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Judgment
PER ANUBHAV SHARMA, JM:
These are appeals preferred by the assessee and revenue against the common order dated 27.06.2025 of the Ld. National Faceless Appeal Centre (NFAC) (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Order No : ITBA/NFAC/S/250/2025-26/1077928804(1) arising out of the order dated 04.08.2021 u/s143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the NaFAC, New Delhi for AY: 2018-19.
Heard and perused the records. The appellant firm is engaged in developing a residential colony under the name and style of “Kanha Green City” situated at Siwaya Jamaullahpur, Daurala, Meerut and assessee’s return was taken up for scrutiny for examination unsecured loans and based upon the reply of the assessee addition was made at Rs.3,15,87,494/- in regard to loans received from 19 persons. Addition was also made on account of interest estimated at 12% on interest-free loan advanced to partners of Rs 10,62,000/-and assessee had succeeded before ld. CIT(A) wherein the addition was deleted to the extent of Rs.2,80,05,594/-. However disallowance of interest was confirmed. The impugned order shows that the benefit was given by the ld. CIT(A) on the basis of remand report given by the assessing officer.
Accordingly, both the department and assessee are in appeal and the respective appeal are adjudicated as follows.
Grounds raised in ITA No. 4675/Del/2025 Assessee’s Appeal)
“1 That the Ld. CIT(A) has erred on facts and in law in confirming the addition aggregating to Rs.39,00,000 u/s 68 r.w.s. 115BBE of Income Tax Act, 1961 ("Act") on account of unexplained cash credits in the books of accounts of the Appellant of the following parties:
(i)Abhishek Kumar Rs. 36,00,000
(ii)Deepa Sharma Rs. 3,00,000
At any rate, without prejudice, such addition of Rs.39,00,000 as confirmed is very excessive.
2.That the Ld. CIT(A) has erred on facts and in law in confirming the disallowance of interest of Rs. 10,62,000 on account of interest estimated @12% on interest free loan advanced to partners.
At any rate, without prejudice, such disallowance of interest of Rs.10,62,000 as confirmed is very excessive.
3.That the Appellant reserves its right to add, amend/modify the grounds of appeal.”
Grounds no. 1 in appeal of assesse challenge confirmation the addition of Rs 39 lakhs on account of unexplained cash credits in the books of accounts of the appellants from Abhishek Kumar of Rs 36 lakhs and Deepa Sharma of Rs 3 lakhs. In regard to these to individuals assesse had provided certain documentary evidences and same are picked from the submission of assesse and reproduced below;
“Abhishek Kumar – Addition of Rs.36,00,000
a)Copy of written submissions dated 09/08/2022 filed before CIT(A) placed at pages 1-13 of PB. Relevant portion from pages 2-3 of PB is reproduced below:
(i)Confirmatory certificate dated 19/07/2022 of Abhishek Kumar (now placed at page 46 of PB) confirming that he raised housing loan of Rs. 36,00,000 from Syndicate Bank which was advanced to the Assessee firm.
(ii)Copy of ledger A/c of Abhishek Kumar in the books of the Appellant for the year under consideration (now placed at page 47 of PB) from which it is evident that fresh loan of Rs. 36,00,000 was raised on 20/11/2017 as filed before the AO.
(iii)Relevant copy of Syndicate bank statement bearing account No.88389740000113 of Abhishek Kumar (now placed at page 48 of PB) reflecting disbursement of housing loan of Rs.36,00,000 on 20/11/2017 to Abhishek Kumar.
(iv)Relevant copy of Syndicate bank statement of the Assessee firm (now placed at page 49 of PB) reflecting loan of Rs.36,00,000 received from Abhishek Kumar on 20/11/2017 as filed before the AO.
(v)Confirmatory certificate of Abhishek Kumar as filed before the AO, copy (now placed at page 50 of PB).
(vi)Copy of Aadhar card of Abhishek Kumar as filed before the AO, copy (now placed at page 51of PB).
(vii)Copy of PAN card of Abhishek Kumar as filed before the AO, copy (now placed at page 52 of PB).”
Deepa Sharma - Addition of Rs. 3,00,000
a)Copy of written submissions dated 09/08/2022 filed before CIT(A) placed at pages 1-13 of PB. Relevant portion from page 3 of PB is reproduced below:
(i)Confirmatory certificate dated 08/07/2022 of Deepa Sharma now placed at page 53 of PB) confirming that she had given loan of Rs. 3,00,000 through RTGS from her Punjab & Sind Bank to the Assessee firm from her personal savings.
(ii)Copy of ledger A/c of Deepa Sharma in the books of the Appellant for the year under consideration (now placed at page 54 of PB) from which it is evident that fresh loan of Rs.3,00,000 was raised on 05/12/2017 as filed before the AO.
(iii)Copy of bank statement of Punjab & Sind Bank, Meerut of Deepa Sharma (now placed at pages 55-57 of PB), from which it is evident that she advanced Rs.3,00,000 to the Assessee firm on 05/12/2017.
(iv)Relevant copy of bank statement of Punjab & Sind Bank, Meerut of the Assessee firm (now placed at page 58 of PB) reflecting loan of Rs. 3,00,000 received from Deepa Sharma on 05/12/2017 as filed before the AO.
(v)Confirmatory certificate of Deepa Sharma (now placed at page 59 of PB) as filed before the AO.
(vi)Copy of Aadhar card of Deepa Sharma (now placed at pages 60-61 of PB) as filed before the AO.”
Now what is material is that the case of assesse is that Abhishek Kumar has given this loan after raising a loan of Rs. 36 lakh from Syndicate bank vide term loan account number 88389740000113 which was disbursed on 20-11-2017 as evident by the term loan account statement. The AO in remand report dated 08/12/2023, copy of which is placed at pages 74-77 of PB, makeit evident that the AO has not made any comments with regard to such addition in the Remand Report. In other words, the AO has neither controverted nor disproved the above submissions/documentary evidences in the Remand Report and the CIT(A) confirmed such addition withoutcontroverting, disproving the submissions/documentary evidences or without giving a specific finding as to why such addition is being confirmed. While it is evident that the Assessee had duly discharged its onus of proving the identity, genuineness of the loan as the loan hadreceived through banking channels and also thecreditworthiness of Sh. Abhishek Kumar by proving source of source of loan i.e. housing loan of Rs.36,00,000 was raised from Syndicate Bank on 20/11/2017 which was advanced on the same date from such bank to the Assessee firm. Pertinent to note is that on similar facts where source of source of loan was housing loan raised from banks, such additions have been deleted by CIT(A).In view of the above facts and circumstances, the addition of Rs.36,00,000 deserves to be deleted.
Coming to loan given by Mrs. Deepa Sharma, who is a house wife and she does not have taxable income. In relevant para 14 of Remand Report, the AO has asserted, that the assessee has submitted confirmatory letter and account details which suggest that individual has given money from personal savings but in support no ITR to prove source of income has been given. PAN not submitted and Aadhar submitted not legible, hence, the submission deserves to be rejected. Thus is evident that the AO has objected to such loan only on the ground that Smt. Deepa Sharma has not filed her income tax return. Now only because Deepa Sharma has not filed her income tax return is cannot be a sufficient ground for making such addition for an amount as minimal as Rs.3,00,000. We are of considered view that when confirmation stood submitted and if same was to be rebutted then same should be on some evidence and not presumption alone drawn for not filing ITR, especially when the source in not any income but house hold saving of a home maker, non filing ITR is not a determinant factor. Thus this addition too deserved to be deleted. Accordingly the ground no. 1 is sustained.
Coming to Ground No. 2 arising out of confirmation of the disallowance of interest of Rs. 10,62,000 on account of interest estimated @12% on interest free loan advanced to partners. During the year the addition to partner capital account were made in case of (1) Deepak Vihan (2)Manoj Vihan (3) Sanjay Rastogi. The confirmation of the following partners along with their ITR with computation sheet for the concerned FY stands filed in assessment proceedings. As per the submission of assesse, Mr. Deepak Vihan and Mr. Manoj Kumar are partners and both were having credit balance in their running capital account as shown by schedule C& schedule E of the balance sheet. While providing interest @12% the debit balance has been duly deducted from the credit balance of the partners capital account and the interest was given on the net capital balance of these two partners. So Mr. Deepak Vihan was given interest of Rs.8,56,350 while Mr.Manoj Kumar was given interest of Rs.4,27,376 upon their net credit balance of capital account @12% while Mr. Ompal Singh was charged interest of Rs.48,380 upon his debit balance. It is pertinent to note that interest has been paid @12% after netting the debit balance of Imprest A/c against the credit balance in the capital A/c of both the partners. The fact remains that the Assessee firm has maintained a capital A/c and a current (Imprest) A/c in respect of two partners namely Deepak Vihan and Manoj Kumar. Copy of capital Alc of Deepak Vihan and his current (Imprest) A/c are (now placed at pages 69-70 of PB). Similarly, copy of capital A/c Manoj Kumar and his current (Imprest) A/c are (now placed at pages 71-72 of PB). To both the partners, interest @6% was paid on the credit balance of their capital A/c and similarly interest @6% has been charged on the debit balance of their current (Imprest) A/c which works out as under:
| Deepak Vihan | Manoj Kumar | Total Interest | |
| Interest @ 6% paid on partner’s capital account | Rs.10,03,961 | Rs.4,81,353 | Rs.14,85,314 |
| Interest @ 6% charged on partner’s current (imprest) account | Rs.1,47,611 | Rs.53,977 | Rs.2,01,588 |
Therefore, the observations of the AO that the capital account shows that interest has been paid to two partners on the capital, no interest has been charged for loan account and the ledger account furnished does not reflect any netting off interest charged against interest paid are factually incorrect as interest has been charged on partner's debit balance in current Imprest account which has been netted off against interest paid on the credit balance capital A/c of both the partners. Such netting off is evident in the case of both the partners from their capital A/c and Imprest A/c, copies now placed at pages 69-72 of PB). Thus disallowance deserves to be deleted. The ground is sustained.
Grounds rasied inn ITA No. 5397/Del/2025 Revenue’s Appeal)
“1.On the facts and circumstances of the case and provisions of the law, Ld. CIT (A) has erred in deleting the addition made on account of unexplained credits in the form of unsecured loans by misinterpreting the remand report and overlooking the fact that in the remand report, the Assessing Officer has categorically stated that the documents produced during appellate proceedings were available with the assessee during the course of assessment proceedings and even after affording ample opportunities, the assessee failed to submit the requisite evidences to prove the genuineness and creditworthiness of loans.
2.On the facts and circumstances of the case and provisions of the law, the Ld. CIT(A) has erred in holding that in the remand report the AO has accepted genuineness of unsecured loans of Rs.2,80,05,594/- received from 13 entities whereas in the remand report genuineness and creditworthiness has been accepted for any of these 13 entities.
3.On the facts and circumstances of the case and provisions of the law, the order of Ld. CIT(A) is perverse in as much as in allowing relief on account of addition made for unsecured loan received from Sh. Nitin Chaudhary, WHARE the addition was made amounting to Rs. 37,81,900/- after considering the repayment during the year under consideration for Rs. 3,18,100/-, but Ld. CIT(A) in para no. 6.4 at page no. 37 of his order has allowed relief for Rs. 41,00,000/- without appreciating the fact that the relief surpasses the addition.
4.On the facts and circumstances of the case and provisions of the law, the Ld. CIT(A) has erred in not bringing on record the circumstances in which the additional evidences under Rule 46A were admitted, as in the instant case neither the assessee was refused for furnishing evidences nor the assessee was prevented sufficient cause from producing evidences which have now been submitted as additional evidences. 5. That the appellant craves leave to add, modify, amend OR DLEETE any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
In regard to the grounds raised in appeal of revenue ld. DR has filed written submission and same are reproduced here below;
“In the appellate proceedings, the appellant submitted some additional evidences in respect of the unexplained credit added u/s 68 in the assessment order. All these materials were accepted in the interest of natural justice and sent to the A0 for his comments and examination. The remand report sent by the AO in this regard, by his letter dt: 08.12.2023 and the rejoinder filled by the appellant by their letter dt: 15.11.2024 has been taken into account. On perusal of the remand report it appears that the 40 has accepted Rs.2,80,05,594/- received by the appellant from the following parties as genuine, out of addition made of Rs. 3,15,87,494/-. Source of fund was explained before the AO. In the remand report the AO has accepted the loan transactions as genuine in respect of the following parties.
1.Ved Prakash Lihare 104000 accepted
2.Netra Prasad Ghalay 130000 accepted
3.Chavi Bhatia 208994 accepted
4.Bharat Agnihotri 2600 accepted
5.Umesh Shamrao Bandgar 4500000 accepted
6.Sanjay Singh 3840000 accepted
7.Sameer SaurabhOjha 3090000 accepted
8.Ravinder Singh 2890000 accepted
9.Ram Kumar 2300000 accepted
10.Rakesh Kumar Bhatia 2400000 accepted
11.Pratap Singh 1640000 accepted
12.Indra Nath Tiwari 2800000 accepted
13.Nitin Chaudhary 4100000 accepted Total Rs.2,80,05,594
In view of the discussion made above the AO is directed to delete RS.2,80,05,594/- out of addition made u/s 68 of Rs. 3,15,87,494/- for the year. The quantum of relief is restricted to RS. 2,80,05,594/- only, on this account. The appeal on this ground is allowed in part, accordingly."
The decision of the NFAC, Delhi is not acceptable on the following grounds -During the course of assessment proceedings it was gathered that the assessee firm had received fresh unsecured loans aggregating to Rs. 3,11,41,900/- from the following persons during the F.Y. 2017-18 relevant to the A.Y. 2018-19:-Apart from above, the assessee firm had also received unsecured loans from following parties during the F.Y. 2017-18 from whom unsecured loans were received in the F.Y. 2016-17 as well:-..
In the assessment order it was held that the assessee firm could not prove in totality the creditworthiness and genuineness of new loans taken from persons mentioned in Table:1 above. In view of the above stated facts, fresh unsecured loans aggregating to Rs. 3,11,41,900/- received by the assessee firm during the F.Y. 2017-18 was treated as unexplained cash credit in the books of the assessee firm and added to the returned income of the assessee firm u/s 68 of the Act vide Assessment order dated 04.08.2021 passed u/s 143(3) r.w.s 144B of the Act.
Further, in the assessment order it was held that the assessee firm could not furnish corroborative evidence to prove the creditworthiness and genuineness of the persons mentioned in Table:2 above. In view of the above stated facts, unsecured loans aggregating to Rs. 4,45,594/- received by the assessee firm during the F.Y. 2017-18 from those persons from whom loans have also been taken in earlier previous year was treated as unexplained cash credit in the books of the assessee firm and added to the returned income of the assessee firm u/s 68 of the Act vide Assessment order dated 04.08.2021 passed u/s 143(3) r.w.s 144B of the Act.
2.During the appellate proceedings, the assessee furnished additional evidences and requested for admission of the same under Rule 46A of the Income Tax Rules, 1962 on the ground that he could not furnish the same to the Assessing Officer as he was not aware of the assessment proceedings. This contention is not tenable as the assessee was given sufficient opportunities vide issue of statutory notices, the details of which is mentioned in Sl. No. 1 above, but the assessee failed to comply with the notices and failed to furnish details as called for vide questionnaire annexed with notice. The non-compliance by the assessee to statutory notices clearly shows that reasonable, speaking and fullest natural justice has been followed by the Assessing Officer, but it is the assessee who has not availed any chances for the reasons best known to him. Therefore, the plea of the assessee in the appellate proceedings that he could not furnish additional evidence before the Assessing Officer because he was not aware of the assessment proceedings is not at all tenable.
3.Though in the remand report the then Assessing Officer had accepted the genuineness of transaction of unsecured loans aggregating to Rs. 2,80,05,594/- but it was also specifically stressed that the additional evidence submitted by the assessee should not be admitted during the course of appellate proceedings because ample opportunities was afforded to the assessee vide issuance of statutory notices during the course of assessment proceedings but the assessee firm failed in its onus to prove the identity, creditworthiness of the lenders and the genuineness of transaction.
4.The assessee was not entitled to raise the ground for the admissibility of additional evidence in view of the provisions of rule 46A of IT Rules, 1962. As per provisions of this rule any evidence whether oral or documentary other than the evidence produced by him during the course of assessment proceedings before the A.O. except in the certain circumstances. Since the production of documentary evidence to prove the identity, creditworthiness and genuineness of loans raised from various parties does not fall under any exceptional condition, same should not have been admitted during the course of appellate proceedings as additional evidence.”
It is apparent that Learned CIT(A) has given benefit to the assessee completely relying on the remand report given by the assessing officer. It will be beneficial to reproduce the remand report to show that assessing officer had accepted the relevant evidences filed by the assesse. Accordingly same is reproduced below;
“In this case the assessment for AY 2018-19 was completed on 04/08/2021 at assessed income of Rs.3,28,41,244/- u/s 143(3) r.w.s. 144B of the I.T. Act, against the return income of Rs. 1,91,750/- with an addition made of Rs.3,15,87,494/- u/s 68 and Rs. 10,62,000/- on account of disallowance of interest to partner.
2.This case was selected for scrutiny under CASS accordingly a notice u/s 143(2) of the Income Tax Act, 1961 was issued on 22/09/2019 and thereafter initial notice u/s 142(1) along with questionnaire was issued on 19/11/2020, 22/12/2020, 20/01/2021 and 24/02/2021 to the assesse through e-filling. The assesse filed the various detail through e-filling portal during assessment proceedings.
3.Aggrieved with the order assesse is in appeal before the CIT (A) and in support to the appeal has submitted some additional documents out of which some documents were earlier also submitted before AO and AO did not find them tenable.
1.In case of Ved Prakash Lilhare at page no.166, the assesse has submitted confirmatory letter, account details and Aadhar Number, which proves that the individual has borrowed the loan from Syndicate Bank Loan A/c no 89201140000086 and the same money has been transfer to the applicant.
2.In case of Netra Prasad Ghalay page no. 159, the assessee has submitted confirmatory letter PAN and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no 88487740000069 and out of this loan, money has been transfer to the applicant.
3.In case of Chhawi Bhatiya page no. 152, the assessee has submitted confirmatory letter PAN, Voter Card and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no 89207140000162 and out of this loan, money has been transfer to the applicant.
4.In case of Bharat Agnihotri page no. 145, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no 89207740000118 and out of this loan, money has been transfer to the applicant.
5.In case of Umesh Shamrao Bandgar page no. 137, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no 888279740000096 and out of this loan, money has been transfer to the applicant.
6.In case of Sanjay Singh page no. 131, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no 89209740000053 and out of this loan, money has been transfer to the applicant.
7.In case of Sameer SaurabhOjha page no. 122, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Canara Bank Loan A/c no 89209740000080 and out of this loan, money has been transfer to the applicant.
8.In case of Ravinder Singh page no.118, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Canara Bank Loan A/c no 89389740000092 and out of this loan, money has been transfer to the applicant.
9.In case of Ram Kumar page no.114, the assessee has submitted confirmatory letter and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no. 89209730000051 and out of this loan, money has been transfer to the applicant.
10.In case of Kakesh Kumar Bhatia page no.110, the assessee has submitted confirmatory letter and account details which suggest that individual has borrowed the loan from DHFL Bank Loan A/cno.25400000197 and out of this loan, money has been transfer to the applicant.
11.In case of Pratap Singh page no. 102, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no.88379740000102 and out of this loan; money has been transfer to the applicant.
12.In case of Nitin Chaudhary page no.80, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from CIC Bank Loan Alc no.LBMRT00003456802 and from DHFL (NBC) Loan No. 14600000865 and the same has been transferred to the applicant. In this case individual has submitted that he borrowed Rs.650000 from Mr. Digvijay Singh through RTGS and same was transfer to applicant i.e. Lord Krishna Developers & Builders. In this case account detail of lender, PAN, Voter Card has been submitted but the reason/ relation for this transaction is not known.
13.In case of Inder Nath Tiwari page no 71, the assessee has submitted confirmatory letter, PAN, Aadhar and account details which suggest that individual has borrowed the loan from Syndicate Bank Loan A/c no.88389740000073 and out of this loan; money has been transfer to the applicant.
14.In case of Deepa Sharma page no.62, the assessee has submitted confirmatory letter and account details which suggest that individual has given money from personal savings but in support no ITR to prove source of income has been given. PAN not submitted and Aadhar submitted not legible, hence, the submission deserves to be rejected.
4.In most of the cases the applicant has repaid the loan taken from various individuals mentioned above. In support the applicant has submitted the account details of borrower and lender. The documents submitted before your good office was available with the assessee during the course of assessment proceedings but after given ample opportunities assessee did not submit all these. The assessee did not comply the statutory notices and willfully did not submitted requisite documents asked through statutory notices. Hence, the assessee did not have the right to submit these documents now. Hence to be rejected.
5.Submitted for kind perusal and further necessary action at your end.”
The Learned First Appellate Authority has given benefit to the assessee on the basis of additional evidence which were filed. The contention of learned DR has been that there was non-compliance by the assessee before assessing officer and at first appellate stage, the additional evidences were filed which were wrongly admitted.We are of considered view that in the application which was filed under Rule 46A, assessee had explained the reasons for failure to make compliance before the assessing officer, and the copy of that application has been placed in the paper book at page number 14-17.The primary assertion of the assesse was that after the initial response of the assessee, the assessing officer had not called for any further information and, at the same time, there was an intervening COVID pandemic period due to which, evidences could not be filed.We find that ld. CIT (A) had called for a response of the Assessing officer and a detailed response was filed in the form of remand report and having considered all the aspects, Learned CIT(A) had admitted the additional evidences.Thus, in the facts and circumstances, instead of pointing out any infirmity in the additional evidences as objection is with regard to admission of the additional evidences, we find no reason to interfere in the conclusions drawn by the learned CIT(A), and the grounds raised have no substance.
Resultantly, the appeal of assessee is allowed and of Revenue is dismissed.