TaxTMI 
TaxTMI 
2026 (5) TMI 725
X X X X Extracts X X X X
X X X X Extracts X X X X
....posite order. 3. In these cases various issues involved, such as recovery of cash from the business premises of the Assessee during search and seizure operation, bank credits entries, loan entries in books of account and introduction of capital by the partners etc. on which the additions were made by the AO, however deleted by the Ld. Commissioner, to the extent as challenged in these appeals and therefore the parties argued the appeals simultaneously, which we will deal with, in the relevant parts of adjudication of the issues involved. 4. The Ld. CIT DR, Mr. R A Dyani, in support of the instant appeals, argued that there had been complete non-compliance by the Assessee during the assessment proceedings, as the Assessee had not only failed to file the relevant details and documents but had also failed to file its return of income in response to notice issued under Section 153A, and therefore, the best judgment assessments framed under Section 144 by the AO being fully justified, are liable to be restored. It was further contended that the Assessee had failed to discharge the initial burden cast under Section 68 of the Act during the assessment stage and also failed to proper....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad been duly discharged by establishing the identity, creditworthiness, and genuineness of the transactions through cogent documentary evidences, including bank statements, ITRs, confirmations, and books of account, and that once such prima facie evidence had been furnished, the onus had shifted to the Revenue, which failed to bring any adverse material on record. It was further submitted that the cash deposits stood explained as arising from recorded cash receipts and cash-in-hand duly reflected in the books, with receipts far exceeding the deposits, and that there was no statutory requirement to maintain party-wise details. 5.2 With regard to cash found during search, the Ld. Counsel argued that cash found was duly supported by entries in the books of account and sufficient opening cash balances, thereby precluding any addition under Section 69A. It was also contended that the protective addition was unsustainable in law, as the ownership of the cash had already been accepted and assessed substantively in the hands of another entity. As regards the objection of the Revenue that certain balance credits remained unexplained even during remand proceedings, it was submitted that o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment as ex-parte and 'Best Judgment Assessment', as per the provision of Section 144 of the Act. 7.3 The AO, on perusing the case record, as well as the data system of the Department observed that the Assessee is engaged in providing courier (angadia) services and during the year under consideration was holding the bank account in Union Bank Ltd. Bearing A/c No. 3198 0101 0039 458, wherein the Assessee during the year under consideration held the credit entry of Rs. 1,21,66,800/- through bank transfer/NEFT/cheque/any other mode of banking channel. 7.4 As the Assessee neither furnished any document nor made any compliance and therefore, as per the AO, the Assessee failed to discharge its onus cast upon it under the provisions of Section 68 of the Act, and hence he held that the funds credited to the tune of Rs. 1,21,66,800/- in the books of Assessee has remained unexplained and therefore, the same is added in the income of the Assessee under Section 68 of the Act being unexplained cash credit, vide assessment order dated 30-09-2021 under Section 153A r.w.s. 144 of the Act. 8. The Assessee being aggrieved challenged the aforesaid addition of Rs. 1,21,66,800/- and the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had been completed ex parte under section 144 read with section 153A of the Act, without the benefit of relevant details. Taking into account the reasons furnished by the Assessee and the supporting affidavit, the Commissioner found the explanation to be reasonable and satisfactory. It was also noted that the additional evidences were directly relevant and material to the issues under consideration. 12. Accordingly, in the interest of justice and in adherence to the principles of natural justice, the Commissioner admitted the additional evidences under Rule 46A. Ultimately, the Commissioner upheld the admissibility of the additional evidences, holding that the Assessee had demonstrated sufficient cause for non-production during assessment proceedings, and proceeded to adjudicate the appeal on merits. 13. The AO in the remand proceedings bifurcated the amount of addition Rs. 1,21,66,800/- in following heads: (a) addition of Rs. 1609200/- made on account of cash deposit. (b) addition of Rs. 98,07,600/- (capital introduced by partners) (c) addition of Rs. 7,50,000/- on account of unsecured loan. 14. During the course of appellate proceedings before....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the addition of Rs. 7,50,000/- being unsecured loan, the Assessee claimed that the said amount has been received on dated 25.04.2017 through banking channels from M/s Shreeji Jewelers and subsequently been repaid by the Assessee firm on dated 08.11.2019 as reflects from the bank statements of Union Bank Ltd. and Bank of Baroda having been received and repaid respectively. 20. The Assessee thus, with the above, before the Ld. Commissioner contended that the onus to prove the identity and credit worthiness of the creditors and genuineness of the transactions cast upon, it stood discharged. 21. We observe from the impugned order that the Ld. Commissioner adjudicated the total credited amount of Rs. 1,21,66,800/- in following components: - (a) addition of Rs. 1609200/- made on account of cash deposit. (b) addition of Rs. 98,07,600/- (capital introduced by partners) (c) addition of Rs. 7,50,000/- on account of unsecured loan. 22. Coming to the addition of Rs. 16,09,200/- which was made by the AO on account of cash deposited, we observe that the AO during the remand proceedings after examining the additional evidences filed by the Assessee, during the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 25. We have given thoughtful consideration to the peculiar facts and circumstances of the case, the claim lodged by the Assessee, the documents available on record, remand report and the decisions rendered by the AO and the Ld. Commissioner in the assessment order and impugned order respectively, with regard to the addition of Rs. 16,09,200/- and/or the issue under consideration. As observed above, the Assessee in the return of income filed for the AY under consideration had declared gross receipts on account of sales of services amounting to Rs. 88,26,909/- and has also shown total cash and cash equivalents amounting to Rs. 96,71,771/- and has also established the deposit of Rs. 16,09,200/- during the year under consideration has been made from the receipts of the cash by way of commission income amounting to Rs. 88,26,909/- having been earned during the year under consideration, which goes to show that total receipts in cash were far in excess of the total cash deposits made in the bank account during the year, as independently verified by the Ld. Commissioner in the appellate proceedings and the AO in the remand proceedings. Further, the AO has failed to produce any contrary m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iate the claim. 30. The Ld. Commissioner further observed that however, from the remand report, it is evident that the Assessee could not establish that an amount of Rs. 4,57,600/- had also been received from Mr. Jignesh. Further, the Assessee during the remand proceedings and first appellate proceedings has also not given any explanation in this regard. Thus, the nature and sources of credits to the extent of Rs. 4,57,600/- also remains unexplained. Thus, the Ld. Commissioner ultimately held that out of Rs. 55,57,600/-, the Assessee has received only Rs. 48,00,000/- during the year under consideration from Mr. Jignesh and consequently in effect Ld. Commissioner sustained the addition to the extent of Rs. 7,57,600/-, deleting the addition of Rs. 48,00,000/-. 31. We further observe that the AO, with regard to the capital introduced Mr. Ashokbhai to the tune of Rs. 42,50,000/- as claimed by the the Assessee, has observed that Assessee firm had received the amount of Rs. 40,50,000/- as per bank account statements of the Assessee firm during the year under consideration, whereas the Assessee has claimed to have received the amount of Rs. 42,50,000/- from him. 32. However, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....applicable to this case, as the proviso is applicable only in cases, where any such sum is found to be recorded in the books of companies, in which the public are not substantially interested. 36. The ld. Commissioner further observed that during the remand proceedings and appellate proceedings, the Assessee has furnished documentary evidences to show that the total amount of Rs. 90,50,000/- was received by it during the year under consideration from its partners. The AO has also confirmed this position in the remand report thus, the requirements under Section 68 are met by the Assessee. 37. The ld. Commissioner further observed that before him the Assessee has also filed copy of balance sheet of KGSSM, which shows that the said company has reserves of Rs. 10,00,26,935/- as on 31.03.2018. Further, the loan transaction, cannot be doubted in the absence of formal written agreement only. Further, the Assessee firm and its partners in any case, are separate and independent taxable entities and the issue regarding genuineness of the transactions of receipt of funds by the partners of KGSSM, is to be examined in the hands of the partners and not in the case of the Assessee firm. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xt of the addition made by the AO and the issue under consideration in the context of the relevant provision of law as applicable thereto and the fact that the Assessee was not supposed to establish the source of source, however, still the KGSSM from whom the Assessee's partners have taken loan amounts, had reserves of Rs. 10,00,26,935/- as on 31.03.2018 meaning thereby, KGSSM was having creditworthiness to extend the loan amounts under consideration to the Assessee's partners, who in turn invested in the Assessee's firm as capital. And thus on the said verification, determinations and analyzations the Ld. Commissioner, ultimately deleted the addition of Rs. 90,50,000/- by treating the same as explained. 42. The Revenue before us, even otherwise could not controvert the findings of the Ld. Commissioner in the context of the addition under consideration. Even otherwise, we also could not find any material and /or reason contrary to the determination made by the Ld. Commissioner on the issue/addition under consideration. Thus, the decision of the ld. Commissioner on the issue under consideration, does not require any interference and hence, the decision of the ld. Commissioner in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....extent of Rs. 7,50,000/-." 45. Thus, the ld. Commissioner on the aforesaid reasons, deleted the addition of Rs. 7,50,000/-. 46. We have given thoughtful consideration on the issue/addition of Rs. 7,50,000/- being unsecured loan. It is not in controversy that the Assessee had received the said amount through banking channel and duly confirmed by the lender by producing the relevant documents, such as confirmation ledger, financials and ITR of the relevant AY. Further, it is a fact that the Assessee has also repaid the loan amount of Rs. 7,50,000/- on dated 08.11.2019 i.e. in the subsequent assessment year. The AO, admittedly not doubted the documents submitted by the Assessee, such as bank statements depicting the receipt of loan and repayment thereof, confirmation issued by the lender, audited financials and ITR of the lender and the net profit of Rs. 13,12,319/- earned by the lender for the year ended on 31.03.2018 but doubted the loan transaction simply on the ground that the Assessee failed to furnish the copy of the loan agreement and therefore, the ld. Commissioner found such doubt, as non-justifiable. 47. In our considered view, the ld. Commissioner not only consider....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., in view of above decisions on the issues/additions as adjudicated by us, the appeal filed by the Revenue Department is liable to be dismissed and therefore, the same is dismissed. 53. In the result, Revenue's appeal i.e. ITA No.2993/M/2025 (AY 2018-19), is dismissed. ITA No.2994/M/2025 (AY 2019-20) 54. Coming to ITA no. 2994/M/2025, it is observed that the Assessing Officer, on perusal of the bank statements of the Assessee, observed that certain credit entries were reflected in its accounts such as Rs. 2,39,00,000/- in Bank of Baroda and Rs. 6,44,000/- in Union Bank of India. Further, the total credits appearing during the year under consideration were aggregated at Rs. 2,45,11,400/-. Thus, the AO in order to examine such bank credit entries, issued a show-cause notice to the Assessee requiring it to explain the nature and source of the said credits. The Assessing Officer also cautioned that non-compliance would result in completion of assessment under section 144 of the Act. 55. However, despite being afforded sufficient opportunities, the Assessee neither filed its return of income nor complied with the statutory notices issued. Consequently, the Assessing Officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts of Rs. 1,22,67,691/- as commission income for the period 01.04.2018 to 31.03.2019, stated to have been received in cash and subsequently deposited into the bank account. The total cash receipts recorded by the Assessee were substantially higher than the cash deposits made in the bank account during the relevant year. Specifically, the Assessee had declared cash receipts of Rs. 1,22,67,691, whereas the impugned cash deposit amounted to only Rs. 6,44,000/-. Accordingly, the Commissioner held that the said deposit could not be treated as unexplained, as sufficient cash availability was duly demonstrated. Consequently, the primary onus cast upon the Assessee under Section 68 of the Act stood discharged. 61. The Ld. Commissioner also considered the observations of the Assessing Officer doubting the genuineness of the receipts, primarily on the ground that the Assessee failed to furnish party-wise details of the commission income earned during the year. In response, the Assessee contended that there is no statutory requirement mandating the maintenance of such party-wise details. Upon consideration of the peculiar facts and circumstances of the case, the Ld. Commissioner noted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....during the period from 21.06.2018 to 05.11.2018. 65. Thus, in view of the above and relying upon the categorical findings of the Assessing Officer in the remand report, the Ld. Commissioner, held that sufficient cash-in-hand was available with the Assessee firm to explain the impugned cash deposits and having accepted the explanation by the AO in remand report, ultimately deleted the addition of Rs. 10,00,000/-. We find that the order of the Learned Commissioner is based on proper verification and cogent findings recorded by the Assessing Officer in the remand proceedings. The conclusion reached is well-reasoned and supported by material on record. Accordingly, we see no reason to interfere with the findings of the Learned Commissioner, and therefore the deletion of the addition of Rs. 10,00,000/- is hereby sustained. 66. Coming to the addition of Rs. 15,00,000/- being capital introduced by the partner, we observe that the Assessee, during the year under consideration, had received an amount of Rs. 15,00,000/- from its partner namely Shri Jignesh Kumar S. Patel, towards capital contribution. The Assessing Officer, during remand proceedings, verified the relevant documents and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rve that this addition pertains to a sum of Rs. 2,14,00,000/- found credited in the Assessee's bank account maintained with Bank of Baroda, treated as an unsecured loan received from M/s KGS Stock Management Pvt. Ltd. 69. The AO, in the remand proceedings, acknowledged the facts that the loan transactions were duly reflected in the bank statements of both the Assessee and the lender for the relevant period (01.04.2018 to 31.03.2019). The lender company possessed substantial reserves and surplus during the year under consideration. However, the Assessee failed to furnish a copy of the loan agreement. Consequently, the purpose and nature of the transaction remained unexplained. 70. On the contrary, the Assessee in rejoinder contended that complete documentary evidences were furnished, including bank statements of both parties, ledger confirmations, audited financial statements and Income Tax Return (ITR) acknowledgment of the lender. And the AO did not point out any discrepancy in the documents submitted. And therefore the three essential ingredients i.e. Identity of the lender, Creditworthiness of the lender, Genuineness of the transaction as mandated in Section 68 were duly s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....{Assessment Year 2020-21} 75. Brief facts relevant for adjudication of this appeal are that on the basis of a search and seizure action under Section 132 of the Income-tax Act, 1961 conducted on 18 October 2019 at the business premises of the Assessee, cash amounting to Rs. 2,62,30,500 was found and seized. Out of which Rs. 1,10,00,000/- has been claimed as belongs to Shri Shashidhar H. Salva. However, the remaining amount of Rs. 1,52,30,500 was not explained, with any supporting evidence. 76. Since the source of the cash was not properly explained, proceedings were initiated under Section 153A, and a notice dated 17 March 2021 was issued. The Assessee failed to file a return of income in response to this notice. Subsequently, a show-cause notice dated 23 September 2021 was also issued, asking why the assessment should not be completed under Section 144 (best judgment) due to non-compliance. In response, the Assessee submitted a letter along with a physical return on 28 September 2021 but failed to file the return electronically as required. Thus, another notice was also issued regarding unexplained credits in following bank accounts: * Bank of Baroda : Rs. 87,04,094....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were made in the absence of relevant details/additional evidences, which were directly relevant to the issues involved and that the Assessee was prevented by sufficient cause from producing the same before the Assessing Officer. The Ld. Commissioner accordingly proceeded to decide the appeal on merits. 82. The Assessee before the Ld. Commissioner with regard to the addition of Rs. 88,08,434/- made by the AO submitted that the total credits in its bank account maintained with Bank of Baroda during the year under consideration amounted to Rs. 76,01,000/- and no amount was credited in the Union Bank account. Thus, as against the total credits of Rs. 88,08,434/- considered by the AO, the actual credits were of Rs. 76,01,000/- in the Bank of Baroda account alone. The Assessee further explained that out of the aforesaid amount of Rs. 76,01,000/- a sum of Rs. 19,00,000/- represented cash deposits made on various dates, out of cash withdrawals by the Assessee firm during the relevant year as well as preceding years. The balance amount of Rs. 57,00,000/- was stated to have been received from M/s KDS Stock Management Pvt. Ltd. as unsecured loan through banking channels. In support of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0,000/- received from M/s KDS Stock Management Pvt. Ltd. and noted that during the remand proceedings, the Assessee had furnished the following documents: i. Bank statement of the Assessee for the period 01.04.2019 to 31.03.2020; ii. Confirmation from M/s KDS Stock Management Pvt. Ltd.; iii. Audited financial statements of M/s KDS Stock Management Pvt. Ltd. for F.Y. 2019-20; iv. ITR acknowledgement of M/s KDS Stock Management Pvt. Ltd. for A.Y. 2020-21. 87. On perusing the bank statement, the AO observed that the Assessee had received funds through banking channels during the year. It was further noted that M/s KDS Stock Management Pvt. Ltd. had received an amount of Rs. 2,38,00,986/- in its bank account on account of redemption of mutual funds, out of which a sum of Rs. 57,00,000/- was advanced to the Assessee. 87.1 We further observe that the AO not doubted the documents filed by the Assessee but simply pointed out that the Assessee had not furnished any loan agreement or documentary evidence specifying the terms and purpose of the loan transaction. In the absence of such supporting evidence, the AO held that the nature of the funds remai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able and therefore the Ld. Commissioner has rightly deleted the same based on factual verification and the remand report. Accordingly, we find no reason to interfere with the order of the Learned Commissioner on this issue. 89. Coming to the addition of Rs. 57,00,000/- on account of unsecured loan, we observe that the said amount was received during the year through banking channels from M/s KDS Stock Management Pvt. Ltd. The AO, in the remand proceedings, examined the documents furnished by the Assessee and recorded a categorical finding that the lender had sufficient funds, sourced from redemption of mutual funds, to advance the loan. The AO has also not disputed the identity of the lender, its creditworthiness, or the genuineness of the transaction as the loan transaction is duly reflected in the books of account of the Assessee, supported by confirmation, bank statements, and financial statements of the lender. The sole basis for doubting the transaction by the AO is the absence of a formal loan agreement. We are in concurrence with the findings of the Ld. Commissioner that mere non-furnishing of a loan agreement, in the presence of substantial documentary evidence establish....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s further noted that in the return of income for A.Y. 2019-20, the Assessee had disclosed cash and cash equivalents amounting to Rs. 3,46,74,575/-. Thus, based on the verification carried out, the AO, in the remand report, acknowledged that availability of sufficient cash balance with the Assessee to explain the cash found during the course of search. 92. Thus, in light of the above factual findings, the Ld. Commissioner held that the Assessee had satisfactorily explained the source of cash found and, accordingly, therefore he deleted the addition of Rs. 1,52,30,500/- made under section 69A of the Act. 93. We find that the decision of the Ld. Commissioner is based on proper appreciation of facts, duly supported by documentary evidences and the remand report of the AO. Once the availability of sufficient cash balance stands established from the books of account and accepted by the AO, no addition under section 69A can be sustained. Accordingly, we find no infirmity in the order of the Learned Commissioner in deleting the addition of Rs. 1,52,30,500/- and thus the decision on Ld. Commissioner on the issue/addition in hand is hereby upheld. 94. Coming to the protective additi....