KETAN HARSHADRAI MEHTA ,MUMBAI V. INCOME TAX OFFICER WARD, 1(2)(5), KALYAN

ITA 5449/MUM/2024

AI Insights

The case revolves around the assessment of unsecured loans amounting to Rs. 20,00,000 taken by the assessee, Ketan Harshadrai Mehta, during the assessment year 2017-18. The Income Tax Officer (ITO) treated these loans as unexplained cash credits under section 68 of the Income Tax Act, leading to an addition to the assessee's income. The assessee contested this decision, arguing that he had provided sufficient evidence to substantiate the loans' genuineness and the creditors' creditworthiness. The CIT(A) upheld the ITO's decision, prompting the assessee to appeal to the Tribunal. The Tribunal, after examining the evidence and the arguments presented, concluded that the assessee had indeed proved the necessary elements to establish the loans as genuine, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315827 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: CIT Vs Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC), CIT Vs Amber Tradecorp (P) ltd. (2022) 145 taxmann.com 27 (Guj), DCIT Vs Rohini Builders CIT Vs Ranchod Jivabhai Nakahava in Tax Appeal No. 50 of 2011 dated 20.03.2012, CIT vs. Ranchod Jivabhai Nakhava, (2012) 21 taxmann.com 159 (Guj.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MESHRAM
• Assessee Lawyers: DEVENDRA JAIN
• Keywords: Condonation of delay; Opportunity of being heard; Additional evidence; Revised return; Unexplained cash credit; Principle of natural justice; Source of fund
• Section: 68; 131

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER &GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 5449/MUM/2024 (AY : 2017-18) (Physical hearing) KetanHarshadrai Mehta 67/2, BaliramGanpatMahatre Bldg. Kongaon, Bhiwandi, Maharashtra-421311. [PAN No. AAJPM 9528 L Vs ITO,Ward-1(2)(5), KalyanMohan Plaza, Wayale Nagar, Khadakpada, Kalyan(W). Appellant / Assessee Respondent / Revenue Assessee by Shri Devendra Jain Advocate Revenue by Shri Rajesh Meshram, Sr. DR Date of institution of appeal 18.10.2024 Date of hearing 26.03.2025 Date of pronouncement 16.05.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the assessment order of ld. CIT(A) dated 14.02.2024 for A.Y. 2017-18. The assessee has raised the following grounds of appeal: 1. In the facts and circumstances of the case and in law, the Learned National Faceless Appeal Centre (NFAC), CIT (Appeals), Mumbai has erred in upholding the addition of Rs. 20,00,000/- being unsecured loans as unexplained cash credits under section 68, merely on surmises and conjectures, disregarding the evidences placed on record. 2. In the facts and circumstances of the case and in law, the Learned National Faceless Appeal Centre (NFAC), CIT (Appeals) has erred in upholding the assessment order passed in gross violation of the principle of Natural Justice without giving proper opportunity of being heard. ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 2 3. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other.” 2. Brief facts of the case are that assessee is an individual and filed his return of income for assessment year (A.Y.) 2017-18 on 07.11.2017 declaring total income at Rs. 1,92,940/-. The case was selected for scrutiny. During the assessment, the assessing officer noted that assessee has shown unsecured loans of Rs. 27,23,805/-. The assessee was asked to justify the fresh unsecured loans as per scope of under section 68 of Income Tax Act. The assessee filed his reply dated 11.12.2019 and filed confirmation of unsecured loans. The assessing officer noted that assessee has shown unsecured loans of Rs. 10.00 lac each from two persons namely ChetanRasiklal Shah and DarshakRasiklal Shah. With regard to unsecured loans of ChetanRasiklal Shah, the assessee furnished confirmations, bank statement, and return of income of lender. On perusal of bank statement of lender, the assessing officer noted that an amount of Rs. 10.00 lac was credited just before the transfer of fund to assessee. The bank statement was operated mainly for providing unsecured loans. The assessee provided copy of revised return of income of lender showing return income of Rs. 4.00 lack, which is not in commensurate with unsecured loans. The assessing officer was of the view that the creditworthiness of creditor not proved. For other creditor DarshakRasiklal Shah, the assessee provided confirmations, copy of revised ITR and bank statement. The assessing officer noted that there was hardly any substantial transaction in his bank account and Rs. 10.00 lacs were credited just two days prior to giving unsecured loans. Such bank account ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 3 was merely operated to provide unsecured loans. The assessing officer thus treated both unsecured loans as unexplained credit within the meaning of section 68 while passing the assessment order on 28.12.2019. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Along with the appeal, the assessee filed detail statement of fact. The statement of facts are recorded on page 3 to 6 of impugned order of ld. CIT(A). In the statement of fact, the assessee stated that during assessment, the assessing officer after verification of details and documents asked the assessee to furnish complete set of income tax return and bank statement of three parties i.e. Tirupati Networks, R. Shantilal& Co. and R. Shantilal Tradelink Pvt. Ltd. Such details were furnished to the assessing officer. The assessing officer thereafter asked for confirmation to two creditors. No question with regard to loan or against evidence in connection to loan taken from ChetanRasiklal Shah and DarshakRasiklal Shah was raised. The assessing officer has not issued any notice pointing out any defect in the documentary evidence furnished by assessee about these two loans. The assessee furnished name, PAN, loan confirmation and transaction detail, acknowledgement of ITR of A.Y. 2017-18 and bank statement of creditors. Thereafter, the creditor also furnished confirmation their ITR and bank statement. The assessing officer disregarded all the evidences the assessee has proved identity, creditworthiness and transaction through banking channel. Bank accounts of lender were of savings account and it may not contain any transaction. The lender giving loan from the refund received on account of loan refund/repay by other party who given loan in earlier years. As evident from the copy of bank pass book. Hence, there was no question of ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 4 return income with commensurate of loan amount when both the creditors have given confirmation. The action of assessing officer is merely based on suspicious which should have been brought to the notice of assessee for seeking further clarification or if required to submit additional evidence in support of explanation offered eralier. The assessee satisfactory discharged his onus in providing identity of the loan creditors and genuineness of transaction should have been added to the total income of assessee. Section 68 can only be invoked if assessee offers no explanation about the nature and source of the amount credited in the books of assessee or explanation offered by assessee, in the opinion of assessing officer not satisfactory. The assessing officer has to specify himself about the nature of the amount credited and source of amount so credited. The assessing officer has not raised questions of source of fund. 4. The ld. CIT(A) on considering the submission of assessee noted that on perusal of bank statement of both the creditors that Rs. 10.00 lac each has been credited on 12.09.2019 in the account of both the lenders. Thus, transaction does not appear to be a regular bank transaction the assessee had to establish that creditors have the capacity to advance such loan. Such capacity of loan can be established by showing sufficient income, capital of reserve or other funds in the hands of creditors. The primary onus prescribed in section 68 remains un-discharged as creditworthiness of creditors was not proved. Further, during the appellate proceedings, the assessee has not furnished evidence to substantiate identity, creditworthiness or genuineness of transaction. The assessee has furnished details of loan which consists of name, address, PAN, loan confirmation and bank transaction. The assessing ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 5 officer has made elaborate discussion in the assessment order. Thus, ld. CIT(A) concluded that he do not find any reason to interfere in the finding of assessing officer. Further, aggrieved the assessee has filed present appeal before Tribunal. 5. We have heard the rival submission of ld. Authorised Representative (AR) of the assessee and the learned departmental representative (ld. Sr. DR) for the Revenue. At the outset of hearing, the ld. AR of the assessee submits that there is delay of 187 days in filing appeal before Tribunal. The delay in filing appeal is neither intentional nor deliberate. The assessee has filed his affidavit in explaining the cause of delay. The ld. AR of the assessee submits that order under section 250 was passed by ld. CIT(A)/ NFAC on 14.02.2024. No physical copy of said order was served upon the assessee. All the notices were served by e-mail only. The assessee was not aware about any notices. When in the month of October, 2024, when the assessee checked on ITBA portal about the status of appeal, the assessee came to know that order of NFAC/CIT(A) was sent on different e-mail, the assessee has given his e-mail [e-mail]. The assessee was not received on such e-mail. The ld. AR submits that delay in filing appeal may be condoned. The assessee has good case on merit and is liable to succeed if one more opportunity to contest the case on merit is allowed. 6. On merit of the case, the ld. AR of the assessee submits that during the relevant financial year, the assessee has availed two loans of Rs. 10.00 lacs each from Chetan Rasiklal Shah and Darshak Rasiklal Shah. The assessee furnished complete details of lender which consists of name, address, PAN ITR and bank statement and thus discharge his primary onus. The assessing ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 6 officer has not made any enquiry against such evidences. The assessee proved the identity, creditworthiness and genuineness of transaction. Identity was proved by furnishing complete address and PAN No. Creditworthiness were proved by furnishing bank statement and copy of ITR of creditors. The transaction was carried out through banking channel. Thus, the assessee is also proved the genuineness of transaction. Once the assessee discharged his onus. The onus was shifted from assessing officer to bring adverse evidence on record. The action of assessing officer as well as ld. CIT(A) based on mere presumption and suspicious. In support of his submission, the AR of the assessee relied upon the decision of Hon’ble Supreme Court in CIT Vs Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC). 7. On the other hand, ld. Sr. DR for the Revenue on the plea of condonation of delay submits that assessee has taken a general plea that order was not served through e-mail provided by assessee. The assessee has not furnished evidence regarding the e-mail provided by assessee. The delay may not be condoned. On the merit of the case, the ld. Sr. DR for the Revenue submits that during the assessment as well as at the time of first appeal, the assessee failed to prove the genuineness of creditors as has been clearly held by ld. CIT(A). 8. In short rejoinder submission, the ld. AR of the assessee submits that assessee furnished bank statement of the lender and before ld. CIT(A) explained that lender has received the repayment of loan given in earlier financial year. The lower authorities have not brought any adverse material on record except making presumption. ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 7 9. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. Firstly, we are considering the plea of ld. AR of the assessee on condonation of delay. We find that primary submission of ld. AR of the assesse is that while filing appeal before ld. CIT(A) the assessee provided e-mail address as of “[e-mail]” for the purpose of notice and /or communication of appeal. Similar fact was pleaded in affidavit that for the purpose of service of notice, the assessee provided e-mail on ITBA portal as of [e-mail]. The assessee further stated that no such notices were sent through such e-mail address. We find that such fact is not countered by ld. Sr. DR for Revenue by showing copy of ITBA portal that notices of appeal or final order dated 14.02.2024 was served through such e- mail. The assessee has taken such stand and filed his affidavit. Thus, in absence of contrary evidence, we have no reason to disbelieve contents of affidavit of assessee. Moreover, assessee is not going to be benefited by filing appeal belatedly. Thus, considering overll the facts of the case, we find that assessee has explained the delay in filing appeal. Thus, delay in filing appeal is condoned. Now, adverting to merits of the case. 10. There is no dispute that during assessment the assessing officer doubted the genuineness of unsecured loans of Rs. 10.00 lacs each availed form two persons. The assessee was asked to prove the transaction of unsecured loan. The assessee in order to prove the transaction of unsecured loan furnished, name and addresses of lenders, PAN, loan confirmation, bank statement and return of income of both the lenders. The assessing officer has not disputed ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 8 the identity of lender nor disputed the fact that loan was received through banking channel. The assessing officer doubted the creditworthiness of lender on taking view that as return of income is not income commensurate with the unsecured loans. We find that on furnishing name, PAN, address, ITR and bank statement, no further show cause notice for confronting the income of lender with the loan amount with the assessee. Before ld. CIT(A), in addition to similar contention as pleaded before assessing officer, the assessee explained that the lender have received / repayment of loan given in earlier years which is evident from the bank pass book. Moreover, the loans were given from savings bank account and were not part of business transaction. We find that such fact is not countered by ld. CIT(A). The ld. CIT(A) simply concurred with the finding of assessing officer. It is settled law that once the assessee discharged primary onus by furnishing identity, creditworthiness and genuineness of transaction, the onus shifts on the Revenue. 11. We find that the Hon’ble jurisdictional High Court in The Hon'ble Jurisdictional High Court in CIT Vs. Amber Tradecorp (P) ltd. (2022) 145 taxmann.com 27 (Guj) held that where the assessee took loan from two parties and assessee has furnished requisite material showing identity of loan givers and that assessee was not beneficiary as loan was repaid in subsequent year, no addition under Section 68 could be made on account of such loan. The Hon'ble Gujarat High Court in the case of DCIT Vs Rohini Builders CIT Vs Ranchod Jivabhai Nakahava in Tax Appeal No. 50 of 2011 dated 20.03.2012, also held that when the assessee has discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers, PAN and copy of assessment orders wherever readily available and proved the ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 9 capacity of creditors that amounts were paid through cheques, no addition is to be made.The Hon’ble jurisdictional High Court in the case of CIT vs. Ranchod Jivabhai Nakhava, (2012) 21 taxmann.com 159 (Guj.) also held thatonce the assessee has discharged their onus the burden shift on the assessing officer to prove otherwise or to bring adverse evidence on record or to make further investigation. In absence of adverse addition, the additions of loan under section 68 are not sustainable. 12. The Hon’ble Supreme Court in CIT Vs Orissa Corporation (supra) also held that when the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. Thus, in view of the aforesaid factual and legal discussion, once the assessee has discharged his primary onus in proving identity, creditworthiness and genuineness of transaction, the assessing officer was not justified in making addition in absence of any evidence on record for making addition under section 68. ITA No. 5449/Mum/2024 Ketan Harshadrai Mehta 10 Thus, the addition under section 68 is deleted. Hence, the grounds of appeal raised by the assessee are allowed. 13. In the result, the appeal of assessee is allowed. Order pronounced in the open Court on 16/05/2025. S Sd/-/- GIRISH AGRAWAL ACCOUNTANT MEMBER - S Sd/-/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: /05/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "