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Judgment
PER MAHAVIR SINGH, VP:
This appeal by the Assessee is emanating from the order of the NFAC, Delhi in Appeal No. CIT(A), Delhi-2/10332/2018-19 dated 09.06.2025. Assessment was framed by the ACIT, Circle 6(1), Delhi u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred the Act) vide order dated 25.12.2018 relating to assessment year 2016-17.
The solitary issue pressed in this appeal is as regards confirming the addition of Rs, 2,25,00,000/- made by the AO u/s. 68 of the Act on account of unsecured loan received by the Assessee Company.
Brief facts of the case are that the assessee company filed its return of income for AY 2016-17 electronically on 14.10.2016 declaring a loss of Rs. 2,93,30,869/- under normal provision and at book loss of Rs. 2,91,19,899/- under special provisions of the Act. The case was selected for scrutiny through CASS in ‘Complete Manner’ with the reason that (i) large increase in sundry creditors and reduction in business income as compared to preceding year (sundry creditors in balance sheet and business income in Part B-TI of ITR); (ii) Real Estate business with high closing stock (verify whether assessee has done correct account, (iii) large increase in sundry creditors with respect of turnover as compared to preceding year (sundry creditors in balance sheet and turnover in P&L account of ITR), (iv) large increase in unsecured loans during the year (Part A-BS of ITR) and (v) Large commission expenses and low net profit (Part A-P&L of ITR). Notice u/s. 143(2) of the Act dated 11.7.2017 was issued electronically and duly served upon the assessee within the limitation period. Notices u/s. 142(1) of the Act dated 20.7.2018 was issued with detailed questionnaire for reply on 6.8.2019. Again notice u/s. 142(1) dated 24.10.2018 with specific questionnaire was issued for reply on 29.10.2018. Final show cause notice dated 23.12.2018 was issued to the assessee company to furnish the details by 25.12.2018. During the proceedings, assessee filed submission on different dates, which were examined. During the year, assessee had been engaged in the business of real estate. The assessee’s case was selected for scrutiny and the AO vide order dated 26.12.2018 u/s. 143(3) made an addition of Rs. 2,25,00,000/- u/s. 68 of the Act relating to three loan transactions obtained from the following three parties namely M/s LA Mancha Enterprises Pvt. Ltd. amounting to Rs. 75 lacs; M/s Rachnatmak Manch amounting to Rs. 50 lacs and From RKG Finvest Ltd. amounting to Rs. 1 crore on the ground that the assessee company ahs not filed the creditworthiness with regard to M/s LA Mancha Enterprises Pvt. Ltd. and M/s Rachnatmak Manch and that the income of both the two entities were extremely low and hence their ability to fund such a loan was suspected and in the cases of RKG Finvest Ltd. The addition was made on the basis of report sated to have been received from the investigation wing and the enquiry stated to have been made in this regard by treating the same as shell entity. Hence, AO made the addition of Rs. 2,25,00,000/- u/s. 68 of the Act. Against the above, assesse appealed before the Ld. CIT(A), who vide his order dated 9.6.2025 has observed that the source of cash credits in the assesee’s books remain unexplained and needs to be taxed in the hands of the assessee and accordingly, addition made by the AO u/s. 68 was upheld by the CIT(A). Aggrieved, assessee in appeal before the tribunal.
At the time of hearing, Ld. AR for the assessee submitted that the addition has been made on mere assumptions and conjectures and the AO/NFAC has erred in rejecting the explanation and evidences brought on record by the Assessee to prove the identity, genuineness and creditworthiness. It was further submitted that AO did not consider the fact that all the loan creditors were existing income tax assessee filing their income tax return and had produced the copies of their bank statements as well as confirmations to prove the identity, creditworthiness and genuineness of the loan creditors and as such the initial onus lying in the assessee was duly discharged. However, the AO made the addition of RS. 2,25,00,000/- u/s. 68 of the Act that too without setting off the same out of assessed loss of Rs. 293,30,869 and assed the taxable income as Rs. 2,25,00,000/- and worked out to the income tax of Rs 98,84,511 as payable on the said addition. It was further submitted that the NFAC has grossly erred in not appreciating the submissions / documents / evidences filed by the assessee and also passed the cryptic and non speaking order
Ld. DR relied upon the orders of the authorities below.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find that Assessee before us, filed a Paper Book containing pages 35-151 which is copy of application under Rule 46A for filing of fresh evidences alongwith copy of audited balance sheet of M/s RKG Finvest Ltd. for the year ended 31.3.2016 alongwith copy of the annual return filed with ROC and annexure as to NBFC, status of the company with ROC, bank statement for the period from 25.8.2015 to 05.01.2016; copy of audited balance sheet of M/s La Mancha Enterprises Pvt. Ltd. for the year ended 31.3.2016 alongwith copy of status of the company with ROC; copy of balance sheet of M/s Rachnatmak Manch alongwith bank statement for the period from 16.11.2025 to 5.3.2016 and copy of bank statement of the assessee for the relevant date relating to the repayment of the loan to the above said three parties in the subsequent year. Upon careful consideration, we find force in the contention of the Asssessee that AO/NFAC has erred in rejecting the explanation and evidences brought on record by the Assessee to prove the identity, genuineness and creditworthiness. We note that Assessing Officer vide para no. 4.8 of his order at page no. 4 has observed as under:-
“On reply to the showcause, the assessee has submitted bank statements and confirmations from the company, but in view of the Report of the Investigation Wing and the inquiries made by this office, there is no doubt that such bank statements and documentation provided have no value in verifying the genuineness of the lender and cannot be held as acceptable evidence.”
We further find that Ld. CIT(A) has passed a cryptic and non speaking order by observing as under:-
“In the instant case, the appellant had infused cash credits to the tune of Rs. 2,25,00,000/- in disguise of unsecured loans. During the course of assessment proceedings, the appellant had not discharged the onus of “genuineness of transaction as well as creditworthiness and identity of the creditors and therefore AO was having no other option otherwise by treating the above as unexplained income u/s. 68 of the Act r.w.s. 115BBE of the Act. The Assessing officer had conducted necessary investigation to establish that the lenders are only accommodation entry providers as detailed in page 4 of the assessment order.”
In view of the aforesaid factual matrix, we deem it fit and proper to remit back the issues to the file of the Assessing Officer for fresh consideration, after verifying all the requisite documentary evidences of assessee viz. relevant bank statements; income tax returns and audited balance sheets etc.. Needless to add that the assessee should be given adequate opportunity of being heard to the assessee. Assessee is also directed to file all the requisite documents and evidences , if any, in order to canvass its case and fully cooperate with the Assessing Officer during the proceedings.
In the result, the Assessee’s appeal is allowed for statistical purposes.