Trilok Chand Jaiswal Vs ITO (ITAT Raipur)
The Income Tax Appellate Tribunal (ITAT), Raipur, allowed the assessee’s appeal against the order of the CIT(A)/NFAC for Assessment Year 2013-14 concerning an addition made under Section 68 of the Income Tax Act, 1961.
The assessee submitted that he had obtained loans amounting to ₹37 lakh from his relatives. According to the assessee, the identity, creditworthiness and genuineness of the loan transactions were established by furnishing Aadhaar and PAN of the lenders, loan confirmation statements, bank statements, computation of income, balance sheets and income tax return acknowledgements for the preceding three years. The assessee further stated that although the Department examined the loans advanced by him to M/s. Vandana Trailers and Body MFG Pvt. Ltd. during the relevant financial year, it accepted loans of ₹7 lakh but added ₹30 lakh out of the ₹37 lakh borrowed from relatives.
The Revenue relied on the orders of the lower authorities.
The Tribunal observed that the Assessing Officer had made the addition merely on suspicion without bringing any concrete evidence against the assessee. It noted that neither the Assessing Officer nor the CIT(A)/NFAC had assigned any specific reason for the addition of ₹30 lakh despite the assessee furnishing loan confirmations, bank statements, income tax returns and account statements of the lenders. According to the Tribunal, the Department had not conducted any specific enquiry or verification regarding the evidence furnished by the assessee.
The Tribunal found that the assessee had duly explained the identity, creditworthiness and genuineness of the transactions by producing the relevant documents. It observed that the Department had rejected the evidence only because cash had been deposited in the lenders’ bank accounts shortly before disbursement of the loans and because the lenders had disclosed meagre income in their returns. However, the Revenue had not commented upon or verified the documentary evidence produced by the assessee.
The Tribunal referred to the decision of the Co-ordinate Bench in ITO-1(3), Raipur (C.G.) Vs. Shri Gautam Prasad Nishad, wherein it was held that there is no presumption that persons with smaller incomes cannot accumulate savings and that doubts regarding cash deposits in lenders’ bank accounts are matters for verification in the hands of the lenders and not the borrower, particularly where the lenders are income-tax assessees.
Applying the same reasoning, the Tribunal observed that the Revenue had produced no evidence to establish that persons filing returns with meagre income could not have accumulated savings. It further held that cash deposits in the lenders’ accounts before advancing loans were matters requiring verification in the hands of the lenders and could not, by themselves, justify an addition under Section 68 in the hands of the assessee.
The Tribunal also referred to the Bombay High Court judgment in Gaurav Triyugi Singh Vs. ITO, which held that an assessee is required to establish the identity of the creditor, the genuineness of the transaction and the creditworthiness of the creditor, but is not required to explain the “source of the source.” The Tribunal reproduced the relevant observations of the High Court.
On the facts of the case, the Tribunal noted that the assessee had furnished Aadhaar, PAN, loan confirmations, bank statements and income tax return acknowledgements of all the lenders. It observed that the Revenue had not conducted any independent enquiry and had proceeded solely on the basis that cash deposits were made immediately before the loans were advanced and that the lenders had disclosed meagre income. The Tribunal further observed that the Department had not examined the savings of each lender or established any direct nexus between the lenders’ returned income, their savings and the loans advanced.
Holding that the additions were arbitrary, perverse and unsustainable, the Tribunal set aside the order of the CIT(A)/NFAC and directed the Assessing Officer to delete the addition and give appeal effect. Accordingly, the assessee’s appeal was allowed.
Cases Discussed
- Gaurav Triyugi Singh Vs. ITO (Bombay High Court), (2020) 423 ITR 531 (Bom.)
- Principal CIT Vs. Veedhata Topwer (P) Ltd. (Bombay High Court), (2018) 302 CTR (Bom) 490; (2018) 166 DTR (Bom.) 218; (2018) 403 ITR 415 (Bom)
- ITO-1(3), Raipur (C.G.) Vs. Shri Gautam Prasad Nishad (ITAT Raipur), ITA No.101/BLPR/2012 & CO No.01/BLPR/2013, order dated 15.10.2015
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 16.03.2026 for the assessment year 2013-14 as per the grounds of appeal on record.
2. The Ld. Counsel for the assessee submitted that in this case addition has been made by the A.O u/s. 68 of the Income Tax Act, 1961 (for short ‘the Act’). The Ld. Counsel submitted that the assessee in the relevant year has obtained loan from his own relatives and list of lenders from whom loans obtained by the assessee emanates from Page 2, Para 3 of the assessment order. The Ld. Counsel submitted that they have established identity, creditworthiness and genuineness of the transactions vide all relevant documents furnished before the Department which are also annexed at Page 87 to 180 of the paper book and the same includes copy of aadhar & PAN of the lenders, loan confirmation statements, bank statements, computation of income, balance sheet, ITR acknowledgements for the previous three years from relevant assessment year. The Ld. Counsel further submitted that as per show cause notice, the issue that was examined by the Department that genuineness of the loan advanced by the assessee to M/s.Vandana Trailers and Body MFG Pvt. Ltd. during F.Y.2012-13 relevant to A.Y.2013-14. In this regard, the Ld. Counsel submitted that the assessee have obtained loan from his relatives amounting to Rs.37 lakhs. That as against this loan, the assessee had given loan to M/s.Vandana Trailers and Body MFG Pvt. Ltd. of Rs.71,50,602/-. The Department had added Rs.30 lakhs and accepted Rs.7 lakhs regarding the loan of Rs.37 lakhs obtained by assessee from various relatives.
3. Per contra, the Ld. Sr. DR relied heavily on the orders of the subordinate authorities.
4. I have heard the submissions of the parties herein and carefully considered the materials available on record. In the present case, the A.O had made addition only on the basis of suspicion without bringing on record any concrete evidence against the assessee. Neither the A.O nor the Ld. CIT(Appeals)/NFAC had given any specific reason regarding additions of Rs.30 lakhs whereas the assessee has provided all the relevant documents/evidences viz. loan confirmations, bank statements, ITR and account statements of the lenders. The Department has simply rested on these evidences furnished by the assessee without conducting any specific enquiry and verification. Identity, creditworthiness and genuineness of the transactions have been duly explained by the assessee by furnishing all the relevant documents. In such scenario, there does not survive any basis for addition u/s.68 of the Act. The Department had summarily brushed aside all the evidences furnished by the assessee only on the ground that just before disbursal of loan, lenders had cash deposits in their respective bank accounts and that they have filed return showing very meagre income. But the Revenue has failed to comment anything on the relevant evidences furnished before the Department regarding the loan confirmations, bank statements, ITRs acknowledgement of lenders.
5. The Co-ordinate Bench of the Tribunal, Raipur in the case of ITO-1(3), Raipur (C.G.) Vs. Shri Gautam Prasad Nishad, ITA No.101/BLPR/2012 & CO No.01/BLPR/2013, order dated 15.10.2015 on the very issue had dismissed the appeal of the Revenue. The Tribunal had made categorical findings therein that there is no presumption that persons with smaller incomes cannot make any savings whatsoever. Doubts raised by the A.O regarding the bank statement with regard to the deposit can be subject matter of verification in the hands of the lender and not the assessee. This is more so when the lender is filing the income tax return.
6. Reverting to the facts of the present case, there is no evidence placed on record by the Revenue showing that persons filing return with meagre income cannot have savings. In other words, such loan can be advanced even through previous savings of the lenders. That further, regarding cash deposits in the bank account of those lenders prior to giving of loan that is subject matter of verification in the hands of the lenders, but on that basis, addition u/s.68 is unjustified in the hands of the assessee.
7. The Hon’ble High Court of Bombay in the case of Gaurav Triyugi Singh Vs. ITO, (2020) 423 ITR 531 (Bom.) has held and observed that to escape the rigors of Section 68 of the Act, the assessee has to explain the identity, creditworthiness and genuineness of the transactions. However, once these are explained, he is not required to explain the source of source. The relevant observation of the Hon’ble High Court (supra) are extracted as follows:
“13 Section 68 of the Act has received considerable attention of the courts. It has been held that it is necessary for an assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof would include proof of identity of the creditor, capacity of such creditor to advance the money and lastly, genuineness of the transaction. Thus, in order to establish receipt of credit in cash, as per requirement of section 68, the assessee has to explain or satisfy three conditions, namely : (i) identity of the creditor; (ii) genuineness of the transaction; and (iii) creditworthiness of the creditor.
14. In Principal CIT Vs. Veedhata Topwer (P) Ltd. (2018) 302 CTR (Bom) 490; (2018) 166 DTR (Bom.) 218; (2018) 403 ITR 415 (Bom), this court has held that assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source. In the instant case, there is no dispute as to the identity of the creditor. There is also no dispute about the genuineness of the transaction. That apart, the creditor has explained as to how the credit was given to the assessee. Thus assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held was that sources of the source were suspect i.e., he suspected the two sources Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source Smt. Savitri Thakur.
15 In view of discharge of burden by the assessee, burden shifted to the revenue; but revenue could not prove or bring any material to impeach the source of the credit. Though Mr. Walve, learned standing counsel, has pointed out that the creditor had no regular source of income to justify the advancement of the credit to the assessee, we are of the view that the assessee had discharged the onus which was on him to explain the three requirements, as noted above. It was not required for the assessee to explain the sources of the source. In other words, he was not required to explain the sources of the money provided by the creditor Smt. Savitri Thakur i.e. Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur.
16 Considering the above, we are of the view that the Tribunal was not justified in sustaining the addition of Rs. 14 lakhs to the total income of the assessee as undisclosed cash credit under section 68 of the Act.”
8. Admittedly, in this case, the assessee has provided copy of Aadhar & PAN of all lenders, confirmation of loan, bank statement and ITR acknowledgement a/w. bank statements of the lenders. Further, the Department had made additions only on the ground that cash deposits were made immediately in the respective accounts of the lenders just before loan disbursal and that the lenders have filed return on very meagre income. That as examined earlier and even as per aforesaid judicial pronouncements, firstly, the Revenue has not conducted any independent enquiry on the evidence furnished by the assessee and had simply rested on them making additions on summary basis. Secondly, cash deposits made in the respective accounts of the lenders just prior to giving loan does not per se make such loan transactions as non-genuine. The Department had not recorded the savings components in the hands of each of the lenders and summarily opined on return filed by them. That if at all additions are to be made, there should be co-relation between the return of income filed and savings by each of the lenders. There should have been a direct nexus of small savings, meagre returned income filed by lender vis-a-vis the loan given. In absence of any such verification, additions are in the nature of being arbitrary, perverse and bad in law, hence, liable to be deleted.
9. In view thereof, on examination of facts and circumstances in this case, I set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete additions from the hands of the assessee providing appeal effect of this order.
10. That as per above terms, appeal of the assessee is allowed.
Order pronounced in open court on 6th day of July, 2026.
