SAROJ RANI,DELHI V. INCOME TAX OFFICER, WARD 44(6), DELHI, DELHI

ITA 5471/DEL/2024

AI Insights

The case involves Saroj Rani, the appellant, who contested the additions made to her income by the Income Tax Officer (ITO) under Section 68 of the Income Tax Act, 1961, which were upheld by the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre. The additions pertained to unexplained cash credits and disallowed exempt income from gifts received. The Tribunal examined the nature of the credits, the absence of books of accounts maintained by the assessee, and the evidentiary support provided for the gifts, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314471 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2021-2022
• Other Referred Cases: CIT Vs. Ms. Mayawati, Baladin Ram v. CIT, CIT vs. Smt. P.K. Noorjahan
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: SURESH GUPTA
• Keywords: Set aside; Business income; Opportunity of being heard; Corroborative evidences; Unexplained cash credit; Onus to prove; Gift; Earning of tax free income
• Section: 143(3); 68; 69; 12

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.5471/Del/2024 [Assessment Year : 2021-22] Saroj Rani 44, Sports Villa, Jay Pee Greens, U.P.-201310 PAN-AAOPR2107H vs ITO Ward-44(6) Delhi APPELLANT RESPONDENT Appellant by Shri Suresh Gupta, CA Respondent by Shri Sahil Kumar Bansal, Sr. DR Date of Hearing 22.04.2025 Date of Pronouncement 08.05.2025 ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal has been filed at the instance of the assessee seeking to assail the First Appellate order dated 08.08.2023 passed by Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), New Delhi [“CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 21.12.2022 passed u/s 143(3) r.w.s. 144B of the Act pertaining to assessment year 2021-22. 2. The assessee has raised following grounds of appeal:- 1. “On the facts and circumstances of the case, the Ld CIT(A) has erred both on facts and in law in upholding the addition of Rs.5,90,73,007/- treating the credits in bank accounts as unexplained cash credit u/s 68 rws 115BBE of IT Act which is unsustainable in law as such unexplained credits are outside the ambit of sec 68 of IT Act as no books of accounts are maintained by the appellant. Such illegality in invoking wrong section for making addition to income is a jurisdictional error which is incurable u/s 292BB of IT Act. 2. On the facts and circumstances of the case, the Ld CIT(A) has erred both on facts and in law in upholding the addition of Rs.5,90,73,007/- u/s 68 rws 115BBE of IT Act as unexplained credits ignoring the fact that the appellant has duly proved discharged its onus u/s 68 of IT Act by submitting all relevant ITA No.5471/Del/2024 Page | 2 evidences. The AO has neither asked any further clarification nor has made any enquiry before making addition. The additions made by the AO are therefore contrary to facts on record and the same is based on mere suspicion, surmises and conjectures which are unsustainable, arbitrary and unjustified. 3. On the facts and circumstances of the case, the Ld CIT(A) has erred both on facts and in law in upholding the disallowance of claim of exempt income of Rs.1,11,56,703/- ignoring the fact that the above is receipt of gift from the donor son which is exempt from income tax and the appellant has submitted all relevant evidences. The additions made by the Ld AO are therefore contrary to facts on record and the same is based on mere suspicion, surmises and conjectures which are unsustainable, arbitrary and unjustified. 4. On the facts and circumstances of the case, the Ld CIT(A)/Ld AO have erred in passing the impugned orders without providing an opportunity of being heard.” 3. Briefly stated, the assessee filed return of income for AY 2021-22 declaring total income of INR 40,330/-. As mentioned in the assessment order, the assessee is not engaged in any business activity during the year under consideration. The case of the assessee was selected for scrutiny through CASS. In the course of assessment, the AO made enquiries towards receipts of unsecured loans and other receipts found credited in the bank account of the assessee. The AO however did not find the explanation offered towards nature and source of such credits of unsecured loans received and receipts by way of repayment of loans advanced in the earlier years, to be satisfactory as contemplated under s. 68 of the Act. The AO accordingly made an addition of INR 5,90,73,007/- in aggregate. Another amount of INR 1,11,56,703/- which is claimed to be receipts of gift from two sons of the assessee namely, Shri Arun Mittal & Shri Kushal Mittal was also added to the total income. It was submitted before the AO that loose diamonds valued at INR 63,77,752/- was received as gift from son Shri Kushal Mittal. Likewise diamonds worth INR 47,78,952/- was received as gift by assessee mother from another son Shri Kushal Mittal. The AO however, did not find the source of gift and explanation offered to be satisfactory. The exempt income purportedly received by way of gift amounting to INR 1,11,56,703/- was accordingly discredited and added to the total income. The returned income was accordingly assessed at INR 7,02,70,040/-. ITA No.5471/Del/2024 Page | 3 4. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) however adjudicated the grievances raised as per grounds of appeal against the assessee with reference to material available on record. The CIT(A) held that the onus which lay upon the assessee has not been discharged and thus declined to interfere with the first appellate order. 5. Further aggrieved, the assessee preferred appeal before the Tribunal. 6. The Ld. Counsel for the assessee made wide ranging oral and written submissions to contest the action of the lower authorities. The Ld. Counsel submitted that it is an admitted position that the assessee has not derived any business income and therefore was neither under obligation to maintain books of accounts nor did she maintain any books of accounts. In the absence of books of accounts, s. 68 could not have been invoked by the AO at the first place. The additions made under s. 68 of the Act and all other additions are thus required to be quashed at the threshold and the returned income requires to be restored. 6.1. On merits, it is the contention on behalf of the assessee that the additions of INR 5,90,73,007/- comprised of; (i) credits by way of unsecured loans of INR 1,09,30,007/- in aggregate from very close family members for which relevant documentary evidences were duly placed in the course of assessment. Besides, the loans have been fully or substantially repaid during the FY itself and therefore the addition s made under s. 68 of the Act is wholly unjustified; (ii) credits/receipt of INR 4,81,43,000/- represents repayment of pre- existing loan advanced by assessee from (a) Ommur Medica Health P Ltd. of INR 33,27,000/-; (b) M/s. Ravee Pro-Build P.ltd. of INR 15,000/-; and (c) M/s. Mukesh Mrinal and Deepak of INR 15,00,000/-. The Ld. Counsel for the assessee submitted that relevant confirmation was filed in this regard and realization of money advanced earlier would not fall within the ambit of s. 68 of the Act. ITA No.5471/Del/2024 Page | 4 6.2. The written submissions showing reference to the documentary evidences and explanation furnished thereon on behalf of the assessee being comprehensive are reproduced hereunder for ready-reference:- Ground Nos.1 & 2 “These grounds project a common grievance of the appellant against the upholding of addition of Rs. 5,90,73,007/- u/s 68 of the Act by the Ld CIT(A) having held unexplained credits the transactions of unsecured loans from family members aggregating Rs. 1,09,30,007/- (Table on page 8 of AO order) and also repayment of loans aggregating Rs.4,81,43,000/ (Table at page 9-10 of AO order). A. Common Objection for all the additions u/s 68 of IT Act The appellant, from the copy of the ITR and computation of income (PB 1-4), wishes to pace emphasis on the fact that she had not been engaged in any business activity during the year under consideration and therefore, she was not under obligation to maintain books of account. The fact that appellant is not engaged in any business activity is beyond dispute as assessing officer in para 1 of AO order has clearly observed that assessee is not engaged in any business activity. The appellant vide letter dated 28.09.2022 (PB 31-34, relevant page 31) in para 1-3 has clarified to the AO that since she is not engaged in business and therefore, assessee is not maintaining any books of account, P&L account and balance sheet does not arise. From the facts available on record, it is evident that the assessee had no income assessable as business income and therefore the assessee was not required to maintain books of accounts. Be that as it may, in absence of any books of account being maintained under sec 44AA of the Act, the AO was not correct in making addition u/s 68 treating the receipts by way of loan or repayment of loans as credits appearing in books of account. The question of such credits, treating the same as unexplained credits in books of account is contrary to facts of the case in absence of any books of account maintained by her. It is a settled position of law that no addition can be made u/s 68 of the Act in absence of any credit entry in the books. The bank passbook/statement do not constitute books of account. The \"books or books of account\" have been defined in section 2(12A) of the Act. The same reads as under: \"2(12A) books or books of account\" includes ledgers, day- books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;\" The definition of books, under the Act, is inclusive. A perusal of the definition shows that the same does not include bank passbook or ITA No.5471/Del/2024 Page | 5 bank statement maintained by another person i.e. bank. A conjoint reading of above provisions would thus lead to the conclusion that the addition u/s 68 can be made only where any amount is found credit in the books as defined u/s 2(12A) of the Act maintained by the assessee. The jurisdictional Delhi High Court in CIT Vs. Ms. Mayawati 338 ITR 563 [Del] held that Section 68 has no applicability when the assessee is not maintaining any books of accounts. The ITAT was of the opinion that balance sheet/statement of the affairs cannot be equated to books of account and also a pass book of the bank cannot be treated as a book of account of the assessee because this is provided by the banker, to its customer and is only a copy of the customer's account in the books maintained by the bank. The bank does not act as an agent of the customer nor can it be said that the banker maintains the pass book under instructions of the customer (assessee) the relationship between the banker and customer is one of the debtor and creditor only. Therefore, a cash credit appearing in assessee's pass book relevant to a particular previous year, in a case where the assessee does not maintain books of account, does not attract the provisions of Section 68. In Baladin Ram v. CIT [1969] 71 ITR 427(SC), the Hon'ble Supreme Court held that under the provisions embodied in s. 68 of the IT Act, it is only when any amount is found credited in the books and the amount so credited may be charged to tax as the income of that previous year, if the assessee offers no explanation or the explanation offered by him is not satisfactory. It is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer, is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book, supplied by the bank to its constituents, is only a copy of the constituent's account in the books maintained by the bank. In view of this, the Tribunal was justified in holding that the pass book supplied by the bank case could not be regarded as a book of the assessee or a book maintained by the assessee or under his instructions. To further support the above proposition of law, reliance is placed in the decision: (1) CIT vs. Bhaichand N. Gandhi 141 ITR 67 (Bom.) (2) Anand Ram Raitani vs CIT 223 ITR 544 (Gau); (3) Madhu Raitani vs. ACIT, 10 taxmann.com 206 (Guwahati) (TM) (4) Manasi Mahendra Pitkar vs. ITO 160 ITD 605 (Mumbai - Trib.) (5) Kokarre Prabhakara vs. ITO, ITA 1239/Bang/2019 dt 11/09/2020 (6) Dinesh Kumar Verma vs ITO ITA1183/Mum/2019 dt: 28.12.2020: ITA No.5471/Del/2024 Page | 6 (7) Smt Babbal Bhatia vs ITO ITA No.5430/Del/2011 dt: 08.06.2018 B. Objections against the Individual items of additions u/s 68 of IT Act 1. Unsecured Loans of Rs 1,09,30,007/- The above unsecured loans comprise of following loans received from family members and the merits/ objection to the addition is dealt against each loans as under: a. Akanksha Mittal (Daughter in law) Rs.26,50,000/- These loan transactions are of Rs.,50,000/- dt: 30.04.2020 and Rs.26,00,000/- dt: 20.11.2020 which are fresh addition to old brought forward loan of Rs. 16,50,000/-. The amount is fully repaid during the year. Copy of the confirmation along with ITRV for AY 2021-22, computation of income, bank statement, PAN Card, her statement of affairs as on 31.03.2020 and 31.03.2021 are placed in paper book at pages 54-66. The entire loan of Rs.44,27,000/- (including opening balance of Rs.16,50,000/-) was repaid during the year through banking channels which can be verified from confirmation, statement of affairs and bank statement where repayment transactions are duly highlighted. The Ld AO was not satisfied about the creditworthiness of loan creditor as her current year income as per the ITR for AY 2021-22 was Rs.4,08,710/- but Ld AO missed the very important aspect of the matter that the above loan creditor had opening capital balance of Rs.3,26,52,121/- as per statement of affairs as on 31.03.2020 (PB 65) and she had benefit of outstanding loan of Rs.,2,00,90,000/- as on 31.03.2020 and therefore, the above loan creditor had adequate resources to advance loan of Rs.26,50,000/- during the year which has been repaid back. Besides above, the current year income of Rs.4,08,710/- is further supplemented by the gift of Rs.48,18,725/- as shown in the computation of income as exempt income forming part of the disclosure in the return of income of above loan creditor. In view of above, and considering the decision of Hon'ble Delhi High Court in the case of Pr. CIT vs. Goodview Trading Pvt. Ltd. 97 CCH 0381 (Del) approved by supreme court in 103 CCH 0304 (SC), ITO vs. Computer Home Information Plus Pvt. Ltd. ITA No.5680/Del/2016 dated 24.05.2019, Addl. CIT vs Prayag Polytech Pvt Ltd ITA No.5970/Del/2017 dt: 18.06.2019 and M/s Wel Intertrade P Ltd vs ACIT ITA No.7166/Del/2018 dt: 03.06.2019where unanimous view was that that current year income alone cannot be the criteria to decide creditworthiness of loan creditor in complete defiance of explanation regarding the sources of funds supported by the evidences placed on record. The addition of above loan is further contested on the ground that since the loan has been repaid during the year, the ITA No.5471/Del/2024 Page | 7 department is not entitled to treat the above loan as unexplained credit in view of decision of DIT vs. Modern Charitable Foundation, 335 ITR 105 (Del), CIT vs Mahavir Crimpers 95 taxmann.com 323 (Guj), CIT vs Karaja Singh 15 Taxmann.com 70 (P&H), CIT vs Ayachi Chandrashekhar Narsangji 42 Taxmann.Com (Guj) and Pr. CIT VS Skylark Build 2018-TIOL-2323-HC-MUM-IT wherein it was held that when unsecured loans were paid back may be in subsequent years, this shows that loans were genuine loans taken by the assessee. The above views have also been taken in the co-ordinate Bench decision in the case of ITO vs RMP Holdings P Ltd ITA No.5089/Del2024 dated 16.04.2025. b. Arun Mittal (Son) Rs. 19,21,007/- The above loan is taken by the assessee from her son which was in addition to brought forward loan of Rs.1,53,00,000/-. The closing balance after repayments stands at Rs.7,85,007/- . Copy of confirmation along with e-filed ITRV, Computation of income, bank statement, PAN Card, His statement of affairs as on 31.03.2020 and 31.03.2021 to establish her creditworthiness are placed in paper book at pages 67-78. The repayment of the loan during the year through banking channels can be verified from confirmation, statement of affairs and bank statement where repayment transactions are duly highlighted. The Ld AO was not satisfied about the creditworthiness of loan creditor as his current year for AY 2021-22 was just Rs.4,04,290/- but Ld AO missed the very important feature in the case which is that the above loan creditor had opening capital balance of Rs.3,88,34,094/- as per statement of affairs as on 31.03.2020 (PB 78) and she had benefit of third credits as loans Rs.29,70,000/- on the opening day and therefore, the above loan creditor could not be held to be lacking creditworthiness to advance loan of Rs. 19,21,007/- to the appellant mother which has been repaid back. Besides above, the current year income of Rs.4,04,290/- is further supplemented by the sale realization of shares of Rs.25,17,596/- as shown in the computation of income on which LTCG loss of Rs.35,23,161/- has been claimed but there was inflow of funds of Rs.25,17,596/- during the year under consideration (PB 71). On the issue of current year being the criteria for judging creditworthiness and the fact that the loans are repaid during the year, the judgements cited in the case of Smt Akanksha Mittal are relied in the above case too. ITA No.5471/Del/2024 Page | 8 c. Neha Vikas Goyal (Married Daughter) Rs.48,69,000/- This is also a loan received by the assessee from the daughter. The first loan transaction of Rs. 13,69,000/- is dt: 14.07.2020 which is only fresh credit by the above daughter as the subsequent transaction of Rs.35,00,000/- is sourced from the loan advanced by the assessee during the year aggregating Rs.82,40,000/- between 06.08.2020 to 06.11.2020. The assessee also received an Neft/RTGS of Rs. 1,35,000/-on 05.03.2021 which bounced back due to technical errors and therefore, Rs.1,35,000/- although appears as credit entry in bank account but it is cancelled due to above reasons which is evident from debit entry of same amount on same date. To establish the source of Rs. 13,69,000/-, the confirmation of the daughter along with computation of income, E-filed ITRV, PAN Card, Bank statement for relevant period are placed in paper book at pages 79-97. Out of above loans, Rs.87,80,000/- was repaid and the above loan creditor turned into a debtor of Rs.37,76,000/- during the year. All the transactions were done through banking channels which can be verified from confirmation, statement of affairs and bank statement where repayment transactions are duly highlighted. The Ld AO was not satisfied about the creditworthiness of loan creditor as her current year for AY 2021-22 was Nil but from the copy of ITR for AY 2020-21 and computation of income (PB 80-82), it can be seen that the above loan creditor had received funds of Rs.1,18,56,500/- from sale of shares of two unlisted entities which was the source of loan given by her to the appellant. It may kindly be noted that there is a fresh addition of Rs. 13,69,000/- dated 14.07.2020 and the bank statement at page 97-98 will show that the above loan has been given out of the amount of opening balance of Rs.52,82,018/- lying in the bank as on 01.04.2020. On the issue of current year being the criteria for judging creditworthiness and the loans paid during the year, the judgements cited in the case of Smt Akanksha Mittal are also relied. d. Rajender Mittal (Husband) Rs.7,90,000/- The assessee received loan of Rs.1,90,000/- through RTGS on 30.06.2020 in addition to the brought forward loan of Rs.50,000/-. During the year, the assessee received cash loan of Rs.2,00,000/- out of cash withdrawals from bank account. Besides above, a sum of Rs.6,00,000/- was also received through RTGS/NEFT on 23.02.2021 which is out of the loan repayments/fresh loans given during 20.06.2020 to 18.02.2021 aggregating Rs. 13,80,304/-. The assessee seeks ITA No.5471/Del/2024 Page | 9 to explain the source of above loan of Rs.1,90,000/- on the basis of copy of the confirmation, e-filed ITRV, Computation of income, PAN Card and bank statement placed in paper book at pages 98-108. Out of above loans, Rs.25,15,304/- including opening balance of Rs.50,000/- was repaid and the above loan creditor turned into a debtor of Rs.14,75,304/- during the year. All the transactions were done through banking channels which can be verified from confirmation and bank statement where repayment transactions are duly highlighted. The Ld. AO was not satisfied about the creditworthiness of loan creditor as his current year for AY 2021-22 was Rs.5300/- but from the copy of computation of income (PB 99-101), it can be seen that the above loan creditor had received funds of Rs.1,00,51,220/- from sale of shares of three unlisted entities which was the source of loan given by him to the appellant. On the issue of current year's income being the sole criteria for judging creditworthiness and repayment of the loans during the year, the judgements cited in the case of Smt Akanksha Mittal are also relied in the above case. e. Sh Amit Mittal (Nephew) Rs.7,00,000/- This amount was received through banking channel on 14.08.2020 which was repaid during the year. Copy of confirmation along with e-filed ITRV, relevant period bank statement and computation of income are placed in paper book at pages 109-120. The Ld AO failed to consider the copy of ITR for AY 2021-22 (PB 111) and computation at page 112- 114 showing the income of the above loan creditor at Rs.19,63,410/- and the Ld AO did not consider the above return in the table on page 232 and recording his dissatisfaction on the creditworthiness of loan creditor. Since, the return of above loan creditor is much higher than the loan amount, the action of Ld AO is without basis. Without prejudice, since the loan has been repaid, the case laws cited in support of Smt Akanksha Mittal loan may be applied in the present case also. II. Repayment of loans aggregating Rs.4,81,43,000/ a. Repayment of loan by M/s Ommur Medica Health P Ltd Rs.33,27,000/- This amount represents repayment of advance of Rs.33.27,000/-given by the assessee during the year under consideration to the above noted company. Copy of the confirmation of account and its PAN Card are placed in paper book at pages 121-122. From the confirmation (PB 121), it can be noticed that the amount of Rs.33.27,000/- was advanced by the appellant in three tranches of Rs.20,00,000/- (PB 218), ITA No.5471/Del/2024 Page | 10 Rs.8,00,000/- (PB 218) and Rs.5.27,000/- (PB 218) on 10.08.2020, 14.08.2020 and 18.08.2020 respectively. The above advance was repaid by the above borrower on 04.09.2020. The entries of advance/repayments can be verified from the bank statement of appellant (PB 209-223). The Ld AO did not accept the above explanation on the ground that no supporting evidence of above transaction was filed but the copy of the bank statement and confirmation of above borrower leaves nothing to doubt the above factum/ explanation of appellant. Your kind attention is decision of co- ordinate Bench in case of ACIT vs Evermore Stock Brokers P Ltd ITA No.5152/Del/2018 dated 19.09.2023 (authored by Hon'ble AM) where it was held that where the credit entries made in the books of account correspond with the earlier pre- existing loan advanced by the assessee, the nature of the receipt, i.e. credit is thus abundantly clear. Ostensibly, the credits for the purpose of s. 68 are recoupment of the earlier advances. The nature of the credit is thus obvious case of repayment of existing loans. It was held that on facts, the AO has obviously misunderstood the true purport of nature of credits. The Assessing Officer has thus misdirected himself in law in proceeding against the assessee on a wholly wrong footing. The onus which lays upon the assessee to explain that the entries made are real and not fictitious, has been duly discharged. Ordinarily, it is difficult to fathom an onus tagged upon the assessee to explain the circumstances as to why third party had needed such funds so long as the transactions are embedded with commercial considerations. Furthermore, the onus towards source in the hands of borrower in relation to repayment entries qua pre-existing loans is indeed onerous and can seldom be visualized. Reliance is also placed in the decision of JCIT vs Radhe Developers P Ltd ITA No.1226/AHD/2018 dated 22.02.2021 (relevant para 11), ACIT vs Sunderdeep Construction P Ltd ITA No.380/IND/2017 and M/s Flourish Pure Foods P Ltd vs DCIT ITA No.30/AHD/2022 dated 16.02.2024. a. Repayment of loan by M/s Ravee Pro-Build P Ltd Rs.15000/- This amount represents repayment of loans given by the assessee to the above noted company. Copy of the confirmation of account and e-filed ITRV with computation of income are placed in paper book at pages 123-127. The arguments/judgments cited in para-a above are also relied upon to highlight that sec 68 is not applicable on nature of transaction done by appellant in present case. b. Repayment of loan by M/s SMN Reality LLP Rs.4,33,01,000/- This amount represents repayment of old recoverable amount of Rs.4,33,01,000/- due as on 01.04.2020. Copy of the confirmation of account, Balance sheet filed with office of ROC ITA No.5471/Del/2024 Page | 11 in Form No.8, bank statement and e-filed ITRV are placed in paper book at pages 128-156. The factual matrix of the present case is that the appellant had been a partner in above LLP till 24.08.2020 which can be verified from the filing with ROC (PB 152) where the date of cessation of partner is given. The appellant had advanced loan of Rs.4,30,51,000/- and had the capital balance of Rs.25,00,000/- in above LLP and thus, the total investment of the appellant stood at Rs.4,33,01,000/-as on 01.04.2020. The above investment was refunded by LLP through banking channels during the year under consideration. Copy of the balance sheet of above LLP for 31.03.2020 and 31.03.2021 is enclosed with present submission. The arguments/judgments cited in para-a above are also relied upon to highlight that sec 68 is not applicable on nature of transaction which are repayment of old advances/ investment done by appellant in present case. c. Repayment of loan by M/s Mukesh Mrinal and Deepak Rs.15,00,000/- This amount represents recovery of amount of Rs.15,00,000/- being recoverable from the above entity as on 01.04.2020. Confirmation is placed in paper book at page 157. The arguments/judgments cited in para-a above are also relied upon to highlight that sec 68 is not applicable on nature of transaction done by appellant in present case. Ground No.3 Disallowance of claim of exempt income of Rs. 1,11,56,703/- In this connection, the appellant seeks to submit that the assessee has received gifts from her sons namely Sh Arun Mittal and Sh Kushal Mittal of the loose diamonds of Rs.63,77,752/- and Rs.47,78,952/- respectively. The above diamonds were purchased by the above done sons during the year under consideration, purchase invoices are placed in paper book at pages 169-173 and gift deeds are enclosed with present submission. These diamonds were acquired by the donors out of the withdrawal from their respective saving accounts. The bank statements of these donors are placed in paper book at pages 174-175 & 176-204. From perusal of the bank statement, it can be seen that there have been no cash deposits in the bank accounts. The statement of affairs signed by the CA for 31.03.2020 and 31.03.2021 placed in paper book at pages 205-208 and theirs e-filed ITRV and computation of income at pages 163-168. to show the creditworthiness of above donors. The gifts were made 30.09.2020 which was the birthday of the husband of the assessee as per Hindi calendars. The fact that donors were sons of the assessee gets proved from the ration card, copy of which is placed in paper book at pages 158- 162. The fact of relationship of mother with the sons is ample proof of natural love and affection. This fact need not be proved beyond establishment of above relationship which stands established from copy of ration card. When an assessment order lacks clear references to the ITA No.5471/Del/2024 Page | 12 specific sections under which the addition is made, it raises doubts about the intention and rationale behind the additions. Such an order can no longer be considered a \"speaking order and provides room to surmises. Such an order cannot be held to be valid in the eyes of law. in this regard, reliance is placed in the decision of Smt. Sudha Loyalka vs ITO (2018 (7) TMI 1892] which has been relied in the case of Neeraj Paliwal vs ITO [2021 (12) TMI 584] and Shree Ramareddy Ramesh vs.ITO ITA No. 2027/Bang/2016. In view of above, it is prayed that the gift of Rs. 1,11,56,703/-be kindly accepted as genuine transaction.” 7. The Ld.Sr.DR for the Revenue, on the other hand, relied upon and supported the respective orders of the AO and the CIT(A). 8. We have carefully considered the rival submissions and perused the material available on record. 9. The assessee has challenged the addition of INR 5,90,73,007/- made under shelter of s. 68 of the Act. The assessee contends that the aforesaid amount comprises of unsecured loan received from family members of INR 1,09,30,007/- and also receipts by way of repayment of loans earlier advanced by assessee aggregating to INR 7,81,43,000/-. 9.1. We shall first advert to the propriety of additions towards unsecured loan received from different family members:- (i) Loan from Mrs. Akanksha Mittal (daughter in law) of INR 26,50,000/-: As borne out from records and pleaded on behalf of the assessee, the assessee has fully repaid the aforesaid fresh and current loan alongwith old loans of INR 16,50,000/- during FY 2020-21 through banking channel. The documentary evidences such as, copy of confirmation, Income tax return, bank statement, balance sheet of the lender were also placed to support the identity, creditworthiness of the lender and genuineness of the transactions. The lender has an opening capital of INR 3.26 crores and therefore, adequacy of resources to advance loan to the assessee cannot be doubted. Significantly, the loan stood repaid during the same financial year which transgresses all other considerations of genuineness or creditworthiness etc. In our view, the documentary evidences placed on record adequately vouches for the bonafides of the unsecured loan taken from daughter in law i.e. Mrs. Akanksha Mittal. ITA No.5471/Del/2024 Page | 13 (b) Loan of INR 19,21,007/- from son Shri Arun Mittal: The aforesaid amount has been taken by way of loan during the year in addition to brought forward a loan of INR 1.53 crores. The loan received during the year as well as brought forward loans have been largely repaid by the assessee during the year with a meager outstanding of INR 7,85,007/-. The copy of confirmation, Income tax return, computation of income of the lender, bank statement, balance sheet etc. adequately establishes the nature and source of loan contemplated under s. 68 of the Act. The AO has cast doubt on the creditworthiness based on current year income of INR 4,04,290/- without taking into account receipt by way of sale proceeds of shares by lender and large opening capital balances held at the disposal of the lender. Be that as it may, the loan stands repaid and propriety of credit cannot be regarded to be suspect. (c) Unsecured loan from Mrs. Neha Vikas Goyal (Married daughter) of INR 48,69,000/-: The assessee contends that the fresh credit received is only INR 13,69,000/- and remaining amount received is out of loan earlier advanced by the assessee to the daughter. The relevant documentary evidence such as confirmation, income tax return, bank statement are placed on record. Noticeably, the loans stands repaid and therefore, there is no justification to doubt the nature and source of loan including the creditworthiness of the lender. (d) Unsecured loan from Shri Rajender Mittal (Husband) of INR 7,90,000/-: Same is the case in the instant credit. The loan stands as repaid and the transaction is supported by the confirmation, bank statement, income tax return of the lender. It is the case of the assessee that lender had received funds of INR 1,00,51,220/- from sale of shares which explains the source of loan advanced. The bonafides of loan thus cannot be doubted. (e) Loan of INR 7,00,000/- from Shri Amit Mittal (Nephew): As pointed out on behalf of the assessee, the amount has been received through banking channel on 14.08.2020 which was repaid during the year. The copy of confirmation on income tax return, bank statement and ITA No.5471/Del/2024 Page | 14 computation of income provides adequate basis to lend support to the bonafides of the transaction with nephew of the assessee. The lender has declared income of INR 19,63,410/- during the year and thus creditworthiness cannot be seen with doubt too. 9.2. In the wake of documentary evidences enumerated above for unsecured loans received from closely connected family members and having regard to the large capital held at the disposal of the lenders as narrated in the submissions made on behalf of the assessee, we find considerable force in the plea of the assessee towards bonafides. The overwhelming factor that all these loans have been repaid during the year transgresses all considerations. 9.3. It is trite that additions under s. 68 cannot be made merely on the basis of some perception of culpability entertained towards receipt of loan. The money in the instant case has been received from family members whose financial standing has been demonstrated to be fairly good. 10. The factum of repayment quells the apprehension entertained by the Revenue. The overriding factum of repayment of loan itself repels any form of disguise on the part of the assessee and dispels the perception of any sordid or extraneous affairs. The clinching evidences towards loan procurement discharges the primary onus which lay upon the assessee under s. 68 of the Act. Coupled with this, the loan itself having been repaid, the assessee does not ultimately stand to gain any spurious benefit from such alleged unexplained cash credit. Such fact justifies the plea of the assessee towards existence of bonafides in the transactions. In the totality of facts, where the trail for obtaining of loan and repayment thereof is proved and the lender has duly filed its return of income encompassing the transaction carried with the assessee, the action of the Revenue cannot be countenanced in law. 11. The Hon’ble Gujarat High Court in the cases of CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj) and CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj) have held that when the Department has accepted the factum of repayment, the additions under s. 68 is not sustainable in law. Similar view has been expressed in CIT Vs. Karaj Singh (2011) 15 ITA No.5471/Del/2024 Page | 15 Taxmann.com 70 (P&H); Panna Devi Chowdhary Vs. CIT, 208 ITR 849 (Bom); and PCIT v. Skylark Build (2019) 180 DTR 266 (Bom.) (HC). 12. At this juncture, it will also be relevant to note the pertinent observations of the Hon’ble Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) in the context of the expression ‘may’ with reference to s. 69 of the Act. The Hon’ble Supreme Court in that case observed that the word ‘may’ should not be read as ‘shall’. The Hon’ble Supreme Court held that the expression ‘may’ indicates that the intention of Parliament in enacting Section 69 (similar to Section 68) was to confer a discretion on the Assessing Officer in the matter of treating the source of investment, which has not been satisfactorily explained by the assessee. In terms of the decision of the Hon’ble Supreme Court, the Assessing Officer is not necessarily obliged to invoke Section 68/s.69 of the Act in every case where the explanation offered is found to be ‘unsatisfactory’ in the opinion of the Assessing Officer. In essence, the overriding fact that loans so obtained stood re-paid through banking channel without any real advantage to the assessee, the onus cast upon the assessee is substantially discharged in view of the observations of the Hon’ble Supreme Court. 13. In view of delineations, the additions on account of unsecured loans received from parties noted above, stands deleted. 14. The assessee inter-alia claims that aggregate credit of INR 4,81,43,000/- represents repayment of existing loans availed by the borrowers from the assessee:- (a) Repayment of loan by M/s. Ommur Medica Health P.Ltd.-INR 33,27,000/- The assessee has filed copy of confirmation from the borrower showing the amount and date on which the loans were advanced to the party and supported by the bank statement of the assessee. In the light of such facts, it is evident that the Revenue has misunderstood the nature of credit. The amount received against pre-existing loan advanced by the assessee cannot be subject matter of additions under s. ITA No.5471/Del/2024 Page | 16 68 of the Act as held in large number of judicial precedents quoted on behalf of the assessee (supra). (b) Repayment of loan by M/s. Ravee Pro-Build P.Ltd. of INR 15,000/- Similarly to the case in Ommur Medica Health P.Ltd. (supra), the aforesaid loan received represents recovery of pre-existing loan. The additions under s. 68 of the Act are not justified. (c) Repayment of loan by M/s. SMN Reality LLP of INR 4,33,01,000/- As per audited balance sheet of M/s. SMN Reality LLP, the assessee was a partner in the LLP. The assessee made reference to the following documents namely; (i) LLP Form No.8 being statement of account and solvency filed by the LLP pursuant to Rule 24 of the LLP Rules 209 showing the financial statement as on 31.03.2021; (ii) LLP Form 11 showing exit of Smt. Saroj Rani i.e. assessee from partnership w.e.f. 24.08.2020 and existing capital contribution of INR 2,50,000/-; (iii) Audited financial statement of the LLP and Note No.3 showing comparative long term borrowings particulars. With the help of these documents, the assessee submits that she was the partner in LLP and an amount of INR 4,30,51,000/- and capital contribution lying with the LLP has been recovered during the year which explains nature of receipt of repayment /recovery entries from M/s. SMN Reality where the assessee was a partner. The source of receipt of INR 4,33,01,000/- is thus cogently explained. The additions made under s. 68 of the Act is therefore, clearly devoid of any merit; and (iv) Repayment of loan by M/s. Mukesh Mrinal and Deepak of INR 15,00,000/- The amount was outstanding as on 01.04.2020. The confirmation from the borrower clearly vouches for the fact that the credit represents recovery of loans. The additions made are thus not justified. ITA No.5471/Del/2024 Page | 17 15. It may be pertinent to note here that the burden of verification on documents submitted is upon the AO. The assessee has filed the relevant documentary evidences and either the loans earlier received have been repaid or the loans advanced by the assessee have been recovered. It may be borne in mind that while dealing with the nature of evidence required to discharge burden of proof under s. 68 of the Act, the additions made are required to be tested on the touchstone of a preponderance of probabilities. It is not necessary for the assessee to discharge the burden to the hilt. 16. In view of the expression ‘may’ employed in s. 68 of the Act, the assessee need only to demonstrate that her plea stands the test of preponderance of probabilities. If the assessee gives a plausible explanation against the additions made to her income, the onus will then shift to the Department to show that the assessee’s explanation was false or not worthy of belief or it was not even probable. The evidence might be direct, circumstantial or both. In the instant case, the assessee has placed tell tale evidences, to support the creditworthiness of the lenders as well as genuineness of the loan transactions. The loans have been received from family members and even repaid. The other credits represent recovery of the pre-existing loan. These facts are discernible from the material placed on record. We thus see no reason to cast aspersion on such credits appearing in the bank statement. On holistic considerations, in our considered view, the assessee has adequately discharged the onus placed upon her as contemplated under s. 68 of the Act. 17. We now advert to the legal contentions raised on behalf of the assessee that in the absence of books of accounts being maintained by the assessee, s. 68 invoked by the AO is ex-proprietary and outside the bounds of law. For this proposition, the assessee has made reference to the following judgements:- (1) CIT vs. Bhaichand N. Gandhi 141 ITR 67 (Bom.) (2) Anand Ram Raitani vs CIT 223 ITR 544 (Gau); (3) Madhu Raitani vs. ACIT, 10 taxmann.com 206 (Guwahati) (TM) (4) Manasi Mahendra Pitkar vs. ITO 160 ITD 605 (Mumbai - Trib.) (5) Kokarre Prabhakara vs. ITO, ITA 1239/Bang/2019 dt 11/09/2020 (6) Dinesh Kumar Verma vs ITO ITA1183/Mum/2019 dt: 28.12.2020; (7) Smt Babbal Bhatia vs ITO ITA No.5430/Del/2011 dt: 08.06.2018; ITA No.5471/Del/2024 Page | 18 (8) CIT vs Ms. Mayawati 338 ITR 563 (Del.High COurt); and (9) Baladin Ram vs CIT [1969] 71 ITR 427 (SC). 17.1. As submitted, it can be culled out from the aforesaid judgements that existence of books of accounts maintained by the assessee is a condition precedent for invoking s. 68 of the Act. Thus, in the absence of books of accounts mandated in law, there is no legal scope to invoke the provision of s. 68 at the first place. 17.2. Guided by the judicial precedents quoted above, we find merit in the legal plea too. 18. In the light of delineations made, the additions made to the tune of INR 5,90,73,007/- under s. 68 of the Act is unsustainable both on fact and law and therefore, reversed and cancelled. 19. Ground No.1 & 2 raised by the assessee are allowed. 20. Ground No.3 concerns disallowance of claim of exempt income of INR 1,11,56,703/- on account of receipt of unexplained gifts. 20.1. In respect of such claim, the assessee seeks to submit that she has received gifts in the form of loose diamonds of INR 63,77,752/- from son Shri Arun Mittal and loose diamonds of INR 47,78,952/- from other son Shri Kushal Mittal. The assessee with reference to the Paper Book, seeks to submit that the evidences of purchase of diamonds by the both sons and Gift Deed of such loose diamonds showing voluntarily transfer of diamonds to mother assessee is placed on record. The source of purchase of diamonds is out of bank balances without any cash deposits. The AO has dis-credited the receipts of diamonds by way of gifts and claim made as exempt income on the ground that there existed no occasion for making gift; no evidence that there is love and affection and the capacity of the owners for giving gifts are not acceptable. The CIT(A) has also endorsed the action of the AO on the ground that the donors have very meager income. 20.2. The assessee contends that the action of the Revenue authorities are based on presumption and surmises and devoid of any logic. No occasion is required per se for giving gift to mother assessee. It is strange that the love ITA No.5471/Del/2024 Page | 19 and affection between sons and mother is under cloud. As regards, the capacity, the payment has been made through banking channel which not stated to be proceeded by any cash deposits. There cannot be any ulterior motive in giving gifts of loose diamonds by both sons to mother assessee which is most sacrosanct relationship. Such gifts do occur in the Indian societies for varied family reasons. 20.3. We find apparent merit in the plea raised on behalf of the assessee. The assessee has placed the evidence of purchases of loose diamonds by the donors (sons) and shown to be out of their bank balances. In the absence of any adverse evidence, the additions made on conjecture are totally uncalled for. Agreeably, creditworthiness of a person cannot be measured solely by the income of the current year. The capital available at the disposal of a person is equally relevant to determine creditworthiness. The payment, in the instant case, has been made by sons for purchase of loose diamonds gifted. The Revenue has not brought anything on record to support the allegations that such gifts are the unexplained income of the mother assessee generated out of unknown sources. The additions made thus cannot be countenanced on facts and law. The action of the AO is set aside and the AO is directed to delete the addition. 21. Ground No.3 raised by the assessee is thus, allowed. 22. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 08th May, 2025. Sd/- Sd/- (VIMAL KUMAR) JUDICIAL MEMBER (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER *Amit Kumar, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "