PREM GRAIN INDUSTRIES PVT. LTD,JALGOAN V. DCIT CIRCLE 1, JALGAON, JALGAON

ITA 2012/PUN/2025

AI Insights

The case involves Prem Grain Industries Pvt. Ltd., which appealed against the order of the CIT(A) confirming the addition of Rs.1,15,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer, who doubted the genuineness of unsecured loans received from Risa International Ltd. The Tribunal examined whether the assessee had discharged its burden of proving the genuineness of the loan transactions. The Tribunal considered the submissions, evidence, and relevant legal provisions, including the amendment to section 68 of the Act, and found in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787029 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 26-08-2025
• Other Referred Cases: Sheela Overseas Pvt. Ltd vs. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. SADANANDA SINGH
• Assessee Lawyers: SURESH ANCHALIYA
• Keywords: Set aside; Principle of natural justice; TDS; Accommodation entries; Source of fund
• Section: 144; 142(1); 132; 68; 131; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.2012/PUN/2025 Assessment year : 2016-17 Prem Grain Industries Pvt. Ltd. E 2/1, MIDC Area, Ahjantha Road, Jalgaon – 425003 Vs. DCIT, Circle – 1, Jalgaon PAN: AADCP9598E (Appellant) (Respondent) Assessee by : Shri Suresh Anchaliya Department by : Shri S. Sadananda Singh, JCIT Date of hearing : 11-11-2025 Date of pronouncement : 20-11-2025 O R D E R PER R.K. PANDA, VP: This appeal filed by the assessee is directed against the order dated 22.07.2025 of the Ld. CIT(A), Pune-12 relating to assessment year 2016-17. 2. Facts of the case, in brief, are that the assessee is a company and filed its return of income on 01.09.2016 declaring total income of Rs.Nil. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The case was selected for limited scrutiny through CASS for the following issue: “Whether unsecured loans are genuine and from disclosed sources.” 3. Accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued to the assessee to prove the genuineness of the transaction, identity and creditworthiness of loan creditors by producing the following details: Printed from counselvise.com 2 ITA No.2012/PUN/2025 i) Confirmation of loan creditor, ii) Bank statements of company as well as loan creditor in which loan transaction is reflected, iii) Copy of return of income filed for AY 2016-17 by the loan creditor with computation of income. 4. From the various details furnished by the assessee the Assessing Officer noted that the assessee has shown total loan creditors of Rs.3,52,53,595/- which includes the following creditors: a) Aagam Capital Ltd. Rs.88,96,067/- b) Risa International Rs.1,15,00,000/- 5. He, therefore, asked the assessee to produce the authorized person of the loan creditors for verification along with documentary evidence. The assessee in response to the same filed the details like copy of return of income, computation of income, copy of audit report, copy of unsecured loans along with confirmation and other relevant details etc. 6. While perusing the record the Assessing Officer noted that during the course of search action u/s 132 of the Act, the statement of Mr Abhinandan Jain, Director of M/s. Risa International was recorded u/s 132(4) of the Act. He noted that an information u/s 133(6) of the Act was issued to the DCIT (Central), Circle 2(1), Pune in response to which the DCIT (Central), Circle 2(1) provided a copy of the statement of Shri Abhinandan Suresh Jain S/o Suresh Jain which was recorded during the course of search action at the office of Risa International at Mumbai. A copy of the statement was also provided to the assesse. To verify the genuineness Printed from counselvise.com 3 ITA No.2012/PUN/2025 of loan transaction and creditworthiness, the Assessing Officer issued summons u/s 131 of the Act to the directors of Risa International and Agam Capital Ltd. In response to the same the director of Risa International Ltd. attended on behalf of the company before the Assessing Officer. He intimated that Risa International Ltd is engaged in the business of steel, textiles and real estate and further intimated that Risa International have no business relation with Prem Grain Industries Pvt. Ltd except the unsecured loans advanced during the year. He also filed a copy of return of income along with balance sheet, profit and loss account for financial year 2015-16 and confirmation of accounts. To verify the creditworthiness of these transactions, a copy of bank statement was also filed. 7. The Assessing Officer recorded the statement of Mr. Abhinandan Jain u/s 131 of the Act and a copy of the same was provided to Shri Abhayraj Chordiya, director of M/s. Prem Grain Pvt Ltd. The Assessing Officer noted that in answer to question No.4 Shri Abhinandan Jain has stated that the amount of credits in the bank account of M/s. Risa International is amount recovered from debtors. He however, stated that the company has not taken unsecured loans and whatever amount is given is out of own funds of the company. Subsequently Shri Abhinandan Jain has provided copies of some bills with regard to debtors through e-mail. 8. The Assessing Officer asked the assessee to show cause as to why addition of Rs.1,15,00,000/- should not be made u/s 68 of the Act and interest thereon Printed from counselvise.com 4 ITA No.2012/PUN/2025 should not be disallowed. The assessee in response to the same filed a detailed reply. Subsequently the assessee sought directions u/s 144 of the Act of the Addl.CIT, Range-1, Jalgaon. The Addl.CIT, Range-1, Jalgaon vide order u/s 144 of the Act vide No.1355 dated 26.12.2018 has directed as under: 9. However, the Assessing Officer was not satisfied with the various submissions made by the assessee. According to him 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. He further noted that true identity of the lender company Risa International Ltd is not proved although the lender claims to be in the business of textile trading and investment. However, search action in the Ranka Group, where the lender was also covered, has proved conclusively that Risa International Ltd is just a paper company used by the beneficiaries of Ranka Group to provide accommodation entries. Rejecting the various explanations given by the assessee the Ld. Counsel for the assessee made addition of Rs.1,15,00,000/- u/s 68 of the Act. 10. In appeal the Ld. CIT(A) upheld the addition made by the Assessing Officer u/s 68 of the Act. Printed from counselvise.com 5 ITA No.2012/PUN/2025 11. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in confirming addition of unsecured loan amounting to Rs.1,15,00,000/- under section 68 of the Act by treating a genuine loan as accommodation entry without appreciating the fact that the appellant has discharged the onus by proving the identity, genuineness and creditworthiness of the unsecured loans received from Risa International Limited and transacted the same through proper banking channel and without considering the fact that the loan is subsequently repaid. 2. On the facts and in the circumstances of the case and in law the Ld CIT(A) erred in confirming the addition of unsecured loan amounting to Rs.1,15,00,000/- under section 68 of the Act by treating a genuine loan as an accommodation entry due to allegedly not proving the source of source of unsecured loan received by the appellant without appreciating the fact that the appellant had duly proved the source of unsecured loan received and source of credit as per the provision of section 68 of the Act for the relevant assessment year. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in confirming the disallowance of the Interest amounting to Rs.2,56,500/- without appreciating the fact that the said interest payment pertained to a genuine loan taken by the appellant and that the appellant had duly deducted TDS in the said transacted through proper banking channel. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in not holding that the principles of natural justice were violated and disregarding the fact that the appellant was neither provided with copies of material relied upon by the Ld. A.O nor provided any opportunity to cross-examine the persons whose statements were relied upon by the Ld. A.O. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in confirming the addition of an unsecured loan merely on circumstantial evidence and alleged infallible evidence which was never put up for question before the appellant under scrutiny proceedings, and thereby violating the principles of natural justice. 6. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another. Printed from counselvise.com 6 ITA No.2012/PUN/2025 12. The Ld. Counsel for the assessee at the outset strongly challenged the order of the Ld. CIT(A) sustaining the addition made by the Assessing Officer u/s 68 of the Act. Referring to para 4 of the assessment order he submitted that the assesse, in response to the notice issued by the Assessing Officer, has filed the details like copy of return of income, computation of income, copy of audit report, copy of unsecured loans along with confirmation and other relevant details etc. Further the loans were repaid subsequently along with interest. 13. 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. He submitted that the Hon’ble High Court in the said decision has further held that where the assessee had produced sufficient material in support of its explanation, no addition can be made u/s 68 of the Act. 14. He submitted that Shri Abhinandan Jain, director of Risa International Ltd had appeared before the Assessing Officer in response to the summons issued u/s Printed from counselvise.com 7 ITA No.2012/PUN/2025 131 of the Act and in his statement recorded he has categorically stated to have given loan to M/s. Prem Grain Industries Pvt. Ltd amounting to Rs.1,15,00,000/-. The source of the same was also explained which was out of collection from the sundry debtors. He had also stated in the statement that M/s. Prem Grain Industries Pvt Ltd is a company in which his father-in-law is Director and this is the reason for giving loan to M/s. Prem Grain Industries Pvt Ltd. He submitted that the assessee in the instant case has conclusively proved the identity, creditworthiness and genuineness of the transaction, therefore, there is no justification for making the addition u/s 68 of the Act. 15. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A). 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 Printed from counselvise.com 8 ITA No.2012/PUN/2025 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 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 Printed from counselvise.com 9 ITA No.2012/PUN/2025 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 10 ITA No.2012/PUN/2025 Printed from counselvise.com 11 ITA No.2012/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 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. 19. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 20th November, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 20th November, 2025 GCVSR Printed from counselvise.com 12 ITA No.2012/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, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 12.11.2025 Sr. PS/PS 2 Draft placed before author 17.11.2025 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 "