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Judgment
PER MADHUMITA ROY, JM:
The instant appeal filed by the Revenue is directed against the order dated 13.10.2025 passed by the ld. Commissioner of Income-tax (Appeals), NFAC, Delhi [hereinafter referred to as the Ld. CIT(A)] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the assessment order dated 11.03.2024 passed by the Assessment Unit, Income Tax Department (hereinafter referred to as ‘the ld. AO’) under Section 143(3) r.w.s. 144B of the Act for Assessment Year 2022-23.
The assessee filed his return of income for the year under consideration on 03.07.2022 declaring income at Rs.12,90,000/-. The case of the assessee was selected for scrutiny under CASS and upon issuance of notice under Section 143(2) dated 01.06.2023 followed by statutory formalities the assessment was finalized upon making addition on very many counts. From the records, it was found that the assessee declared presumptive income of Rs.2,70,355/- under Section 22AB with gross turnover of Rs.10,73,100/-. The assessee had not produced sales bills, certified sale account extract to confirm the genuineness of the sales and, therefore, in the absence of documentary evidence the genuineness of presumptive income found to be doubtful; the entire amount of Rs.10,73,100/-remained unexplained and added in the hands of the assessee. Similarly, the declared purchase expenses of Rs.8,02,765/- were not supported with sufficient evidence like purchase bills, certified purchase account extract in the absence of which as the same remained unexplained, added in the hands of the assessee. The unsecured loan of Rs.2,31,30,000/- was also added in the hands of the assessee in the absence of proof of full return of income filed by the borrowers along with the balance sheet, copy of agreement made between them, details of rate of interest charged, certified loan ledger account extract. Before the First Appellate Authority, the assessee filed additional evidences under Rule 46A of the Income Tax Rules, 1962. It is the case of the assessee that due to technical glitch the assessee could not submit the following documents before the Ld. AO:-
Print out of grievance submitted on ITBA;
ii) Sale bills and ledger;
iii) Purchase Ledger
iv) Details of loans from Smt. Nirmal Gupta - ITR V, Computation, her statement
Details of loans from Sh. Mahender Gupta - ITR V computation and other documents.
vi) Details of loans from Shri Sumeet Singhal – ITR V, Computation, 26AS
vii) CIT(A) order
viii) Assessment order
A remand report was called for from the ld. AO who, denied the admission of additional evidence so furnished by the assessee before the First Appellate Authority, considering the plea of technical glitch as taken by the assessee was an afterthought. However, the AO has not been able to controvert the merit of the matter having regard to the documents placed before the First Appellate Authority. The assessee was further given an opportunity to controvert such findings of the AO and objection was duly made to that effect. Under these facts and circumstances of the matter, the Ld.CIT(A) was of the opinion that the appellant was prevented by sufficient cause for producing the evidence which he was called upon to produce by the AO and, therefore, proper opportunity of being heard was not provided and, therefore, additional evidences filed by the assessee before him were admitted. Finally, considering the evidence so adduced by the assessee before the First Appellate Authority the Ld.CIT(A) allowed the appeal with the following observations:-
“8.7CONCLUSION: The additional evidences have been filed during the appellate proceedings and the same have been admitted as the appellant had been prevented by sufficient cause to submit the same during the assessment proceedings. This issue regarding the admission of addition evidence has been discussed in Para 7 above.
8.7.1The appellant has submitted the following additional evidences:
i.Copy of sales ledger
ii.copy of purchase ledger
iii.copy of bank statement
iv.Copy of purchase invoices & sales invoices.
The same had been forwarded to the Assessing Officer. The Assessing Officer in this regard has merely stated that the same should not be considered under Rule 46A. However, no adverse finding regarding these additional evidences has been provided.
From the consideration of the additional evidences it is seen that out of the total purchases of Rs. 8,02,745/-, purchases of Rs. 6,00,650/- have been made through banking channels, as has been discussed in prior Paras. The appellant has provided copy of the purchase ledger and the purchase invoices. Thus, from the evidences furnished, it is evident that the purchases were genuine. Further, even part of the sales receipts were received through banking channels. The appellant has submitted copies of purchase invoices and sales invoices. No adverse comments have been furnished by the AO with respect to these documents submitted by the appellant.
It is also clear that the appellant had filed return u/s. 44AD and thus, was not required to maintain books as per the Provisions of the Act. The appellant has declared presumptive income of Rs. 2,70,355/- u/s. 44AD with a gross turnover of Rs. 10,73,100/-. This turns out to a profit rate of 25.19% which is a reasonably good profit ratio.
In view of the above, I find that the additions made by the Assessing Officer by adding the entire sales and the entire purchases are not justified, in view of the evidences filed by the appellant. This has led to double taxation.
The purchases have been largely made through banking channels. Out of the total purchases of Rs. 8,02,745/-, purchases of Rs. 6,00,650/- have been made through banking channels. Thus, 74.8% of the purchases have been made through banking channels. If purchases have been made, sales will automatically have to be made. Even part of the sales has been made through banking channels. Therefore, the finding of the Assessing Officer in summarily rejecting all the purchases and the sales is not sustainable. It is pertinent to point out that the purchases and the sales have not been contravened by the Assessing Officer even in the Remand report.
Therefore, considering the factual matrix of this case and the various judicial pronouncements relied upon, it is held that the additions made by the AO of Rs. 10,73,100/- and Rs. 8,02,765/- by adding both the sales and the purchases, is not sustainable and therefore, the same is deleted.”
“9.6 CONCLUSION:
9.6.1The Assessing Officer has made additions of Rs. 2,31,00,000/- on account of the fact that the appellant during the assessment proceedings has not submitted the copy of the Balance Sheet and the complete return of the income filed by the persons from whom loan was taken and therefore the genuineness of the unsecured loans taken by the appellant remains doubtful.
9.6.2The appellant has during the course of the appellate proceedings filed additional evidences, which have been admitted as discussed in Para 7, after providing the Assessing Officer an opportunity to rebut the additional evidences filed. The additional evidences filed by the appellant regarding the persons from whom unsecured loans had been taken is as below:
(a) Mr. Mahender Gupta:
1.Copy of confirmation - duly signed and self-certified
2.Bank Statement - highlighting the transactions
3.Copy of computation, ITR V, Financials
(b) Ms. Nirmal Gupta:
1.Copy of confirmation - duly signed and self-certified
2.Bank Statement - highlighting the transactions
3.Copy of computation, ITR V, Financials
4.Statement from Ms Nirmala Gupta specifying the source of funds given to Sumeet Singhal HUF
(c) Mr. Sumeet Singhal:
1.ITR- V
2.Computation of income
3.26AS of Mr. Sumeet Singhal
9.6.3These additional evidences filed by the appellant had been forwarded to the Assessing Officer for his comments. The observation of the Assessing Officer regarding the additional evidences in this regard as discussed in Para 4 of the assessment order is reproduced as below:
“3.As per the documents, the assessee has received unsecured loan from 3 parties namely, (i) Mehender Gupta, (ii) Nirmal Gupta and (iii) Sumeet Singhal, individual. The AO made the additions of the total amount received during the year as the assessee has not submitted the proof of full return of income filed by parties from unsecured loans have been borrowed along with balance sheet, copy of agreement made between them, details of rate of interest charged and certified loan ledger account extract. The assessee has submitted that these documents could not be submitted in response to the final show cause notice during the assessment proceedings due to technical issue with the ITBA portal and provided copy of his complaint to support the claim that the ITBA port was actually having a technical problem. The documents which the assesse failed to submit as required in the final show cause notice at the time of assessment proceedings are now submitted by the assessee u/r 46A.
During the year under consideration, the assessee had received unsecured of Rs.25,00,000/- from Mehender Gupta. As per copy of ITR of Mehender Gupta furnished by assessee, the income of Mehender Gupta for AY: 2022-23 is Rs.1,11,99,230/-.The transaction had been made through banking channel as reflected in the bank statement and confirmation had also been made by the party.
During the year under consideration, the assessee had received unsecured of Rs.1,55,00,000/- from Ms. Nirmal Gupta. As per copy of ITR, the income of Nirmal Gupta for AY: 2022-23 is Rs.15,41,199/-.Further, as per copy of the certificate issued by Smt. Nirmal Gupta, the assesse, Sumeet Singhal is the son of her brother and the source of the loan advanced by her are partly from loan from M/s Steerling Enterprises and partly from redemption of PFC bond. The transaction had been made through banking channel as reflected in the bank statement and confirmation had also been made by the party.”
9.6.4After consideration of the remand report submitted by the Assessing Officer and the counter comments filed by the appellant, it is pertinent to examine the additional evidences filed by the appellant regarding the creditworthiness of the persons concerned and the genuineness of the loan transactions. The same is discussed as below:
(a) Mahender Gupta:
- Shri Mahender Gupta has filed a Return of income for the A.Y. 2022-23 for Rs.1,11,99,230/- and has paid tax of Rs.38,30,779/-.
- Shri Mahender Gupta has also filed the confirmation of the said loan of Rs. 25,00,000/-, alongwith his PAN and Address.
- Shri Mahender Gupta has also provided the detail of the said transaction wherein the loan of Rs. 25,00,000/- has been debited from his bank account on 25/10/2021. From the same, it is seen that the transaction has been made through banking channel.
The relevant extract of the Bank statement is also on record.
- From the Computation of income it is seen that Shri Mahender Gupta has following Incomes:
i)Income from House Property of Rs. 91,22,067/-.
Shri Mahender Gupta has derived this income from House Property from seven different properties.
ii) Loss from Business or Profession of Rs. (80,83,445/-)
iii) Income from Capital Gains of Rs.10,75,601/-.
iv) Income from Other Sources of Rs.1,16,74,230/-. Therefore, Gross Total Income of Rs.1,16,74,230/-.
- Further from the statements of affairs it is seen that Shri Mahender Gupta has assets of Rs. 63,55,89,064/-. The details of the same are reproduced as below: •
1)Fixed Assets Rs. 14,66,18,012/-
2)Investments:
i)Bonds Rs. 60,00,000/-
ii) FDR Rs.12,71,70,272/-
iii) Insurances Rs. 2,14,76,190/-
iv) Mutual Funds Rs.7,63,41,219/-
v)Shares Rs. 11,38,000/-
Total Investments- Rs. 28,61,25,682/-
3.Current Assets, Loans & Advances:
i)Loans & Advances Rs. 19,83,33,339/-
ii) Other current assets Rs. 28,14,247/-
iii) Cash in Hand Rs. 564633/-
iv) Bank Balance Rs. 11,33,150/-
Total Current Assets, Loans & Advances- Rs. 20,28,45,370/-
From the consideration of the above facts, it is seen that the PAN, Address and confirmation from Shri Mahender Gupta is on record along with the relevant extracts of the bank statements.
Further, Shri Mahender Gupta has filed a returned income of Rs. 1,11,99,230/- and has assets of Rs. 63,55,89,064/- as has been discussed above.
Out of the total assets, almost 14.66 crores is in fixed assets and more than 12.71 crores is in FDRs. Thus, Sri Mahender Gupta has enough creditworthiness to extend the loans. Further, the loan to the appellant has been provided through banking channels.
Therefore, considering the factual matrix as discussed in the above Paras, it is held that Shri Mahender Gupta had sufficient creditworthiness to extend the loan of Rs. 25,00,000/- to the appellant. Further, the loan has been extended through banking channels, the confirmation of which is also on record. Therefore, even the genuineness of the loan transaction is established. Further, the Assessing Officer in his Remand Report has also recorded no adverse findings regarding the loan provided by Shri Mahender Gupta.
In view of the above, I find that the addition of Rs. 25,00,000/- made by the Assessing Officer is not sustainable and hence the same is deleted.
(b) Ms. Nirmal Gupta:
•Smt. Nirmal Gupta has filed return of Rs. 15,41,199/- for the A.Y. 2022-23.
From the computation of income filed by Smt. Nirmal Gupta it is seen that she has Dividend income of Rs. 20,83,888/- and Interest income from bonds of Rs.24,90,459/-.
She has thus total Income from Other Sources of Rs. 46,32,561/- out of which the interest income from Bonds has been claimed as exempt.
Smt. Nirmal Gupta has also filed the confirmation of the said loan of Rs. 2,05,00,000/- alongwith her PAN and Address. Out of the said loan, loan of Rs.1,55,00,000/- has been provided during the year and the rest of the loan is opening balance. In the confirmation, she has provided the details of the source from which loan of Rs.1,55,00,000/- has been provided to the appellant.
Smt. Nirmal Gupta has also provided the copy of the bank statement and the details of the bank transactions through which the loan of Rs.1,55,00,000/- during the relevant A.Y. 2022-23 has been provided from her bank account on different dates.
Smt. Nirmal Gupta has also filed confirmation that she has received a sum of Rs.1,12,69,364/- from redemption of PFC Bonds on 01.02.2022 out of which a loan of Rs.1,10,00,000/- has been provided to the appellant. She has further submitted that the same is evident from her transaction statement of Stock Holding Corporation of India Ltd.
Further, she has submitted that she has received loan of Rs. 50,00,000/- and Rs. 18,00,000/- from M/s. Sterling Enterprises on 28/12/2021 and 31/01/2022. In this regard, she has submitted that Sterling Enterprises is the proprietary firm of Shri Atul Gupta (Son of Smt. Nirmal Gupta) having PAN:
From the confirmation filed by Smt. Nirmal Gupta it is seen that Shri Sumeet Singhal (Karta of Sumeet Singhal HUF is the Son of the brother of Smt. Nirmal Gupta) and that Smt. Nirmal Gupta has advanced this sum as interest free loan to M/s. Sumeet Singhal HUF.
From the consideration of the above facts, it is seen that the PAN, Address and confirmation from Smt. Nirmal Gupta is on record alongwith the relevant extracts of the bank statements.
Further, Smt. Nirmal Gupta has filed return of Rs. 15,41,199/- for the A.Y. 2022-23. She has Dividend income of Rs. 20,83,888/- and Interest income from bonds of Rs.24,90,459/- during the relevant A.Y. 2022-23. Smt. Nirmal Gupta has also filed confirmation that she has received a sum of Rs.1,12,69,364/- from redemption of PFC Bonds on 01.02.2022 out of which a loan of Rs.1,10,00,000/- has been provided to the appellant. Further, the loan to the appellant has been provided through banking channels.
Therefore, considering the factual matrix as discussed in the above paras, it is held that Smt. Nirmal Gupta had sufficient creditworthiness to extend the loan of Rs. 1,55,00,000/- to the appellant during the relevant A.Y. 2022-23. Further, the loan has been extended through banking channels, the confirmation of which is also on record. Therefore, even the genuineness of the loan transaction is established.
The Assessing Officer in his Remand Report has recorded no adverse findings regarding the source from which loans have been made by Smt. Nirmal Gupta. It has not been brought on record by the Assessing Officer through his Remand Report that any of the contentions made by the Smt. Nirmal Gupta are incorrect or unsubstantiated.
The Assessing Officer has merely stated in the Remand Report that the return of income filed by Smt. Nirmal Gupta is not commensurate with the unsecured loan of Rs. 1,55,00,000/- extended by her to the appellant.
However, the Assessing Officer has not considered her redemption of PFC Bonds, nor her exempt Dividend Income, the amount received from M/s. Sterling Enterprises nor the Income from the other sources. The Assessing Officer has also failed to conduct any enquiry regarding the explanations furnished by Smt. Nirmal Gupta to come to any adverse finding.
Further, from the addition made, it appears that the Assessing Officer has made the entire addition of Rs. 2,05,00,000/- which had been received by the appellant from Smt. Nirmal Gupta. This also included the opening balance of Rs. 50,00,000/-. It is a settled Law that only credits received during the year can be added back and not the opening balance. This principal has been laid down by the Hon’ble High Court of Delhi which is also the Jurisdictional High Court in CIT vs. Usha Studs Agricultural Farms Ltd. (2008) 301 ITR 384.
Therefore, considering the facts of the case, I find that the addition of Rs. 2,05,00,000/- made by the Assessing Officer is not sustainable and hence the same is deleted.
(c) Sumeet Singhal:
The appellant has a loan of Rs. 1,30,000/- from Shri Sumeet Singhal who is also the Karta of Sumeet Singhal HUF. However, the appellant in this context has submitted that he has made no transactions with the HUF during the relevant A.Y. and that the loan of Rs. 1,30,000/- is the opening balance from the previous F.Y.
The contentions made by the appellant along with the additional evidences filed were forwarded to the Assessing Officer for his comments. However, the Assessing Officer in his Remand Report has furnished absolutely no comments on the contentions made by the appellant. It has not been contravened that the loan pertained to the previous F.Y.
Since the loan advanced by Shri Sumeet Singhal pertained to the Previous F.Y., the same could not have been added to the income of the appellant during the relevant A.Y. As discussed above, this principal has been laid down by the Hon’ble High Court of Delhi which is also the Jurisdictional High Court in CIT vs. Usha Studs Agricultural Farms Ltd. (2008) 301 ITR 384.
Therefore, considering the above facts, I find that the addition of Rs. 1,30,000/- made by the Assessing Officer is not sustainable and hence the same is deleted.
9.6.5Therefore, considering the factual matrix of the case, the discussions made in the above Paras (a), (b) & (c) and the various judicial precedents discussed above, the addition of Rs. 2,31,30,000/- made by the Assessing Officer in the case of the appellant is deleted and therefore the ground of appeal No.2 is allowed.”
Considering the additional evidence adduced by the assessee before the First Appellate Authority, the order of deletion of addition made by the Ld.CIT(A) with the elaborate discussion thereon as extracted hereinabove is found to be just and proper having regard to the reason assigned therein so as not to warrant any interference. The appeal preferred by the Revenue is devoid of any merit and, thus, dismissed.
In the result, the appeal filed by the Revenue is dismissed..