DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, LUDHIANA V. GAUTAM MALHOTRA, FARIDKOT

ITA 677/CHANDI/2024

AI Insights

The case involves an appeal by the revenue against the decision of the CIT(A) which had deleted an addition of Rs. 305 Lacs made by the Assessing Officer under Section 68 of the Income Tax Act. The addition was initially made on the grounds that the income tax returns of the lenders showed low income compared to the loans given. The assessee, Shri Gautam Malhotra, had received unsecured loans from Shri Arun Malhotra and Smt. Neelam Malhotra, which were scrutinized under Section 68 during the assessment year 2017-18. The CIT(A) found that the assessee had provided adequate documentary evidence to establish the creditworthiness and the genuineness of the loan transactions, including the source of the lenders' funds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397938 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHIR SEH GAL LD
• Assessee Lawyers: MANAV BANSAL LD
• Keywords: Additional evidence
• Section: 68

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHANDIGARH BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No.677/CHANDI/2024 (िनधाŊरणवषŊ / Assessment Year: 2017-18) DCIT- Central Circle-2 SCO 1-6, 3rd Floor Kitchlu Nagar Near BVM School Ludhiana-141001. बनाम/ Vs. Shri Gautam Malhotra S/o Shri Deep Malhotra Old Cantt Road Faridkot, Punjab-151203 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. AIGPM-9197-C (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri Sudhir Sehgal (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Shri Manav Bansal (CIT) – Ld. DR सुनवाईकीतारीख/Date of Hearing : 14-05-2025 घोषणाकीतारीख /Date of Pronouncement : 02-06-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals)-5, Ludhiana [CIT(A)] dated 30-03-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3)of the Act on 30-12-2019. The sole grievance of the revenue is deletion of addition of Rs.305 Lacs as made by Ld. AO u/s 68 of the Act. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 2 2. The assessee declared income of Rs.109.07 Lacs. During assessment proceedings, it transpired that the assessee received unsecured loans from various persons during the year and accordingly, he was required to demonstrate the fulfillment of conditions of Sec.68. After considering assessee’ submissions, loan creditors were accepted except for loan of Rs.145 Lacs as received from Shri Arun Malhotra and another loan of Rs.160 Lacs as obtained from Smt. Neelam Malhotra. The assessee had obtained aggregate loan of Rs.515 Lacs from these two persons out of which the addition was made u/s 68 for Rs.305 Lacs as under: - No. Name Amount of Loan Addition made 1. Shri Arun Malhotra Rs.145 Lacs Rs.145 Lacs 2. Smt. Neelam Malhotra Rs.370 Lacs Rs.160 Lacs Total Rs.515 Lacs Rs.305 Lacs The addition has been made on the ground that the respective Income Tax Returns (ITRs) of the two lenders showed less income and there was huge debits and credit in the account of the lender which were not commensurate with the income tax return. 3. The assessee’s submissions during first appeal were subjected to remand proceedings wherein the assessee furnished additional evidences which were in the shape of documentary evidences pertaining to those persons who had lent money to these two lenders. However, Ld. AO still doubted the source of source and pointed out deficiencies in the documentary 3 evidences. The adjudication of Ld. CIT(A) is contained in para 5.2.3 onwards. It was noted that in terms of requirements of Sec.68, the assessee was required to establish the identity of the creditor, the creditworthiness of the lender and the genuineness of the transactions. 4. The Ld. CIT(A) observed that the documentary evidences of the two lenders were duly furnished by the assessee during assessment proceedings. During appellate proceedings, the assessee further furnished the detailed source of entities from where the said credits were received by the two lenders. The assessee furnished, PAN, confirmation of accounts, copies of Income Tax Returns and Bank statements. The assessee also provided documents relating to source of source to explain the genuineness and creditworthiness of the loan givers. The Ld. CIT(A) concurred that the assessee furnished complete details of the transactions to the extent of source of source. Therefore, the onus of Sec.68 was duly discharged by the assessee. The Ld. AO made addition merely on the observation that returned income of lenders was low. However, there was no adverse material on record which would prove that unsecured loan money belonged to the assessee. Finally, considering ratio of various judicial decisions, the impugned addition was deleted against which the revenue is in further appeal before us. 4 Our findings and Adjudication 5. From the facts, it clearly emerges that the creditworthiness of the lender was doubted by Ld. AO merely on the ground of low return of income. However, during remand proceedings, the assessee amply proved the source of source and furnished the requisite documents establishing creditworthiness of the two lenders. Apparently, the loans have been sourced by the two lenders from third-parties and the assessee established the creditworthiness of even of third parties. The low income would not be a ground to make the impugned additions. The loan amount has been sourced from third-parties. All the ingredients of Sec.68 are shown to have been fulfilled by the assessee. Therefore, we see no reason to interfere in the impugned order, in any manner. 6. The appeal stands dismissed. Order pronounced on 02-06-2025 Sd/- Sd/- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER लेखासद˟ /ACCOUNTANT MEMBER Dated: 02-06-2025 5 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH "