NETAFIM AGRICULTURAL FINANCING AGENCY PVT LTD,MUMBAI V. ACIT CIRCLE 15(2)(1), MUMBAI

ITA 507/MUM/2025

AI Insights

The case involves Netafim Agricultural Financing Agency Pvt. Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals) that confirmed the addition of Rs. 34,20,458 to the assessee's income under Section 68 read with Section 115BBE of the Income-tax Act, 1961, for the Assessment Year 2017-18. The addition was based on unexplained cash credits during the demonetisation period, where cash deposits were made directly by the assessee's customers into its bank accounts. The Tribunal found that the lower authorities had not adequately considered the documents submitted by the assessee and restored the matter to the AO for a detailed examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668713 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Durga Prasad More [1971] 82 ITR 540 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUJATHA IYANAGAR
• Assessee Lawyers: SANJEEV ADITYA
• Keywords: Unexplained cash credit; Bogus
• Section: 143(3); 68; 133(6)

Judgement Text

" |आयकर अपीलीय न्यायाधिकरण न्यायपीठ, म ुंबई| IN THE INCOME-TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SMT. RENU JAUHRI, ACCOUNTANT MEMBER आयकर अपील सुं./ITA No. 507/MUM/2025 (नििाारण वर्ा / Assessment Year :2017-18) Netafim Agricultural Financing Agency Pvt. Ltd. 308, Windfall, 3 rd Floor, D Wing, Sahar Plaza Complex, Andheri Kurla Road, JB Nagar, Andheri East, Mumbai-400059 v/s. बिाम ACIT, Circle 15(2)(1), Mumbai Room No. 357, 3rd Floor, Aayakar Bhavan, M K Road, Mumbai-400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADCN7106J Appellant/अपीलार्थी .. Respondent/प्रनिवादी निर्ााररती की ओर से /Assessee by: Shri Sanjeev Aditya राजस्व की ओर से /Revenue by: Ms. Sujatha Iyanagar, स िवाई की िारीख / Date of Hearing 02.06.2025 घोर्णा की िारीख/Date of Pronouncement 27.06.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai- /National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 28.11.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18. P a g e | 2 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency 2. The assessee has raised the following grounds of appeal: “1. The order of the First Appellate Authority, CIT (A) 24, Mumbai is against law and facts and circumstances of the case. 2. The First Appellate Authority erred in making addition u/s 68 r.w.s. 115BBE to the tune of Rs. 34,20,458/-. 3. The First Appellate Authority erred in passing order without taking cognizance of the submissions made by the Appellant in response to the show cause notice dated 16th December 2019 vide letter dated 18th December 2019. 4. The First Appellate Authority erred in understanding the fact that the appellant has not deposited any cash of its own and the cash deposits are those which are directly deposited by its customers into the appellant's bank account. 5. The First Appellate Authority erred in completely ignoring the confirmations of M/s. Venkatesh Krishi Seva Kendra and M/s. Ved Agritech proving the fact that there is no cash deposit made by the appellant. 6. The First Appellate Authority erred in understanding the facts that non- response to notices u/s 133(6) cannot be considered a default on the part of the appellant. 7. The First Appellate Authority erred in understanding the facts that the order cannot be passed against the appellant by completely ignoring the submissions made without offering any valid reasons as to why the said submissions are not acceptable to the revenue. 8. The First Appellate Authority has completely ignored the submissions made by the appellant with the assessing officer which was in turn submitted to the First Appellate Authority as well and has to the contrary has erred in passing order by stating that the details were not submitted to the assessing officer at all. For these reasons and for any other reason that may be adduced at the time of hearing, it is prayed that the Hon'ble Tribunal may be pleased to direct that the order of the First Appellate Authority (E-Appeals) to the extent agitated herein is not in accordance with law and facts and circumstances of the case and allow the appellant's contention.” 3. Brief facts of the case are that the assessee filed its return declaring total income of Rs. 3,45,92,760/- on 31.10.2017. The case was selected for complete scrutiny for verification of the high-value receipt of cash deposit shown during P a g e | 3 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency the demonetisation period. The assessee company is engaged in the business of providing agricultural loans to farmers and others for the purchase of drip irrigation systems. During the demonetisation period, some of the customers deposited a total of Rs. 35,04,033/- in the assessee’s bank accounts maintained with Yes Bank Ltd. and HDFC Bank Ltd. The details of these deposits were obtained from the two banks by Ld. AO, and the assessee was asked to submit the names of the borrowers along with the amounts deposited by them during the demonetisation period. The assessee submitted a list of 14 parties who had made these deposits, and therefore, notices were issued u/s 133(6) by the Ld. AO to the persons/entities who had deposited more than Rs. 3,00,000/- in the assessee’s bank accounts for verifying the identity, creditworthiness and genuineness of the transactions. However, no response was received from any of these entities, and accordingly, the assessee was asked to show cause as to why the cash deposited during the demonetisation period should not be added to its income and charged to tax at the prescribed rate. Since the assessee failed to discharge its onus of proving identity, creditworthiness of the depositors and genuineness of the transactions, the Ld. AO added the sum of Rs. 34,20,458/- to the assessee’s income u/s 68 r.w.s. 115BEE of the Act and finalised the assessment at an income of Rs. 3,80,13,218/- vide order u/s 143(3) dated 28.12.2019. P a g e | 4 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency 4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The appeal of the assessee was dismissed by Ld. CIT(A) with the following observations: 4.3 I have considered the grounds raised in the appeal, assessment order, submission of the appellant. During the course of appellate proceedings, the appellant has submitted that the appellant has received Rs. 35,04,033/- repayments from its borrowers to whom loan has been given to various parties. The receipt of Rs. 35,04,033/- has been through cash where the borrowers have directly deposited the cash in the bank account of the appellant. 4.3.1 In order to verify the identity, creditworthiness and genuineness of the persons/entities who have deposited more than Rs 3,00,000/- in assesse's account notice u/s 133(6) of the Act were issued and served However, there was no response from the said entities/persons. The AO vide letter dated 16.12.2019 requested the assessee to produce all the creditors from whom the unsecured loan were taken. The assessee failed to discharge its onus. By non production, the assessee did not discharge its onus of proof neither did it try to shift the onus back to the revenue 4.3.2 If someone has deposited cash then the depositor would know the appellant very closely. If it is so then appellant should be in a position to file the confirmation and other details like their IT returns, bank details and bank statements and even produce the depositor/s before the AO. Depositor should also be willing to substantiate the transaction. However despite being specifically asked for, the appellant failed to file any documents before the AO. This is very important aspect that highlights that the 'apparent is not real. There is something wrong with the entries appearing in the books of the appellant. Non filing of any of the details asked for, by the appellant conclusively proves that the unsecured loan entries appearing in the books of the appellant are not genuine. Discussing a similar situation Hon'ble Supreme Court in Durga Prasad More [1971] 82 ITR 540 (SC) held. \"Now we shall proceed to examine the validity of those grounds that appealed to the learned judges. It is true that the 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 favour 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,\" P a g e | 5 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency 4.3.4 The appellant simply filed the details, which were not filed before the AO during the course of assessment proceedings, cannot be accepted at this juncture. In view of the facts of the case mentioned above and the judicial pronouncements discussed above, I agree with the AO that these are unexplained cash credits in the books of the appellant and the addition of Rs.34,20,458/- as bogus and is confirmed. Hence, all the grounds raised in this appeal are dismissed.” 5. Before us, Ld. AR submitted a paper book containing copies of loan documents, some of the confirmations, along with written submissions, wherein it has been contended that the impugned cash was directly deposited in the bank accounts of the assessee by the borrowers and that no cash deposit has been made by the assessee itself. Simply because the AO was unable to get requisite details/response from the borrowers after issuing of notices u/s 133(6) does not put a burden on the assessee to ensure that they respond to the notices. Further confirmations in respect of two of the parties were submitted by the assessee. However, these were not considered while passing the assessment order. It has been contended by the Ld. AR that the requirement of establishing genuineness of the transaction has been fulfilled by submitting internal KYC documents by the assessee. It has further been stated by the Ld. AR that no cognizance has been taken of the proofs submitted before the AO as well as the CIT(A) and the addition made by the Ld. AO is without any basis and deserves to be deleted. 6. On the other hand, Ld. DR has strongly relied on the orders of the lower authorities and has argued that the plea of the assessee that he did not come to know about the deposits made in its accounts by third parties is not acceptable, P a g e | 6 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency as the assessee, being an Non-Banking Financial Company (NBFC), is required to exercise due diligence with regard to the transactions with its borrowers including deposits in its bank accounts especially during demonetisation period when huge cash has been deposited. Since there was no response from the depositors to the notices issued u/s 133(6) of the Act by the Ld. AO, it was the duty of the assessee to prove the identity and creditworthiness of its borrowers and the genuineness of the transactions. Simply providing the name, PAN and address of the parties is not enough to prove the genuineness of the transactions, and hence, Ld. AO has rightly invoked the provisions of Section 68 of the Act. 7. We have heard the rival submissions and considered the material available before us. Admittedly, cash of Rs. 35,04,033/- has been deposited in the assessee’s bank account by nine parties on different dates during the demonetisation period, mostly in Specified Bank Notes (SBN) currency. As no response was received to the notices u/s 133(6), the assessee was rightly asked to prove the identity and creditworthiness of its borrowers and also of the genuineness of the transactions by the Ld. AO. Since the persons/entities who had deposited the impugned cash in the bank accounts of the assessee are its borrowers only, it is expected that the assessee would have done due diligence with regard to KYC before giving the loans to its customers. Further, repayment of loans by these parties from time to time would also be in the knowledge of P a g e | 7 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency the assessee. Hence, it is expected that the assessee should furnish the requisite evidences to discharge its onus u/s 68 of the Act. It is the observation of the Ld. CIT(A) that the requisite documents have not been furnished by the assessee during the course of assessment proceedings, due to which the order of the Ld. AO was upheld. However, before us, the Ld. AR has submitted a paper book containing various documents stated to have been submitted before AO/CIT(A), which have apparently not been examined by the lower authorities. 8. In view of the above facts and circumstances, we are of the considered opinion that the assessee should discharge its onus by establishing the identity and the creditworthiness of its borrowers in question, as well as the genuineness of the transactions to the satisfaction of the Ld. AO. We, accordingly, deem it appropriate to restore the matter back to the file of the jurisdictional AO for proper verification and to pass a fresh order after giving due opportunity to the assessee. The assessee is also directed to make requisite compliance before the Ld. AO. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 27.06.2025. Sd/- Sd/- PAWAN SINGH RENU JAUHRI (न्यानयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai P a g e | 8 ITA No. 507/Mum/2025 A.Y. 2017-18 Netafim Agricultural Financing Agency दिन ुंक /Date 27.06 .2025 अननक ेत स ुंह र जपूत/ स्टेनो आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदेशािुसार/ BY ORDER, सहायक िंजीकार (Asstt. Registrar) आयकर अिीलीय अनर्करण/ ITAT, Bench, Mumbai. "