MOHAN LAL JAIN, KORBA,KORBA V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-KORBA, KORBA

ITA 386/RPR/2023

AI Insights

The case involves Shri Mohan Lal Jain, the proprietor of M/s. Mohan Lal Jain, who appealed against the orders of the Assistant Commissioner of Income Tax, Circle-Korba, which had added Rs.23,05,130 as unexplained cash credit under Section 68 of the Income Tax Act, 1961, and disallowed interest on these loans amounting to Rs.56,436. The Tribunal examined the evidences provided, including affidavits, bank statements, and income tax returns of the lenders, and found that the loans were genuine and the lenders had the capacity to lend such amounts. The Tribunal also addressed the ad-hoc disallowance of business expenses, finding that the disallowance was made without specific justifications.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469747 (ITAT-RAIPUR)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-09-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 20-12-2023
• Other Referred Cases: CIT v. Durga Prasad More [1971] 82 ITR 540, Sumati Dayal Vs.CIT (214 ITR 801) (SC), Chuhar Mal V CIT (1988) 172 ITR 250, Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775, Kishinchand Chellaram Vs. CIT (1980) 125 ITR 713, CIT Vs. Ashwani Gupta (2010) 191 Taxman 51, Pawan Kumar Agrawal Vs. ITO, Tax case No.24 of 2011, ACIT Vs. Singhania Buildcon Pvt. Ltd., ITA No.199/RPR/2019, ACIT Vs. Subodh Singhania, ITA No.135/RPR/2019, Krishna Hospital Vs. ITO, ITA No.95/RPR/2017, Shabd Prakash Lath Vs. ITO, ITA No.89/RPR/2014, Kiran Agrawal Vs. ITO, ITA No.100/BLPR/2012, Hement Trading Co. Vs. ITO, ITA No.17/Jodh/2024, Amit Kumar Bansal Vs. ITO, ITA No.130/RPR/2013, Animesh Sadhu Vs. ACIT, Circle-1, Hoogly, ITA No. 11/Kol/2013, ACIT, New Delhi Vs. M/s Modi Rubber Ltd. ITA No. 1952/Del/2014, M/s. Sunita Finlease Limited Vs. Income Tax Officer, ITA No.244/RPR/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: VEEKAAS S SHARMA; FURNISHING REASONABLE; PLAUSIBLE
• Keywords: Unexplained cash credit; Onus to prove; Wrong claim; Bogus
• Section: 119; 68; 131; 73; 37; 44AB; 191; 101

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी रवीश सूद, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं. / ITA No.386/RPR/2023 Ǔनधा[रण वष[ / Assessment Year : 2013-14 Shri Mohan Lal Jain Proprietor of M/s. Mohan Lal Jain, Darri Road, Korba-495 667 PAN: ADGPJ2105A .......अपीलाथȸ / Appellant बनाम / V/s. The Assistant Commissioner of Income Tax Circle- Korba (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Veekaas S Sharma, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 03.09.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 01.10.2024 2 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 23.10.2023, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income- tax Act, 1961 (in short ‘the Act’) dated 29.12.2016 for the assessment year 2014-15. The assessee has assailed the impugned order on the following grounds of appeal: “1. On the facts and in the circumstances of the case, the Learned AO has erred on facts and in law in making addition of Rs.23,05,130/- on account of Unsecured Loans from family members u/s.68 of the Income Tax Act, 1961 and the Learned CIT (Appeals), National Faceless Appeal Centre, Delhi has erred in confirming the addition to the tune of Rs.23,05,130/- as the addition is contrary to facts, law and legislative intent, hence, it is prayed that the addition of Rs.23,05,130/- confirmed by the Learned CIT (Appeal) may kindly be deleted. 2. On the facts and in the circumstances of the case, the Learned AO has erred on facts and in law in making ad-hoc disallowance of Rs.3,00,000/- on account of various expenses such as Shop Expenses, Vehicle Repair and Maintenance, Telephone and Mobile expenses, Travelling expenses and Office and Miscellaneous expenses and the Learned CIT (Appeals), National Faceless Appeal Centre, Delhi has erred in confirming the ad-hoc lump sum disallowance to the tune of Rs.3,00,000/- as the disallowance is contrary to facts, law and legislative intent, hence, it is prayed that the disallowance of Rs.3,00,000/- confirmed by the Learned CIT (Appeal) may kindly be deleted. 3. On the facts and in the circumstances of the case, the Learned AO has erred on facts and in law in making disallowance of Rs.56,436/- on account of interest paid to Unsecured Loan lenders and the Learned CIT (Appeals), National Faceless Appeal Centre, Delhi has erred in confirming the disallowance to the tune of 3 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 Rs.56,436/- as the disallowance is contrary to facts, law and legislative intent, hence, it is prayed that the disallowance of Rs.56,436/- confirmed by the Learned CIT (Appeal) may kindly be deleted. 4. The Appellant craves leave to add, amend, alter vary and/or withdraw any or all the above grounds of Appeal.” 2. Succinctly stated, the assessee who is engaged in the business of wholesale trading in Galla Kirana and FMCG goods, had e-filed his return of income for A.Y.2014-15 on 30.11.2014, declaring an income of Rs.16,83,970/-. The return of income filed by the assessee was processed u/s.143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that the assessee had taken unsecured loans from various family members on which interest was paid during the subject year. The A.O directed the assessee to furnish copies of the return of income, computation of income and copy of bank accounts of the loan creditors for verification. The A.O observed that the assessee had during the year under consideration claimed to have received loans from the lenders aggregating to Rs.23,05,130/-, as under: 4 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 Sr. No. Name of the lender/PAN Relationship with the assessee Return of income for A.Y.2014-15 Source of income Unsecured loan amount advanced to the asssessee Interest paid 1. Shri Mohan Lal Jain (HUF) (AAGHM8727A) Karta Rs.3,30,400/- Rental and interest income Rs.8,00,000/- - 2. Smt. Renu Jain (AFRPJ8178E) Daughter Rs.5,04,743/- Job work and interest income Rs.5,80,000/- Rs.27,266/- 3. Smt. Binita Jain (AFRPJ8176L) Daughter-in law Rs. 5,15,010/- Mehendi, cooking classes and interest income Rs.3,60,000/- Rs.16,965/- 4. Smt. Shweta Jain (AKMPJ7609J) Daughter-in- law Rs.5,72,280/- Tuition fees Rs.3,65,130/- Rs.9894/- 5. Smt. Munni Jain (ADGPJ2106D) Wife Rs.4,96,850/- Rental and income from stitching and sewing Rs.2,00,000/- Rs.2351/- Total Rs.23,05,130/- Rs.56,436/- 4. Thereafter, the A.O issued summons u/s.131 of the Act and recorded statements of three lenders (out of 5 lenders), viz. (i) Shri Mohan Lal Jain; (ii) Smt. Renu Jain; and (iii) Smt. Binita Jain. The A.O observed that a perusal of the bank accounts of the lenders, revealed cash deposits, which, thereafter, was routed to the assessee vide RTGS/transfers in the guise of loans. As the assessee had failed to substantiate the creditworthiness of the subject lenders, therefore, the A.O held that it was the assesee’s unaccounted money routed back to its coffers in the guise of 5 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 loans advanced by the said parties. The A.O, observing that the creditors had no creditworthiness to advance such huge amounts, therefore, held the entire amount of Rs.23,05,130/- as unexplained cash credit and made an addition of the same in the hands of the assessee u/s. 68 of the Act. Also, the A.O disallowed the assessee’s claim for deduction of interest paid on the aforesaid loans of Rs.56,436/-. 5. The A.O further observed that as the assessee had claimed deduction of various expenses, viz. shop expenses, vehicle repair and maintenance expenses, telephone and mobile expenses, travelling expenses and office and miscellaneous expenses in his trading, Profit & Loss a/c, thus, called upon him to substantiate the veracity of the same based on supporting vouchers. It was observed by the A.O that there were certain shortfall/deficiencies in the aforesaid vouchers which the assessee could not explain properly. Accordingly, the A.O in order to plug any possible leakage of revenue made an ad-hoc lump sum disallowance of Rs.3,00,000/- out of the aforesaid expenses. Thus, the A.O vide his order passed u/s.143(3) of the Act, dated 29.12.2016, after, inter alia, making the aforesaid additions/disallowances, determined the income of the assessee at Rs.43,45,536/-. 6 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 6. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: “5. Observations, Findings and Decisions: 5.1 I have carefully examined the action of the Ld. AO and the circumstances which led to the completion of the impugned assessment order. I have also carefully perused the statement of facts and grounds as made in the course of the appeal proceedings. I find that merely because lender has filed return of income and deposited cash into their bank accounts and then issued cheques to the appellant does not prove that the loan were genuine without submitting the evidence of income so earned by the lenders and reasons for holding cash till the cheques were issued to the appellant, could not have been said to have discharged the onus cast upon the appellant in the surrounding circumstances of the case. 5.2 In the present case the factual matrix demonstrated in the assessment order by the Ld.AO shows that the lenders are all family members of the appellant, and none could establish that they were actually carrying out such types of activities as claimed before the Ld. AO in compliance to summons u/s 131 of the Act. Moreover returned filed by them also does not reflect such type of activities as observed by the Ld. AO in his order. The reasons for holding cash-in-hand till the time of issuance of cheques were also not demonstrated with acceptable circumstances. Thus, it clearly points out that the loans were from persons who did not have the means to be creditworthy and could not establish their credit-worthiness. The appellant though submitted various documents to substantiate identity, genuineness of the transaction but never tried to establish with details of activities and source of income of those persons who had given loan to the appellant company about their creditworthiness. Ld AO to establish, identity and creditworthiness of the loans as well as genuineness of the transactions as a part of the verification of the lenders, summons u/s 131 were issued to them and their deposition were recorded on oath which are on record. The Ld AO observed from the statement so recorded that none of the these parties had proper capacity to lend such amounts to the assessee. None of the parties had any regular source of income. In this regard reliance can be 7 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 made on the decision of the Hon’ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540 at pages 545-547 made a reference to the test of human probabilities in the following fact situation:- “………..It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real in a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals if all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favor then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents………….. 5.3 It is a well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs.CIT\" (214 ITR 801) (SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. In the present case, it is clear that apparent is not the real as evidenced from the investigation report. Further, the Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) held that what was meant by saying that evidence Act did not apply to the proceedings under Income-tax Act, 1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of anything, the onus of proving that he was not its owner, was on that 8 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 5.4 The transactions relating to loan here come within the ambit of \"suspicious transactions\", and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, furnishing of details of name and address of lenders, their PAN, mode of payment and Bank Statements, I.T return and other such features are only apparent features. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld.AO fall in the realm of \"suspicious\" and \"dubious\" transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances. which he indeed has done in a very meticulous and careful manner. In the case of Win Chadha Vs CIT (International Taxation) in ITA No.30885 3107/Del/2005, the Hon'ble Delhi ITAT \"B\"-Bench has observed, on 31.12.2010 as under: -SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEALT WITH: 6.11. The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct preponderance of probabilities and nature of incriminating information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shilling on the Department in cases of suspicious circumstances, by following observations: “……………….It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory In such case there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being un-rebutted, can be used against him by holding that it is a receipt of an income nature. While considering 9 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 the explanation of the assessee, the department cannot, however, act unreasonably. …………..Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence.\" CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence. I may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are- (1) the circumstances alleged must be established by such evidence, as in the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced, some of these links may have to be inferred from the proved facts; 10 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 (4) in drawing those inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. (5) The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth.\" 6.14. It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstance in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15 The Assessee's technical contentions about admissibility and reliance on material available on the AQ's record are in the nature of contentions challenging criminal or civil liabilities in a court of law. We are dealing with a process of adjudication of assesses tax liability le, assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court in the case of SS Gadgil (supra) no Tis is involved in adjudication of tax liability. The Assessee's contention that there was no new material before the AD after the CIT(A)'s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, in a sensitive matter like this, oven a single clue or revelation can be of great importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI, DRI, ED whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AD, are devoid of any merit and are rejected outright……………………..” 11 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 5.5 Human probabilities, surrounding circumstance and preponderance of probability goes against the appellant. The ratio and observations in the case of Durga Prasad More(supra) and Sumati Dayal (supra) and other case laws referred above, applies in the appellant's case. The appellant thus, failed to satisfy the all the three ingredients set forth as per decision of various courts including the Apex court, which cast onus on the assessee to prove the identity and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction when money is found credited in the books of accounts of the assessee and failure to satisfy the same, provision of section 68 shall be invoked. The Ld. AO has, thus, righty invoked section 68 and added Rs.23,05,130/-, found credited in the books of the accounts of the appellant, under that section. 5.6 In view of the above discussion and relying upon the case laws mentioned above, I find no infirmity in the orders of the Ld. AO and I confirm the addition of Rs.23,05,130/-. The case laws relied upon by the appellant are distinguishable on the facts of the case. The ground No. 2 taken by the appellant, thus, stand dismissed. 5.7 Ground No.1 relates to disallowance of Rs. 56,436/- on account of interest paid on unsecured loans, As the loans taken were added with the appellant's income, therefore, interest on the same is also not allowable and therefore the same is upheld. The ground No.1 of appeal is, thus, dismissed. 5.8 Ground No.3 is related to estimated disallowance of Rs.3,00,000/- on the total expenditure of Rs.34,98,275/- under five heads debited in the profit and loss account. Ld AO discussed in detail on each such heads and found that either the vouchers are not properly maintained or are self- made and, in some heads, personal use could not be ruled out. Thus, on estimate he disallowed a sum of Rs.3,00,000/- which is less than 10% of total expenditure Rs.34,98,275/- under those head of Rs.34,98,275/- is reasonable. Thus, I do not find any infirmity in such ad hoc disallowance and therefore confirm the said amount. Ground No.3 is, thus, dismissed. 6. In the final result, the appeal filed by the appellant is treated as Dismissed.” 12 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 7. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before the tribunal. 8. Shri Veekaas S Sharma, the Ld. Authorized Representative (for short ‘AR’) for the assessee at the threshold submitted that the A.O had drawn adverse inferences as regards the loans raised by the assessee without placing on record any material which would disprove the authenticity of the respective loan transactions. The Ld. AR submitted that the A.O had grossly erred in law and facts of the case in not providing to the assessee the copies of statements of the aforementioned persons that were recorded at his back. The Ld. AR in support of his aforesaid contention, had relied on the judgment of the Hon’ble Supreme Court in the case of Kishinchand Chellaram Vs. CIT (1980) 125 ITR 713 (SC) and that of the Hon’ble High Court of Delhi in the case of CIT Vs. Ashwani Gupta (2010) 191 Taxman 51 (Delhi.). 9. The Ld. AR submitted that out of the loans raised by the assessee from five lenders, the loans raised from three lenders were repaid before the case of the assessee was selected for scrutiny assessment, while for the remaining loans were repaid in due course. The Ld. AR in support of his contention that the loans advanced by the lenders are genuine had drawn my attention to a “chart”, which revealed the repayment of the aforesaid loans. For the sake of clarity, the same is culled out as under: 13 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 The Ld. AR in support of his contention that once the loan is repaid then the addition u/s. 68 of the Act is not sustainable, had relied on the orders of ITAT, Raipur in the cases of ACIT Vs. Singhania Buildcon Pvt. Ltd., ITA No.199/RPR/2019, dated 17.10.2022 and ACIT Vs. Subodh Singhania, ITA No.135/RPR/2019, dated 17.10.2022. 10. Also, the Ld. AR submitted that the assessee had filed details of return of income of aforementioned lenders. It was submitted by the Ld. AR that if the return of income of lenders had been accepted by the department, then no adverse inferences could be drawn against the assessee. The Ld. AR in support of his aforesaid contention had relied on 14 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 the judgment of the Hon’ble High Court of Chhattisgarh in the case of Pawan Kumar Agrawal Vs. ITO, Tax case No.24 of 2011, dated 04.04.2017. 11. The Ld. AR further submitted that the assessee had duly discharged the onus that was cast upon him as regards proving the identity and creditworthiness of the lenders, and genuineness of the respective transactions by placing on record PAN, income tax return, confirmations of loans, bank statements of the lenders, balance sheets of the lenders and “affidavits” of the respective lenders. The Ld. AR in support of his aforesaid contention had relied on the judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Orissa Corporation (P). Ltd. (1986) 54 CCH 0239 ISCC. It was submitted by the Ld. AR that when the lenders had confirmed the factum of having advanced the respective loans by filing “affidavits”, then addition u/s. 68 of the Act could not be sustained. The Ld. AR in support of his aforesaid contention had relied on the judgment of the Hon’ble Supreme Court in the case of Basir Ahmed Sisodia Vs. ITO, (2020) 314 CTR (SC) 1 and that of the Hon’ble High Court of Chhattisgarh in the case of CIT Vs. Abdul Aziz, ITA No.19 of 2004, dated 14.02.2012. 12. Further, the Ld. AR submitted that a mere cash deposit in the bank accounts of the lenders immediately before the advancing of the loans would not lead to the conclusion that the said amount was sourced out of 15 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 the assessee’s unaccounted money. The Ld. AR in support of his aforesaid contention had relied on the following judicial pronouncements: (i) Krishna Hospital Vs. ITO, ITA No.95/RPR/2017, dated 29.08.2022 (ii) Shabd Prakash Lath Vs. ITO, ITA No.89/RPR/2014, dated 16.10.2018 (iii) Kiran Agrawal Vs. ITO, ITA No.100/BLPR/2012, dated 17.02.2016 (iv) Hement Trading Co. Vs. ITO, ITA No.17/Jodh/2024, dated 29.02.2024 (v) Amit Kumar Bansal Vs. ITO, ITA No.130/RPR/2013, dated 02.05.2017. 13. Apropos the ad-hoc lump sum disallowance of expenses of Rs.3,00,000/-, the Ld.AR submitted that the assessee had maintained proper books of account which were duly audited u/s. 44AB of the Act. It was averred by the Ld. AR that the books of accounts had not been rejected by either of the lower authorities. Adverting to the adverse inferences drawn by the A.O regarding the assessee’s claim for deduction of expenses, it was vehemently submitted by the Ld. AR that there was no whisper in the body of the assessment order about any specific instance of expenditure which was either not found to be verifiable or was not in order. The Ld. AR submitted that as the expenses claimed by the assessee as a deduction were incurred wholly and exclusively for the purpose of his business, therefore, the same could not have been summarily disallowed on an ad-hoc basis by the A.O on whimsical observations. The Ld. AR in 16 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 support of his aforesaid contention had relied on the orders of the ITAT, Raipur in the case of Vardhan Associates Vs. ACIT-3(1), Raipur, ITA No.81/RPR/2019, dated 26.07.2022 and Sandeep Kumar Dhamejani, ITA No.292/RPR/2023, dated 17.05.2024. On the basis of his aforesaid contentions, it was submitted by the Ld. AR that as there was neither any justification nor basis for making of the impugned ad-hoc disallowance of Rs.3 lac (supra) by the A.O, therefore, the same cannot be sustained and is liable to be struck down. 14. I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 15. Admittedly, it is a matter of fact borne from record that three lenders (out of five lenders), viz. (i) Shri Mohan Lal Jain (HUF); (ii) Smt. Renu Jain; and (iii) Smt. Binita Jain had appeared before the A.O, and their statements were recorded u/s.131 of the Act. As the assessee had entered into loan transaction with five parties, therefore, I shall deal with the same in a chronological manner, as under: A. Shri Mohan Lal Jain (HUF): Rs.8,00,000/- 17 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 16. Shri Mohan Lal Jain, Karta of Mohan Lal Jain (HUF), had admitted in his statement recorded u/s. 131 of the Act that it had advanced loan of Rs.11,20,000/- to the assessee. On being queried about the source of cash deposits in the bank account which, thereafter, had formed part of the loan advanced to the assessee, it was submitted by him that the same was sourced out of the assessee HUF’s accumulated savings and rental income. The aforesaid lender had vide its “affidavit” dated 17.05.2024, deposed that the loan of Rs.11,20,000/- was advanced out of its accumulated capital which stood at Rs.23,03,462/- as on 31.03.2014, which was more than sufficient for advancing the subject loan. The assessee in support of his contention had placed on record various documents viz. (i) an “affidavit” dated 17.05.2024, Page 116 to 119 of APB; (ii) copy of bank statement of Bank of India, A/c. No.947110100008672, Page 120 of APB; (iii) ITR acknowledgment for A.Y.2014-15, Page 121 of APB; (iv) copy of capital account & balance sheet as on 31.03.2014, Page 122 of APB; (v) copy of payment voucher reflecting repayment of loan, Page 123 of APB; and (vi) copy of confirmation of account for the year ended on 31.03.2014, Page 124 of APB. 17. On a perusal of the aforesaid documents, it transpires that Mohan Lal Jain (HUF) had sufficient funds to advance loan of Rs.11,20,000/- to the assessee from its duly explained sources. Also, the aforesaid lender had filed its return of income of Rs.3,30,400/- for the subject year and the 18 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 same had been accepted by the department. As the aforesaid lender had in its statement recorded u/s. 131 of the Act admitted of having advanced loan of Rs.11,20,000/- to the assessee and also, had come forth with explanation as regards the source of source pertaining to the loan advanced, therefore, there was no justification on the part of the A.O in treating any part of the same as unexplained cash credit u/s. 68 of the Act. B. Smt. Renu Jain: Rs.5,80,000/- 18. Smt. Renu Jain had admitted in her statement recorded u/s. 131 of the Act that she had advanced a loan of Rs.5,80,000/- to the assessee. On being queried about the source of cash deposits in her bank account, which thereafter, was advanced as a loan to the assessee, it was stated by her that the same was sourced out of the rental income and the vocation of accounting/accounting training, as well as the amounts accumulated from the said sources of her income. It was further deposed by her in “affidavit” dated 17.05.2024 that the aforesaid loan of Rs.5,80,000/- was advanced from her accumulated capital of Rs.21,92,270/- as on 31.03.2014, which was more than sufficient for advancing loan/money to the assessee. The assessee in support of his claim had placed on record various documents, viz. (i) an “affidavit” dated 17.05.2024, Page 52 to 55 of APB; (ii) copy of bank statement of State Bank of India, A/c No.10371943981, Page 56 of 19 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 APB; (iii) ITR acknowledgment for A.Y.2014-15, Page 57 of APB; (iv) copy of balance sheet as on 31.03.2014, Page 58 of APB; (v) copy of payment vouchers reflecting repayment of loan, Page 59-60 of APB; and (vi) confirmation of account for the year ended on 31.03.2014, Page 61 of APB. 19. It transpires on a perusal of the aforesaid documents that Smt. Renu Jain had sufficient funds to advance loan of Rs.5,80,000/- to the assessee from her duly explained sources. Also, the aforesaid lender had filed her return of income declaring an income of Rs.5,04,740/- for the subject year, Page 57 of APB, which had been accepted by the department. As the aforesaid lender had in her statement recorded u/s. 131 of the Act admitted of having advanced a loan of Rs.5,80,000/- to the assessee and also, had come forth with an explanation as regards the source of source pertaining to the loan advanced to the assessee, therefore, there was no justification on the part of the A.O in treating the same as an unexplained cash credit u/s. 68 of the Act. C. Smt. Binita Jain: Rs.3,70,000/- 20. Smt. Binita Jain had admitted in her statement recorded u/s. 131 of the Act that she had advanced a loan of Rs.3,70,000/- to the assessee. On being queried about the source of cash deposits of Rs.3,70,000/- in her bank account, which, thereafter, was routed as a loan to the assessee, it was stated by her that the same was sourced from her business of running 20 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 cooking classes and mehendi classes. It was also stated by her that the aforesaid loan of Rs.3,70,000/- was advanced out of her accumulated capital of Rs.23,16,620/- as on 31.03.2014, which was more than sufficient for sourcing the advance to the assessee. The assessee in order to substantiate the authenticity of the aforesaid loan transaction had placed on record various documents, viz. (i) an “affidavit” dated 17.05.2024, Page 86 to 89 of APB; (ii) copy of bank statement of State Bank of India, A/c No. 10371946585, Page 90 of APB; (iii) ITR acknowledgment for A.Y.2014-15, Page 91 of APB; (iv) copy of balance sheet as on 31.03.2014, Page 92 of APB; and (v) confirmation of account for the year ended on 31.03.2014, Page 93 of APB. 21. On a perusal of the aforesaid documents, it transpires that Smt. Renu Jain had sufficient funds to advance the loan of Rs.3,70,000/- to the assessee from her duly explained sources. Also, the aforesaid lender had filed her return of income declaring an income of Rs.5,15,010/- for the subject year which had been accepted by the department. As the aforesaid lender had in her statement recorded u/s.131 of the Act admitted of having advanced the loan of Rs.3,70,000/- to the assessee and also, had come forth with an explanation as regards the source of source pertaining to the subject loan, therefore, in my view there was no justification on the part of the A.O in treating the same as an unexplained cash credit u/s. 68 of the Act. 21 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 D. Smt. Shweta Jain: Rs.3,56,225/- 22. Smt. Shweta Jain vide her “affidavit”, dated 17.05.2024 and confirmation, Page 109 of APB had admitted to have advanced a loan of Rs.3,56,225/- to the assessee. It is deposed by her that the cash deposit in her bank account which, thereafter, was advanced as a loan to the assessee was sourced from her multiple streams of income, viz. rental income, tuition receipts and interest income. It is further stated by her that the aforesaid loan of Rs.3,56,225/- was given to the assessee out of her accumulated capital of Rs.16,70,758/- as on 31.03.2014, which was more than sufficient for sourcing loan to the assessee. The assessee in support of his claim had placed on record various documents, viz. (i) an “affidavit” dated 17.05.2024, Page 101 to 104 of APB; (ii) copy of bank statement of State Bank of India, A/c No. 32216562662, Page 105-106 of APB; (iii) ITR acknowledgment for A.Y.2014-15, Page 107 of APB; (iv) copy of balance sheet as on 31.03.2014, Page 108 of APB; and (v) confirmation of account for the year ended on 31.03.2014, Page 109 of APB; and (vi) Copy of ITR for A.Y.2008-09 to A.Y.2013-14, Page 110 -115 of APB. 23. On a perusal of the aforesaid documents, it transpires that Smt. Shweta Jain had sufficient funds to advance loan of Rs.3,56,225/- to the assessee from her duly explained sources. Also, the aforesaid lender had filed her return of income for the subject year declaring an income of 22 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 Rs.5,72,280/- and the same has been accepted by the department. As the aforesaid lender had admitted of having advanced loan of Rs.3,56,225/- to the assessee and also, had come forth with an explanation as regards the source of source pertaining to the amount of loan, therefore, there was no justification on the part of the A.O in treating the same as an unexplained cash credit u/s. 68 of the Act. E. Smt. Munni Jain: Rs.2,00,000/- 24. Smt. Munni Jain had duly confirmed of having advanced a loan of Rs.2,00,000/- to the assessee. It is stated by her that the cash deposit in her bank account which, thereafter, was routed as a loan/advance to the assessee, was sourced out of cash in hand available with her which in turn was sourced out of rental income, tuition fees and interest income from bank. It is further stated by her that the aforesaid loan of Rs.2,00,000/- was advanced to the assessee out of her accumulated capital of Rs.40,01,165/- as on 31.03.2014 which, thus, was more than sufficient for sourcing the loan/advance to the assessee. The assessee in order to substantiate the authenticity of the subject loan transaction had placed on record various documents, viz. (i) an “affidavit” dated 17.05.2024, Page 66 to 69 of APB; (ii) copy of bank statement of State Bank of India, A/c No.10371947862, Page 70-72 of APB; (iii) ITR acknowledgment for A.Y.2014-15, Page 73 of APB; (iv) copy of capital account & balance sheet 23 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 as on 31.03.2014, Page 74 of APB; (v) copy of payment voucher reflecting repayment of loan, Page 75 of APB; (vi) confirmation of account for the year ended on 31.03.2014, Page 76 of APB; and (vii) Copy of ITR for A.Y.2004-5 to 2007-8 and A.Y.2009-10 to A.Y.2013-14, Page 77-85 of APB. 25. On a perusal of the aforesaid documents, it transpires that Smt. Munni Jain had sufficient funds to advance a loan of Rs.2,00,000/- to the assessee from her duly explained sources. Also, the aforesaid lender had filed her return of income declaring an income of Rs.4,96,850/- for the subject year which had been accepted by the department. As the aforesaid lender had admitted of having advanced loan of Rs.2,00,000/- to the assessee and also, had come forth with an explanation as regards the source of source pertaining to the amount of loan, therefore, there was no justification on the part of the A.O in treating the same as an unexplained cash credit u/s. 68 of the Act. 26. Considering the aforesaid facts, I am of the view that now when, viz. (i) that all the lenders were regularly filing their returns of income since last several years; (ii) that all the lenders have sufficient accumulated capital/funds for advancing the respective loans to the assessee; (iii) that all the lenders had duly confirmed the factum of having advanced respective loans to the assessee; (iv) that 3 lenders (out of 5 lenders) had appeared before the A.O who had recorded their statements u/s. 131 of 24 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 the Act, wherein they had duly confirmed the respective loans transactions there was no justification on the part of the A.O to have held the aforesaid loans aggregating to Rs.23,05,130/- as unexplained cash credit u/s. 68 of the Act. I am of a firm conviction that now when the respective lenders had duly admitted of having advanced the respective loans to the assessee and also, had explained the sources, out of which, the respective amounts had been advanced by them, there could be no justification for the A.O to have held the same as an unexplained cash credit u/s. 68 of the Act. My aforesaid view is fortified by the judgment of the Hon’ble High Court of Chhattisgarh in the case of Pawan Kumar Agrawal Vs. ITO, Ward-2(2) (supra). 27. At this stage, I may herein observe that as the amounts received by the assessee are in the nature of loan transactions, therefore, though the assessee remained under no obligation to have established the source of source of the respective amounts so received as per the mandate of the “2nd proviso” to Section 68 of the Act, but I find that in the present case, the assessee had even proved the same despite there being no statutory obligation on his part to do so. Accordingly, I, not being able to concur with the view taken by the lower authorities vacate the addition of Rs.23,05,130/-. Thus, the Ground of appeal No.1 raised by the assessee is allowed in terms of the aforesaid observations. 25 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 28. Apropos the ground of appeal No.3 qua the disallowance of Rs.56,436/- on account of interest paid on unsecured loan, I am of the view that since the addition of unsecured loan of Rs.23,05,130/- had been vacated by me in terms of the aforesaid observations, therefore, the disallowance of the corresponding interest paid on the unsecured loans has to be struck down. Accordingly, I vacate the addition of Rs.56,436/- made by the A.O on account of interest paid on unsecured loan. Thus, the Ground of appeal No.3 raised by the assessee is allowed in terms of the aforesaid observations. 29. I shall now deal with the sustainability of the ad-hoc lump sum disallowance of Rs.3 lac (supra) made by the A.O regarding the assessee’s claim for deduction of various expenses, viz. (i) shop expenses; (ii) vehicle repair & maintenance expenses; (iii) telephone and mobile expenses; (iv) travelling expenses; and (v) office and miscellaneous expenses. As is discernible from the assessment order, the A.O had made the aforesaid lumpsum disallowance of Rs.3 lac (supra) for the reason that there were certain shortfall/deficiencies in the vouchers pertaining to the various expenses claimed by the assessee in his trading and Profit & loss account which could not be properly explained by the assessee. I find that though the A.O had given a generalized reason for justifying the ad hoc disallowance of Rs.3 lac (supra) but has not referred to a single instance of expenditure which as per him was either not verifiable; or was not found to 26 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 be in order; or was not found to have been incurred wholly and exclusively for the purpose of business. In my considered view the aforesaid ad-hoc disallowance of Rs.3 Lac (supra) made by the A.O is merely haunted by his general observations and not on the basis of any concrete material or any specific instance of an expenditure which as per him was for any cogent reasons liable to disallowed. In the backdrop of the aforesaid facts, I find substantial force in the claim of the ld. A.R that in absence of pointing out of any specific infirmity qua the assesse’s claim for deduction of the aforesaid expenditure by the lower authorities, the disallowance of any part of the same on an ad-hoc basis can by no means be held to be justified. My aforesaid view is fortified by the order of the ITAT, Kolkata in the case of Animesh Sadhu Vs. ACIT, Circle-1, Hoogly, ITA No. 11/Kol/2013, dated 12.11.2014 and that of the ITAT, Delhi in the case of ACIT, New Delhi Vs. M/s Modi Rubber Ltd. ITA No. 1952/Del/2014, dated 15.05.2018. Also, my aforesaid view that an assessee’s claim for deduction of an expenditure u/s.37 of the Act cannot be arbitrarily disallowed by the A.O on an ad-hoc basis is supported by the order of the ITAT, Raipur in the case of M/s. Sunita Finlease Limited Vs. Income Tax Officer, ITA No.244/RPR/2017 dated 30.03.2022. As the A.O had failed to place on record any material which would prove to the hilt that the assessee had either raised a bogus claim of expenditure; or that the said expenditure was not incurred wholly and exclusively for the purpose 27 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 of business; or that the expenditure so claimed as a deduction did not fall within the four parameters of Section 37 of the Act, therefore, I am unable to persuade myself to subscribe to the disallowance made by him. I, thus, in terms of my aforesaid observations vacate the disallowance of Rs.3 lac made by the A.O. Thus, the Ground of appeal No.2 raised by the assessee is allowed in terms of the aforesaid observations. 30. Ground of appeal No.4 being general in nature is dismissed as not pressed. 31. In the result, appeal of the assessee is allowed in terms of the aforesaid observations. Order pronounced in open court on 01st day of October, 2024. Sd/- (रवीश सूद /RAVISH SOOD) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर/ RAIPUR ; Ǒदनांक / Dated : 01st October, 2024. SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // 28 Mohan Lal Jain Vs. ACIT, Circle- Korba ITA No. 386/RPR/2023 Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "