SARNATH FINANCE LTD.,BAREILLY V. INCOME TAX OFFICER-2(2), BAREILLY

ITA 40/LKW/2025

AI Insights

M/s Sarnath Finance Ltd., an NBFC, appealed against the order of the Commissioner of Income Tax (Appeals) which confirmed the additions made by the Assessing Officer for the assessment year 2017-18. The additions included Rs.4,50,000 and Rs.42,00,000 as unexplained cash credits under section 68 of the Income Tax Act, 1961, representing repayments of loans to Mr. Vivek Tandon and Ahuja Goods Carrier (P) Ltd., respectively. The assessee argued that these were legitimate business transactions and provided evidence such as loan agreements and banking transactions. However, both the Assessing Officer and the CIT(A) rejected these claims, leading to the appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315923 (ITAT-LUCKNOW)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: REVENUE WAS HEARD; SUNIL KUMAR RAJWANSHI
• Keywords: Bad and doubtful debts; Unexplained cash credit
• Section: 144; 68

Judgement Text

"I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘SMC’, LUCKNOW BEFORE SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 M/s Sarnath Finance Ltd., 35-I/1A, Rampur Garden, Bareilly. PAN:AADCS1820N Vs. Income Tax Officer-2(2), Bareilly. (Appellant) (Respondent) O R D E R (A) This appeal vide I.T.A. No.39/Lkw/2025 has been filed by the assessee for assessment year 2017-18 against impugned appellate order dated 31/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024- 25/1068228393(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. Grounds of appeal are as under: “1. BECAUSE, on the facts and in the circumstances of the case, the impugned order passed by the Ld. Commissioner of Income Tax (Appeals) is bad in law as the Order of Assessment is itself bad in Law as it has been issued without jurisdiction. The order of assessment deserves to be set-aside and quashed. 2. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law Appellant by None Respondent by Shri Sunil Kumar Rajwanshi, Addl. CIT (D.R.) I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 2 and on facts in confirming the order passed by Assessing Officer u/s 144 without appreciating that the condition precedent for invoking the provisions of Section 144 of the Act have not been satisfied in the instant case and thus the assessment order, itself is bad in law. 3. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the Order of Assessment and in disbelieving the stand of the appellant that the loan advanced by it to borrowers, in the normal course of business, was recovered by the assessee and in doing so has erroneously ignored positive evidence available on record and purely rested its decision on conjecture and suspicion, which is illegal. The Assessing Officer as also the Commissioner of Income Tax (Appeals) has not lawfully appreciated the submissions made by assessee and evidence available on record concerning the repayment of the loan; the additions are not legal, particularly as the appellant is a NBFC, the parties were examined on oath by the Assessing Officer, confirmation was received as also documentary evidence in the shape of loan agreements, books of accounts, transaction performed through banking channel, audit of Books etc; irrespective of such overwhelming evidence, the repayment of the loan has been treated as unexplained cash credit by the Assessing Officer, most unjustifiably. 4. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts while confirming the addition made by the Assessing Officer for Rs.4,50,000/- as unexplained Cash Credit u/s 68, which sum of money represents repayment of Loan given to Mr. Vivek Tandon by the appellant. ADDITION OF Rs. 4,50,000/- 5. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming an addition Rs.42,00,000/- as unexplained Cash Credit u/s 68 which sum of money represents repayment of loan taken by Ahuja Goods Carrier (P) Ltd. The appellant being a NBFC has advanced loan and the disputed I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 3 addition represents its recovery, there is absolutely no jurisdiction vesting in the authorities to cause the impugned addition. The addition is further unsustainable as the person concerned has appeared before Assessing Officer and admitted. Therefore the addition made by Assessing Officer deserves to be deleted. ADDITION OF RS.42,00,000/- 6. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has failed to consider that appellant is a registered NBFC Company and makes provision for Non-Performing Assets (NPA), Mr. Vivek Tandon and Ahuja Goods Carrier (P) Ltd. were NPA accounts in its Books. These debtors were regularly shown as NPA in the Returns filed by appellant before Reserve Bank of India and that the Assessing Officer has not rejected the Books of Account nor has there been ever any dispute concerning the RBI filings. 7. BECAUSE, wholly without prejudice and in the alternative, if the Assessing Officer is of the opinion that debtors appearing in the Books of Account and reflected against the names i.e. Mr. Vivek Tandon and Ahuja Goods Carrier (P) Ltd. have become bankrupt and/or are not the persons who have the means to repay the loaned amount, then the assessee deserves to be permitted a deduction towards bad debts from its taxable income. 8. BECAUSE, on the facts and in the circumstances of the case, the additions sustained by the Assessing Officer cannot be made under Section 68 of the Act as the assessee is a duly registered NBFC and the recovery of loan appearing as credits in its Books of Account is a genuine business transaction and accordingly, the provisions of Section 68 have no application. 9. BECAUSE, on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in law in failing to appreciate that the impugned order of assessment was itself illegal and bad in law as the order has not been passed by competent jurisdictional Assessing officer. I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 4 10. BECAUSE, the Ld. Commissioner of Income Tax (Appeals) has grossly erred in rejecting the appeal of the assessee without providing the assessee with a due and proper opportunity of hearing and has also ignored material available on record including the submissions made by assessee therefore the impugned order deserves to be set-aside and quashed.” (B) The facts of the case, in brief, are that the assessee filed its return of income for the year under consideration on 11/09/2017, declaring a total income of Rs.1,39,110/-. The Assessing Officer completed the assessment and assessed the total income of the assessee at Rs.43,39,110/- by making addition of Rs.4,50,000/- under section 68 of the Act, and Rs.42,00,000/- as unexplained cash credit. Aggrieved, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) dismissed the appeal of the assessee observing as under: I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 5 I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 6 (C) During the course of hearing, none was present on behalf of the assessee. In the absence of any representation from the side of the assessee, learned Departmental Representative for Revenue was heard, who relied on the orders of the authorities below. On careful perusal of the impugned order of the learned CIT(A), and other materials on record, no infirmity is found in it. No material has been presented from either side to justify any interference with or modification of the impugned order of I.T.A. No.39/Lkw/2025 Assessment Year:2017-18 7 learned CIT(A). Therefore, the impugned order of learned CIT(A) is upheld and the appeal is dismissed. (D) In the result, the appeal of the assessee is dismissed. (Order pronounced in the open court on 16/05/2025) Sd/. (ANADEE NATH MISSHRA) Accountant Member Dated:16/05/2025 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. D.R., I.T.A.T., 5. CIT(A) "