TaxTMI 
TaxTMI 
2026 (7) TMI 557
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.... in its original return of income, revised return was filed on 25.10.2017 declaring total income of Rs. Nil. The case of the assessee was selected for limited scrutiny under CASS. Accordingly, statutory notices u/s. 143(2) and 142(1) of the Act alongwith questionnaire were issued and served upon the assessee, calling for information/documentary evidences in relation to the issues identified for limited scrutiny in response to which, the assessee duly furnished the requisite details/documentary evidences. It was found that during the relevant AY 2016-17, the assessee had availed unsecured loan amounting to Rs. 1,00,00,000/- from the Promoter Director, Mr. Sanjiv Puri. During the course of assessment proceedings, the Ld. Assessing Officer ("AO") asked the assessee to prove the identity, creditworthiness of the lender and genuineness of the aforesaid transaction by submitting the confirmation from the lender, his return of income and bank statements. The assessee submitted copy of PAN, bank details, Form-16 and loan confirmation letter in order to establish the identity and creditworthiness of the creditor (lender) and genuineness of the transaction. But return of income of the lender....
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....ot conclusive, Therefore, the AO would be entitled to consider whether notwithstanding the fact that the payments were made by cheques, whether the assessee has satisfactorily explained the nature and source of the amounts found credited in the books of the assessee. 3.10 In view of the above facts and discussion, it is clear that the assessee failed to prove the creditworthiness of the creditor and genuineness of the transaction. As the copies of income tax returns of the creditor have not been furnished either by the assessee or by the creditor himself, needless to say that he is the promoter director of the assessee company, the creditworthiness is not proved. The bank statement also does not show the sufficient balance out of salary income as discussed above. As regards, the genuineness of transaction, this aspect is also not proved by the assessee as the two deposits of Rs. 50,00,000/- each immediately prior to the transfer of amount, source of which has not been explained, makes the transaction doubtful. It is also the responsibility of the creditor who is himself the promoter director of the assessee company to co-operate in the assessment proceedings but he remaine....
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....ed and confirmation from the creditor, his IT returns and bank statements to prove the identity, creditworthiness and genuineness of the transactions within the meaning of section 68 of the Income Tax Act. However, the assessee has only furnished copies of PAN card and a confirmatory letter from Mr. Sanjiv Puri but not furnished copy of IT return and bank statement. Thereafter, the AO had issued show cause letter dated 13.07.2018 by which the assessee's attention was invited towards its failure to prove the credits within the meaning of section 68 of the Income Tax Act 1961. The compliance was required to be made on 20.07.2018, but no compliance was made by the assessee. Therefore, again, the AO vide letter dated 31.07.2018, reminded the assessee to file the requisite documents and explanation as to why the credits of Rs. 1,00,00,000/- should not be treated as its deemed income. However, the assessee has again failed to furnish the necessary details as called for by the AO but filed a reply, which was considered by the AO. After consideration of the reply filed by the assessee, the AO found that in addition to the confirmatory letter, the assessee furnished copy of Form 16 in s....
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.... also considered by the AO. After perusal of the submission, the AO found that through this submission also, the assessee had not furnished the Income Tax returns of the creditor though it had been submitted again and again that the creditor was a promoter director of the assessee company. Hence, the creditor was a closely related person and the onus was heavier on the assessee to prove the credits. The AQ further stated that the assessee's contention that the creditor Shri Sanjiv Puri had substantial earning from salary and the amount was advanced through banking channel was not acceptable for the reasons that the bank statement of the creditor shows that the payment of Rs. 1,00,00,000/- was made on 03.06.2015 and there were two deposits of Rs. 50,00,000/- each on 23.05.2015. Prior to this date, the available balance in the account of the creditor was only Rs. 5,50,881/-. Hence, the AO held that the contention of the assessee that the amount was paid out of salary income does not hold good. The AO further stated that it is apparent that the amount of Rs. 1,00,00,000/- was transferred out of deposits of Rs. 1,00,00,000/- just before the alleged transfer and therefore, the sourc....
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....remains unexplained. Therefore, the AO had made addition of Rs. 1,00,00,000/- on account of unexplained credit under section 68 of the Act while passing the assessment order. While making the addition, the AO has also relied on the decision of the Hon'ble Supreme Court in the case of Roshan Di Hatti V CIT [1977] 107 ITR 938, Kalekhan Mohammad Hanif Vs. CIT[1963] 50 ITR 1, wherein the Hon'ble Apex Court held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source of a receipt, whether it be of money or other property. cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. The AO has also relied on the decision of the Hon'ble Calcutta High Court in the case of Shankar Industries Vs. CIT [1978] 114 ITR 689, wherein the Hon'ble High Court held that it is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof o....
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....d may be charged to income-tax as the income of the assessee of that previous year" 5.3 Above provisions of act, which is intended to follow the above discussed accounting principle, even if read strictly word to word, cast onus on assessee in two folds: 1. Assessee has to offer an explanation about nature, and source; 2. Explanation offered by him should be found satisfactory by the Assessing found satisfactory by the Officer. 5.4 First, let us try to understand the words used in section namely-nature & source. Various judicial authorities from time to time including the Hon'ble Apex Court have tried to interpret these two phrases, and all of the judicial pronouncements have agreed that while explaining the nature & source, assessee has to offer an explanation and prove the credit to the satisfaction of AO basically on three aspects: 1.1. Identity of his creditors; 2. Capacity of creditors to advance money; and 3. Genuineness of transaction. 5.5 It is important to reiterate that these three tests have been finalized and accepted by Hon'ble Apex Court from time to time, even in the decision in case of N....
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.... on his own, and gathers some material, which is sufficient to cast doubt on source & nature of credit, it is the duty of assessee to provide further explanation and material as required by AO. Similarly, if the AO at any stage of probe reaches a dead end, and informs the assessee about the same, it is duty of assessee, to help him in and provide whatever is asked and is in his possession, to resolve that dead end. This position of shifting of onus from assessee to AO & AO to assessee is a tricky one, which depends on the specific facts of any case. In this regard Hon'ble Apex Court in case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) has stated: "Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each, case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it" .......... .......... 5.8.9 In light of above facts, discussions and judicial pronouncement, the tests evolved for testing any credit entry in books of assessee has....
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....has basically two limbs, first whether the said transaction has actually happened and testing the facts and reasons given by assessee on the doctrine of "Human Probability, which include commercial prudence, and surrounding circumstances. The judicial pronouncement for Human probability, commercial prudence & surrounding circumstances have already been discussed above. 5.12 In the light of above discussion, it is very important to consider the result of investigations conducted in this case. On almost all counts mentioned above whether it is identity, genuineness or creditworthiness the assessee has failed to completely discharge its onus. 6. On perusal of the above legal matrix, it is observed that the Hon'ble Courts/ITAT has held that the assessee has to discharge its onus by furnishing the necessary evidences in respect of identity & creditworthiness of the investors and genuineness of the transactions in such a situation when any sum was credited in the books of the account of the assessee as the provision of section 68 of the Act. It is also relevant to mention here that in case of any one of the condition i.e. either identity of the investor or creditwor....
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....on is genuine is also not acceptable because, the lender Shri Sanjiv Puri in his reply dated 18.10.2018 had stated that he had received the said credit of Rs. 50,00,000/- from a close related party as repayment of loan which was given earlier as interest free loan from his salary income but the lender Shri SanjivPuri has not furnished any necessary supporting evidences in support of his claim, which shows that he has nothing to explain or furnish in support of the said two deposits of Rs. 50,00,000/-. It is also relevant to mention here that in the said reply dated 18.10.2018, the lender has also admitted that he had not filed any Income Tax Return for A.y.2014-15, Α.Υ.2015-16 & A.Y.2016-17. Thus, the creditworthiness and genuineness of the lender remained unexplained. .......... .......... 8. In view of the above factual discussion and legal matrix of the case, the addition made by the AO is justified and hence confirmed. Thus, the grounds of appeal no. 1 to 6 are dismissed." 4. Dissatisfied, the assessee is in appeal before the Tribunal, raising the following grounds of appeal: "1. Order of the Hon'ble CIT(A) is bad in law ....
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....nsiderable amount of the salary to the Lender, providing a reasonable basis for the Appellant to not doubt the source of money advanced by the Lender. 3.2 On the facts and circumstances of the case, the Hon'ble CIT(A) erred in placing reliance on the decision of the Hon'ble Delhi High Court in the case of Brijbasi Education and Welfare Society vs PCIT (2021) wherein the genuineness of the donors could not be established since the donors changed their original submissions and confessed before the CBI that they had not given any donations to the Assessee. The decision cannot be applied to the instant case since the Lender has provided a confirmatory letter that he has given a loan to the Appellant. 3.3 On the facts and circumstances of the case, the Hon'ble CIT(A) erred in placing reliance on the decisions of the Hon'ble Mumbal Tribunal in the cases of J. K. Global vs ITO (2024) 167 taxmann.com 15, Income-tax Officer vs. Sal Everest Building & Developers (2022) 142 toxmann.com 383 and DCIT vs. Leena Power Tech Engineers (P) Ltd (2021) 130 taxmann.com 341 as well of the Hon'ble Ahmedabad Tribunal in the case of Pavankumar M Sanghvi vs. Income-tax ....
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....wherein the onus to prove the genuineness of the transaction was shifted back to the assessee since the share applicants were not contactable. The facts of the said decision are distinguishable in the facts of the Appellant's case and therefore, not applicable. 4.4. On the facts and circumstances of the case, the Hon'ble CIT(A) erred in placing reliance on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Focus Exports Pvt. Ltd. (2014) 51 Taxman 46 (Delhi) wherein the assessee had failed to co-operate during the assessment proceedings and the summons issued to the Directors of the Appellant under section 131 of the Act remained unanswered. The facts of the said decision are distinguishable from the instant case of the Appellant as the Appellant submitted all the documents to the extent available and the Lender also responded to the notice issued under section 133(6) of the Act. 5. On the facts and circumstances of the case, the Hon'ble CIT(A) erred in disregarding various case laws relied upon by the Appellant and not providing any rebuttal for any case laws relied upon by the Appellant. 6. Wrongful disallowance of carry ....
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.... assessee is not required to prove source of source for the relevant AY 2016-17 under consideration. He submitted that the law is amended w.e.f. 01-04-2023 to cast the burden on the assessee to explain the source of source. He, therefore, submitted that the Ld.AO erred in making the impugned addition in the hands of the assessee as the amended provisions are not applicable to the assessee for the relevant AY. 2016-17. 5.2 In support of his above contention, the Ld.AR placed relied on the decision(s) of the Pune Bench of the Tribunal in the case of - (i) Dhaval Vinod Gada vs. DCIT, in ITA No. 1817/PUN/2025, AY. 2013-14, dt. 03-12-2025 and (ii) Prem Grain Industries Pvt. Ltd. vs. DCIT, in ITA No. 2012/PUN/2025, AY. 2016-17, dt. 20-11-2025. 5.3 He further relied on the decision(s) of the Hon'ble Delhi and Gujarat High Court in the cases of Sheela Overseas (P.) Ltd. vs. PCIT [2026] 183 taxmann.com 236 (Delhi) and Laxmi Infra Developers Ltd. vs. ACIT [2026] 184 taxmann.com 636 (Gujarat), respectively. 5.4 Without prejudice to his above arguments, the Ld.AR raised another contention that if at all any addition is called for, it should be made in the hands of Mr....
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....he lender and the amount of Rs. 1,00,00,000/-(two credit deposits of Rs. 50,00,000/- each) is not given from the salary sourced by the lender, who is promoter-director of the assessee company and hence the transactions are not genuine. The Ld. CIT (A)/NFAC confirmed the addition made by the Ld. AO for the reasons which we have already reproduced in the preceding paragraphs. Before us, relying on various documents/details submitted before the lower authorities, the Ld. AR has submitted that the assessee has proved all the three ingredients u/s 68 of the Act and therefore the addition made by Ld. AO and confirmed by the Ld. CIT(A)/NFAC is unsustainable in law. From the perusal of the factual paper book filed by the Ld. AR, we find that the following documents/details were submitted before the Ld. AO/CIT(A)/NFAC : i. Tax audit annexures of the assessee where the particulars of loan have been disclosed along with information of TDS u/s 194A on interest paid to the lender. (page no. 135 to 138 of the Factual Paper Book refers) ii. Loan confirmation given by the lender (page no. 206 of the Factual Paper Book refers) iii. PAN of the lender (page no. 207 of the F....
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....f the coordinate bench of the Tribunal in the case of Dhaval Vinod Gada (supra) wherein following the earlier decision of the Tribunal in the case of Prem Grain Industries Pvt. Ltd. (supra) and the Hon'ble Delhi High Court in the case of Sheela Overseas (P) Ltd (supra), it was held that the 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 source other than share application money, share capital, share premium or any amount of such nature and the addition made u/s 68 of the Act was therefore deleted. 10. We find that the coordinate bench in Dhaval Vinod Gada's case (supra) held as under: "11. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A)/NFAC 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. 1.62 crores u/s 68 of the Act on the ground that the assessee has accepted loan of Rs. 1.62 crores from Shr....
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....the property has been accepted and no addition has been made by the Assessing Officer nor anything was brought to our notice that any action u/s 147 or 263 of the Act has taken place. Under these circumstances we have to see as to whether any addition can be made in the hands of the assessee u/s 68 of the IT Act where he has not only explained the source but has also explained the source of the source. 13. 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. 14. We find following the above addition, the Coordinate Bench of the Tribunal in the case of Prem Grain Industries Pvt. Ltd. Vs. DCIT (supra) has deleted the addition made by the Assessing Officer u/s 68 of the Act and sustained by the Ld. CIT(A)/NFAC by observing as under: "16. We have heard the rival arguments....
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....ther relevant details etc. This fact has been admitted by the Assessing Officer at para 4 in the body of assessment order. It is also an admitted fact that in response to the summons uws 131 of the Act, Shri Abhinandan Jain, director of Risa International Lid 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: .......... 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 ....