Abhudaya Siksha Prasar Nayas vs Income Tax Officer, Exemption Ward

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of the Additional/Joint Commissioner of Income Tax (Appeals)-1, Bangaluru [in short ‘the CIT(A)’] dated 22.12.2025, for Assessment Year 2016-17.

The solitary issue raised in the present appeal is with respect to addition of Rs.20,00,000/- made under section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on account of unsecured loans taken by the assessee from trustees/relatives of the trustees.

Shri Vaibhav Goel, appearing on behalf of the assessee, submits that the assessee is a charitable trust registered under section 12AA of the Act. The assessee is running educational institutions. During the period relevant to assessment year under appeal, the assessee had taken unsecured loans aggregating to Rs.45,96,802/- from relatives of trustees and related parties. The ld. AR submits that the Assessing Officer (AO) made an ad-hoc addition of Rs.20,00,000/- out of total unsecured loans without pointing any specific defect in the documentary evidences furnished by the assessee. The ld. AR submits that in order to discharge the onus cast upon the assessee, complete details viz. PAN, copy of income tax returns, copy of bank statements of the lenders and confirmations from the lenders were furnished during the course of assessment proceedings. It is further submitted that the addition has been made merely on surmises without bringing any adverse material on record. The ld. AR contended that the CIT(A) has erred in confirming the addition made by the AO, without appreciating the evidences placed on record. The ld. AR thus prayed for reversing findings of the CIT(A) and allowing appeal of the assessee.

Per contra, Shri Manoj Kumar, representing the Department, vehemently defended the impugned order and prayed for dismissal of the appeal. The ld. DR submits that the assessee has failed to establish creditworthiness of the lenders and genuineness of the loan transactions.

Both sides heard, orders of the authorities below examined. The addition of Rs.20,00,000/- has been made u/s. 68 of the Act out of total unsecured loans of Rs.45,96,802/- received from following parties:-

Vivek Mittal & Associates is a CA Firm of Shri Vivek Mittal husband of Ms. Preeti Mittal, Trustee, Shri Sharad Aggarwal is also related to Ms. Preeti Mittal and Shri Ravi Arora is a trustee.

A perusal of the assessment order shows that the addition has been made primarily on the ground that the lenders have declared low income and failed to substantiate their creditworthiness. The CIT(A) has upheld the addition reiterating findings of the AO. From the documents available on record, i.e. copies of income tax returns and bank statements of the lenders it is evident that the lenders had sufficient balance in bank accounts to advance loan. The identity of the lenders is not in dispute. The transactions have been carried out through banking channels. No material has been brought on record by the Revenue to show that the funds advanced have emanated from the coffers of the assessee. The addition has been made on general observations without pointing any specific infirmity in the evidences furnished by the assessee. I fail to understand, that if the AO was convinced that the lenders were having no means, then as to way entire loan amount was not added u/s.68 of the Act. The AO without assigning any reason made adhoc addition of Rs.20,00,000/- u/s.68 of the Act. Considering entire facts of the case, I find merit in submissions of the assessee. Hence, adhoc addition of Rs.20,00,000/- made u/s. 68 of the Act is directed to be deleted.

In the result, appeal of the assessee is allowed.