DHAVAL VINOD GADA,PUNE V. DCIT CIRCLE-5, PUNE

ITA 1817/PUN/2025

AI Insights

The case revolves around an appeal by Dhaval Vinod Gada against the order of the CIT(A) / NFAC, which upheld the addition of Rs.1.62 crores to the assessee's income for the assessment year 2013-14. The addition was initially made by the Assessing Officer under section 68 of the Income Tax Act, 1961, suspecting the genuineness of an interest-free loan taken by the assessee for purchasing land. The Tribunal examined the evidences and arguments presented, including the source of the loan and the transactions involved, and concluded that the assessee had sufficiently explained the source of the funds, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792632 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 30-07-2025
• Other Referred Cases: PCIT vs. M/s. NRA Iron and Steel Pvt. Ltd., Sheela Overseas Pvt. Ltd vs. PCIT, Prem Grain Industries Pvt. Ltd. Vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A D KULKARNI
• Assessee Lawyers: NIKHIL S PATHAK
• Keywords: Set aside; Unexplained cash credit; TDS; Accommodation entries; Source of fund
• Section: 147; 142(1); 263; 271(1)(c); 68; 131; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.1817/PUN/2025 Assessment year : 2013-14 Dhaval Vinod Gada 101, New Timber Market, Bhawani Peth, Pune – 411042 Vs. DCIT, Circle – 5, Pune PAN: ANJPG4733A (Appellant) (Respondent) Assessee by : Shri Nikhil S Pathak Department by : Shri A D Kulkarni Date of hearing : 26-11-2025 Date of pronouncement : 03-12-2025 O R D E R PER R.K. PANDA, VP: This appeal filed by the assessee is directed against the order dated 25.06.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2013-14. 2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) / NFAC in confirming the addition of Rs.1,62,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 3. Facts of the case, in brief, are that the assessee is an individual and engaged in business as wholesale as well as retail business of plywood, veneer and glass. He filed his return of income on 22.09.2013 declaring total income at Rs.8,01,699/-. The case of the assessee was selected for scrutiny to verify ‘large Printed from counselvise.com 2 ITA No.1817/PUN/2025 increase in unsecured loan’. Accordingly statutory notice u/s 143(2) of the Act was issued and served on the assessee. Subsequently the Assessing Officer issued notice u/s 142(1) of the Act along with a questionnaire in response to which the AR of the assessee filed the various details from time to time. 4. During the course of assessment proceedings the Assessing Officer noted that the assessee has purchased a land at Baner for Rs.1.62 crore for which he has taken interest free loan of Rs.1.62 crore from Shri Manilal M. Gada, a person covered u/s 40A(2)(b) of the Act. The land was purchased from Smt. Nenshi L. Shah, Shri Lalji K. Shah, Shri Shantilal Shah, who are the vendors and are residing in Mumbai. The Assessing Officer issued a notice u/s 133(6) of the Act to Shri Manilal M. Gada on 02.03.2016 to submit copy of bank account and other details from which he had advanced interest free loan of Rs.1.62 crore to the assessee. Shri Manilal M. Gada, in response to the said notice submitted his reply on 10.03.2016 in TAPAL. On perusal of the bank account of Mr. Manilal M. Gada, the Assessing Officer noted that Shri Manilal M. Gada has accepted an amount of Rs.1.62 crore as loan from his wife Smt. Neeta Manilal Gada and on the very same date the assessee has provided the entries to Shri Dhawal V Gada i.e. the assessee. Since the entries of loan were received from Smt. Neeta M. Gada by Shri Manilal M. Gada, the Assessing Officer issued summons u/s 131 of the Act along with notice u/s 133(6) of the Act on 22.03.2016 to Mrs. Neeta Manilal Gada to attend office on 23.03.2016. Since Mrs. Gada failed to attend office of the Assessing Officer on the given date, the Assessing Officer telephonically contacted the AR of Printed from counselvise.com 3 ITA No.1817/PUN/2025 the assessee. The Ld. Counsel for the assessee in response to the same filed certain documents in respect of Smt. Neeta M. Gada on 29.03.2016. The Assessing Officer on perusal of the bank account and the ledger extracts of Smt. Neeta M. Gada noted that she had accepted loans from Shri Shantilal Shah, Smt. Nenshi L. Shah and Shri Lalji K. Shah, who are the three persons from whom the assessee had purchased the said land and paid consideration of Rs.1.62 crores for his half share. Therefore, the Assessing Officer disbelieved the amount of Rs.1.62 crores paid by the assessee as out of loan from Shri Manilal M. Gada and accordingly made addition of Rs.1.62 crores u/s 68 of the Act on the ground that the explanation offered by the assessee in respect of Rs.1.62 crores is not satisfactory by observing as under: “6.4 From the above chart, it is transparent that the entries of loans were taken and repaid and land of Rs.3.24 Crore was purchased by the assessee and his brother. The ultimate beneficiary was assessee and his brother by accommodating entries of loan. The assessee had received the ownership of land and the entries of loans received from Shri. Manilal M. Gada are not satisfactory in the opinion of assessing officer. 6.5 Being relied upon above discussion, the amount of Rs.1,62,00,000/- is treated as unexplained cash credit under section 68 of the Act as the explanation offered by the assessee in respect of Rs.1,62,00,000/- is not satisfactory in my opinion. The assessee had made layer transaction for accommodating undisclosed funds. Penalty u/s. 271(1)(c) of the Act is also initiated for furnishing inaccurate particulars of income. For the remaining amount of Rs.1.62, crore, of which Shri Morgen Vinod Gada is beneficiary, the information in this respect will be intimated to respective Assessing Officer.” 5. In appeal, the Ld. CIT(A) / NFAC, relying on the decision of Hon’ble Supreme Court in the case of PCIT vs. M/s. NRA Iron and Steel Pvt. Ltd. reported in 103 taxmann.com 4, upheld the addition made by the Assessing Officer by observing as under: Printed from counselvise.com 4 ITA No.1817/PUN/2025 Printed from counselvise.com 5 ITA No.1817/PUN/2025 6. Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal. 7. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) / NFAC in sustaining the addition made by the Assessing Officer. He submitted that there is no dispute to the fact that the assessee has availed loan of Rs.1.62 crores from Shri Manilal Gada. Shri Manilal M. Gada, in his response to the notice issued by the Assessing Officer u/s 133(6) of the Act has confirmed to have given the said loan of Rs.1.62 crore being loan obtained from his wife Mrs. Neeta M. Gada. His bank statements were also given. Further the brother of the Printed from counselvise.com 6 ITA No.1817/PUN/2025 assessee has also availed identical loan amount from Shri Manilal Gada. However, no addition in the hands of his brother has been made by the Assessing Officer nor any action u/s 147 or 263 has been taken. He submitted that the addition u/s 68 of the Act in the instant case cannot be made since the assessee has not only explained the source but even the source of the source. 8. Referring to the decision of the Hon’ble Delhi High Court in the case of Sheela Overseas Pvt. Ltd vs. PCIT vide ITA No.546/2023, order dated 28.05.2025, he submitted that the Hon’ble High Court in the said decision has held that amendment to section 68 of the Act introduced by virtue of the Finance Act, 2022 makes it abundantly clear that section 68 of the Act, as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share capital money, share capital, share premium or any amount of such nature. Thus, the enlargement of the assessee’s onus to explain the source of the source of sums credited as unsecured loans necessitated the amendment to section 68 of the Act to expressly provide for the same. 9. Referring to the decision of the Coordinate Bench of the Tribunal in the case of Prem Grain Industries Pvt. Ltd. Vs. DCIT vide ITA No.2012/PUN/2025 order dated 20.11.2025 for assessment year 2016-17, he submitted that the Tribunal, following the above decision of the Hon’ble Delhi High Court, has deleted the addition made by the Assessing Officer u/s 68 and sustained by the Ld. CIT(A) / Printed from counselvise.com 7 ITA No.1817/PUN/2025 NFAC. He accordingly submitted that the order of the Ld. CIT(A) / NFAC be set aside and the grounds raised by the assessee be allowed. 10. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. 11. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.1.62 crores u/s 68 of the Act on the ground that the assessee has accepted loan of Rs.1.62 crores from Shri Manilal Gada who in turn has received the said amount from his wife Smt. Neeta Manilal Gada and Smt. Neeta Manilal Gada has obtained the loan from Shri Shantilal Shah, Smt. Nenshi L. Shah and Shri Lalji K. Shah who are the vendors of the said land. According to the Assessing Officer the entries of loan were taken and repaid and land of Rs.3.24 crores was purchased by the assessee and his brother. The ultimate beneficiary was the assessee and his brother by accommodating entries of loan. We find the Ld. CIT(A) / NFAC while sustaining the addition has relied on the decision of the Hon’ble Supreme Court in the case of PCIT vs. M/s. NRA Iron and Steel Pvt. Ltd. (supra). It is the submission of the Ld. Counsel for the assessee that the decision of Hon’ble Supreme Court in the case of PCIT vs. M/s. NRA Iron and Steel Pvt. Ltd. (supra) is not applicable to the facts of the present case. Further the assessee in the instant Printed from counselvise.com 8 ITA No.1817/PUN/2025 case has explained the source of source. It is his submission that in view of the decision of Hon’ble Delhi High Court in the case of Sheela Overseas Pvt. Ltd vs. PCIT (supra) where it has been held that amendment to section 68 of the Act introduced by virtue of the Finance Act, 2022 makes it abundantly clear that section 68 of the Act, as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share capital money, share capital, share premium or any amount of such nature, therefore, no addition u/s 68 can be made. 12. We find some force in the above arguments of the Ld. Counsel for the assessee. It is an undisputed fact that the assessee during the course of assessment proceedings has explained the source of Rs.1.62 crores being the loan taken from Shri Manilal M. Gada. It is also an undisputed fact that Shri Manilal M. Gada in response to the notice u/s 133(6) of the Act has submitted his reply along with his bank statement according to which he has given an amount of Rs.1.62 crores as loan to the assessee. There is no doubt that Shri Manilal M. Gada has obtained loan of equal amount from his wife Smt. Neeta Manilal Gada who in turn has obtained loan of equal amount from the vendors Shri Shantilal Shah, Smt. Nenshi L. Shah and Shri Lalji K. Shah. It is also an undisputed fact that identical amount of loan obtained by the brother for purchase of 50% share in the property has been accepted and no addition has been made by the Assessing Officer nor anything was brought to our notice that any action u/s 147 or 263 of the Act has taken place. Under these circumstances we have to see as to whether any addition can be made Printed from counselvise.com 9 ITA No.1817/PUN/2025 in the hands of the assessee u/s 68 of the IT Act where he has not only explained the source but has also explained the source of the source. 13. We find the Hon’ble Delhi High Court in the case of Sheela Overseas Pvt. Ltd vs. PCIT (supra) has held that amendment to section 68 of the Act introduced by virtue of the Finance Act, 2022 makes it abundantly clear that section 68 of the Act, as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share capital money, share capital, share premium or any amount of such nature. 14. We find following the above addition, the Coordinate Bench of the Tribunal in the case of Prem Grain Industries Pvt. Ltd. Vs. DCIT (supra) has deleted the addition made by the Assessing Officer u/s 68 of the Act and sustained by the Ld. CIT(A) / NFAC by observing as under: “16. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.1,15,00,000/- u/s 68 of the Act being the amount of loan obtained from Risa International Ltd by the assessee on the ground that mere submission of documents such as PAN, copies of ITRs, account confirmations, repayment with interest and TDS thereon cannot by itself discharge the burden cast upon the assessee u/s 68 of the Act. According to him, in terms of section 68 of the Act, the assessee has to prove the identity and creditworthiness of loan creditors and the genuineness of the transaction. According to him, in the instant case the true identity of the loan creditor Risa International Ltd is not proved and its creditworthiness was also is doubtful since Risa International is just a paper company used by the beneficiaries of Risa International Ltd to provide accommodation entries. We find the Ld. CIT(A) sustained the addition made by the Assessing Officer. It is the submission of the Ld. Counsel for the assessee that the assessee has filed all the relevant details such as PAN, copies of ITRs, account confirmations, repayment with interest and TDS thereon, bank statement etc to prove the identity and creditworthiness of the loan creditor and genuineness of the transaction. The Printed from counselvise.com 10 ITA No.1817/PUN/2025 director of Risa International Ltd, lender company has appeared before the Assessing Officer in response to the summons u/s 131 of the Act and has confirmed to have extended the loan of Rs.1,15,00,000/- out of collections from sundry debtors. He has also stated to have extended the loan to the company where his father-in-law is the Director. It is also his submission that in view of the amendment to section 68 of the Act prior to 01.04.2023 the assessee is not required to explain the source of the source of funds other than share capital money, share capital, share premium or any amount of such nature. 17. We find some force in the arguments of the Ld. Counsel for the assessee. It is an admitted fact that the assessee during the course of assessment proceedings has filed various details such as return of income, computation of income, copy of audit report, copy of unsecured loans along with confirmation and other relevant details etc. This fact has been admitted by the Assessing Officer at para 4 in the body of assessment order. It is also an admitted fact that in response to the summons u/s 131 of the Act, Shri Abhinandan Jain, director of Risa International Ltd had appeared before the Assessing Officer whose statement was recorded wherein he has confirmed to have given loan of Rs.1,15,00,000/- to M/s. Prem Grain Industries Pvt Ltd, a company in which his father-in-law is the Director. He has also stated in the statement that the amounts of credit in the bank account of Risa International Ltd is out of the amount recovered from the debtors. He has also stated that the company has received back the entire amount by 08.06.2017. The details of the statement so recorded of Shri Abhinandan Suresh Jain are as under: Printed from counselvise.com 11 ITA No.1817/PUN/2025 18. We find the Hon’ble Delhi High Court in the case of Sheela Overseas Pvt. Ltd vs. PCIT (supra) has held that amendment to section 68 of the Act introduced by virtue of the Finance Act, 2022 makes it abundantly clear that section 68 of the Act as was in force prior to 01.04.2023 did not require the assessee to explain the source of the source of funds other than share capital money, share capital, share Printed from counselvise.com 12 ITA No.1817/PUN/2025 premium or any amount of such nature. Thus, the same is not applicable to unsecured loans since the same is not in the nature of share capital money, share capital, share premium etc. Further since the assessee in the instant case has filed the requisite details, the director of the lender company has appeared before the Assessing Officer and has confirmed to have given the loan of Rs.1,15,00,000/- out of the amount received from sundry debtors which in turn has already been repaid by 08.06.2017, therefore, in our opinion, the assessee has fully discharged its onus cast upon it by proving the three ingredients of section 68 i.e. identity, creditworthiness of lenders and genuineness of the transaction. We, therefore, set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition. Grounds raised by the assessee are accordingly allowed.” 15. Since in the instant case the assessee has filed the requisite details explaining the source of Rs.1.62 crores being the loan obtained from Shri Manilal M. Gada and Shri Manilal M. Gada in response to notice u/s 133(6) of the Act has also confirmed to have given the said loan and has filed his bank statement explaining the source, therefore, in our opinion, the assessee has fully discharged the onus cast upon him in terms of section 68 by proving the three ingredients i.e. identity and creditworthiness of Shri Manilal M. Gada and the genuineness of the transaction. We, therefore, set aside the order of the Ld. CIT(A) / NFAC and allow the grounds raised by the assessee. 16. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 3rd December, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 3rd December, 2025 GCVSR Printed from counselvise.com 13 ITA No.1817/PUN/2025 आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 28.11.2025 Sr. PS/PS 2 Draft placed before author 02.12.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "