192, Krishna Township, Satellite Road, Mota Varachha, Surat – 395 006. (Gujarat). [PAN – AAJFR 6673 F] (Appellant) (Respondent) Assessee by Shri Rasesh Shah, CA Revenue by Shri Ajay Uke, Sr. DR Date of Hearing 09.12.2025 Date of Pronouncement 29.12.2025 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: This appeal is filed by the Revenue against the order of the Commissioner of Income tax (Appeals)-4, Surat (in short “the CIT(A)”) dated 08.04.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2017-18 on 07.11.2017 declaring Nil income. The case was selected for scrutiny under CASS. In the course of assessment, the Assessing Officer found that the assesses had obtained fresh loan from 26 parties, the details in respect of this was called for. According to Printed from counselvise.com ITA No.700/SRT/2025 (Assessment Year: 2017-18) DCIT vs. M/s. R B & Co. Page 2 of 6 the Assessing Officer, the assessee did not furnish the complete details in respect of loan taken from the following four persons: - Sr. No. Name Loan amount accepted 1. Kevin Godhani Rs.11,49,000/- 2. Manojbhai Vasoya Rs.20,00,000/- 3. Narendra Bhimjibhai Rs.20,00,000/- 4. Shradda Developer Rs.50,00,000/- Total Rs.1,01,49,000/- As the Assessing Officer was not satisfied with the credit worthiness and genuineness of these four loan creditors, the amount of Rs.1,01,49,000/- was treated as unexplained credit and added to income. 3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the first appellate authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed. 4. Now the Revenue is in appeal before us. The following grounds have been taken in this appeal: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,01,49,000/- being unexplained credits and in not appreciating that the Assessee has failed Printed from counselvise.com ITA No.700/SRT/2025 (Assessment Year: 2017-18) DCIT vs. M/s. R B & Co. Page 3 of 6 to substantiate the creditworthiness of the lenders and genuineness of such credits as per the rigors of section 68 of the Income Tax Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,01,49,000/- being unexplained credits by admitting the additional evidences under Rule 46A of the Income Tax Rules and in not appreciating that the Assessee could not put forth any justification to support that it was prevented to produce such additional evidences in course of the assessment proceedings. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in entirely relied on the submission filed by the assessee and completely ignored the finding of the Assessing Officer submitted in the remand report 4. The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made.” 5. Shri Ajay Uke, Ld. Sr. DR, submitted that the CIT(A) was not correct in allowing relief to the assessee when the credit worthiness and genuineness of the four loan creditors was not established. He submitted that merely because loan transactions were made through banking channels or that the loans were repaid does not establish the genuineness of the transactions and the creditworthiness of the creditors. He, therefore, strongly supported the order of the Assessing Officer. 6. Per contra, Shri Rasesh Shah, Ld. AR of the assessee, submitted that the Ld. CIT(A) had correctly appreciated the facts of the case and allowed relief to the assessee. He explained that not only the loan was received through banking channel but most of the amount was also repaid. Further, the evidences in the form of PAN, Aadhaar, Bank Statement etc. were also brought on record. The Ld. AR supported the order of the Ld. CIT(A). Printed from counselvise.com ITA No.700/SRT/2025 (Assessment Year: 2017-18) DCIT vs. M/s. R B & Co. Page 4 of 6 7. We have considered the rival submissions and gone through the materials available on record. It is found that in the course of appeal proceeding the assessee had filed certain additional evidences to establish the identity, genuineness and creditworthiness of the four creditors in respect of whom addition was made in the course of assessment. The Ld. CIT(A) had called for remand report of the Assessing Officer in respect of additional evidences brought on record. In the course of remand proceedings, the Assessing Officer had caused further enquiries by issue of notice under Section 133 of the Act. The Ld. CIT(A), after considering the facts of the case as well as the remand report of the Assessing Officer, had deleted the entire addition on account of loan of Rs.1,01,49,000/- taken from four parties. So far as loan of Rs.11,49,000/- from Kevin Godhani and Rs.50,00,000/- taken from Shradda Developer, these loans were considered as genuine for the reason that the entire amount of loan was repaid by the assessee. The Ld. CIT(A) has given the following finding in this regard: - “Apart from the details filed, after considering the above submissions, it is observed that loans taken from Sh. Kevin Godhani and Shradda Developer were fully repaid. The appellant has also given all the relevant details relating to the said that they are assessed to tax, have PAN numbers and confirmations of having given unsecured loans to the appellant and the bank statements evidencing the transfer of funds. The appellant, in its submissions, has also relied on the decision of Hon'ble Gujarat High Court in CIT vs. Ayachi Chandrashekhar Narsangji [42 taxmann.com 251] and the decision of Co- ordinate Ahmedabad Bench in ITO vs. Computer Force in ITA No.1636/Ahd/2009 and M/s Jindal (India) Textiles in ITA No.125/Ahd/2012. Accordingly, in view of above discussion as well as respectfully relying on the judicial decisions as cited above, the loans taken from Sh. Kevin Godhani and Shradda Developer are held to be genuine.” 8. Considering the fact that the assessee had brought on record evidences to establish the identity, creditworthiness and genuineness of these two loan transactions and also the fact that the entire loan taken from Kevin Godhani and Shradda Developer was repaid, we do not find Printed from counselvise.com ITA No.700/SRT/2025 (Assessment Year: 2017-18) DCIT vs. M/s. R B & Co. Page 5 of 6 any reason to disagree with the decision of the Ld. CIT(A) in respect of these two loans. The Revenue has been unable to controvert the finding of the Ld. CIT(A) in respect of these two loan creditors. Accordingly, the addition in respect of loans taken from Kevin Godhani and Shradda Developer was rightly deleted by the Ld. CIT(A). 9. As regarding the loan of Rs.20,00,000/- each taken from Manojbhai Vasoya and Narendra Bhimjibhai, it is found that the identity of these two creditors was duly established. The Ld. CIT(A) has given a finding that the identity and genuineness have been proved with the payment made through banking channels and account confirmation by these two parties. Merely because the amounts were received through banking channel, it does not establish the creditworthiness and genuineness of the loan transactions. Both Manojbhai Vasoya and Narendra Bhimjibhai did not respond to the notice under Section 133(6) issued by the Assessing Officer in the course of remand proceeding and no explanation was given by them about the nature and source of the amount advanced by them to the assessee. The fact that Manojbhai Vasoya was not traceable and he was declared bankrupt was duly acknowledged by the assessee in his submission. Prima facie, the loan obtained from a non-traceable and bankrupt person can’t be held as genuine and no material was brought on record by the assessee to establish the creditworthiness and genuineness of this loan transaction. The assessee could not explain as to whether any interest was paid on the loan taken from these two parties and as to whether any TDS was made thereon. Admittedly, these two loans were not repaid and were still outstanding. The factum of payment of interest and deduction of TDS was a relevant factor to establish the genuineness of the loan transactions, which was not examined by the Assessing Officer in the course of assessment and this aspect was also Printed from counselvise.com ITA No.700/SRT/2025 (Assessment Year: 2017-18) DCIT vs. M/s. R B & Co. Page 6 of 6 not explained by the assessee in the course of present appeal. We, therefore, deem it proper to set aside the matter to the file of the Assessing Officer with a direction to verify whether any interest was paid on the loans taken from Manojbhai Vasoya and Narendra Bhimjibhai, and if yes, whether the TDS was made thereon. The assessee is directed to produce the evidence in this regard before the Assessing Officer and also clarify as to whether these loans are still outstanding or have been repaid. The assessee is free to bring on record any other evidence to establish the creditworthiness of these two creditors. The AO will decide the creditworthiness and genuineness of the loan taken from Manojbhai Vasoya and Narendra Bhimjibhai afresh, after considering the above aspects. 8. In the result, the appeal of the Revenue is partly allowed for statistical purpose. Order pronounced in the open Court on this 29th December, 2025. Sd/- Sd/- (SANJAY GARG) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 29th December, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE C Assistant Registrar Income Tax Appellate Tribunal Surat Bench, Surat Printed from counselvise.com "