Narendra Mahadev Awate Vs ITO (ITAT Pune)
Possible Double Addition and Contra Bank Entries Ignored: Pune ITAT Restores ₹68.65 Lakh Addition for Fresh Verification
In Narendra Mahadev Awate v. ITO, information obtained during a search on Gameskraft Technologies Pvt. Ltd. indicated substantial transactions in the assessee’s online-gaming accounts. On examining his bank accounts, the Assessing Officer made additions aggregating to ₹68.65 lakh under section 68 read with section 115BBE, comprising loans from friends and relatives, funds invested in online gaming, a cash gift from agriculturist parents and other alleged unsecured loans. The Assessing Officer also denied the standard deduction under section 16 for want of Form 16, salary slips and employer confirmation.
The assessee contended that the authorities had incorrectly included contra entries and inter-account transfers as unexplained credits. He further claimed that unsecured loans aggregating to approximately ₹33.45 lakh had effectively been added twice—first as the source of online-gaming investments and again as separate bank credits.
Before the Tribunal, the assessee furnished bank-wise transaction details, creditor names, PANs, addresses, loan movements and income-tax acknowledgements of major lenders. He sought an opportunity to reconcile every debit, credit and contra entry.
Considering the possibility of duplication and incorrect treatment of bank transfers, the Pune ITAT restored the entire matter to the Assessing Officer for fresh examination. The assessee was granted one final opportunity to establish the salary claim, reconcile the bank accounts and prove the identity and creditworthiness of lenders and genuineness of the loan transactions.
List of Cases Discussed / Relied Upon
- CIT v. Shiv Shakti Timbers (229 ITR 505)
- Kalwa Devadattam v. Union of India (49 ITR 165)
- CIT v. Precision Finance Pvt. Ltd. (208 ITR 465)
- CIT v. P. Mohanakala (291 ITR 278)
- CIT v. Korlay Trading Co. Ltd. (232 ITR 820)
- Sumati Dayal v. CIT (214 ITR 801)
- Kishinchand Chellaram v. CIT (125 ITR 713)
- Roshan Di Hatti v. CIT (107 ITR 938)
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 19.08.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2022-23.
2. Facts of the case, in brief, are that the assessee is an individual and a part time employee at M/s. Technomax Industries, Wanowri, Pune. He filed his return of income on 27.07.2022 declaring total income of Rs.4,93,540/- consisting of income from salary from M/s. Technomax Industries, profit from business u/s 44AD and income from other sources. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The case of the assessee was selected for scrutiny and accordingly statutory notice u/s 143(2) was issued and served on the assessee. Thereafter, notice u/s 142(1) along with a questionnaire was also issued and served on the assessee in response to which the assessee filed the requisite details.
3. The Assessing Officer noted that a search and seizure action was carried out in the case of M/s. Gameskraft Technologies Pvt. Ltd. on 15.03.2022 u/s 132. During the course of search proceedings and the post-search enquiries information was gathered in respect of winnings of the players / individuals playing on the portal of M/s. Gameskraft Technologies Pvt. Ltd. It was noted that the said company maintains two game portals named Rummy culture and Gamezy wherein games like Casual, Fantasy, Rummy Gamezy & Poker Gamezy, Deal, Pool, Pints & Tournaments etc were played. It was confirmed that real money was being used and bonus was also provided by M/s. Gameskraft Technologies Pvt. Ltd. in all the games stated above. At the time of winning of player, the real money along with bonus was credited into the wallet of the player after deducting commission of the company. Information was obtained that the assessee had earned an income of Rs.77,76,591/- as winnings from playing games with real money on various portals maintained by M/s. Gameskraft Technologies Pvt. Ltd. However, a perusal of the return showed that the assessee has not shown such income in his return. The Assessing Officer, therefore, asked the assessee to explain as to why an amount of Rs.77,76,591/- should not be added to the total income of the assessee.
4. The Assessing Officer further noted that the assessee has not furnished Form No.16 towards claim of salary or salary slips or employer certificate. He observed that the bank account entries do not disclose salary receipts in their narrations. Therefore, in absence of any corroborative evidence, the Assessing Officer disallowed the deduction claimed u/s 16 of the Act amounting to Rs.52,500/-.
5. The Assessing Officer also noted that the assessee has repaid the housing loan of Rs.6,44,854/-. On being questioned by the Assessing Officer it was explained that the same was unsecured loan taken from 2 friends. Since the assessee has not shown it as liability in the return of income and the assessee failed to provide full confirmations, PAN details or proof of the creditworthiness of the lenders, the Assessing Officer made addition of Rs.8,40,000/- u/s 68 r.w.s. 115BBE of the Act.
6. The Assessing Officer further noted that the assessee has made investment of Rs.26,47,236/- in online gaming. On being questioned by the Assessing Officer it was submitted that the same was sourced from his earnings and unsecured loan from family and friends. The Assessing Officer observed that these investments were neither shown in the return of income nor the assessee furnished any supporting documents. He, therefore, treated an amount of Rs.25,04,990/- as unexplained cash credit u/s 68 r.w.s. 115BBE.
7. So far as the cash deposit of Rs.2,75,000/- is concerned, it was originally submitted that the money belonged to his sister and the assessee later explained that it was a gift from his agriculturist parents. In absence of any proof of agricultural income of his parents, the Assessing Officer rejected the claim and made addition of the same u/s 68 r.w.s. 115BBE of the Act.
8. The Assessing Officer on examination of the bank account noted that there are credit entries totaling to Rs.97,45,000/- against the turnover of only Rs.19,55,041/-. On being questioned by the Assessing Officer, the assessee submitted that this includes the unsecured loan of Rs.35,19,990/-. However, the assessee could not provide complete confirmation, identity, genuineness of the transactions of the lenders. After considering the separate addition of the amount of Rs.35,19,990/- which was treated as unexplained cash credit u/s 68 r.w.s. 115BBE, the Assessing Officer made addition of Rs.68,64,980/- as unexplained cash credit u/s 68, the details of which are as under:
i. 8,40,000/- from two friends
ii. 25,04,990/- investment in online gaming received from family and friends
iii. Cash gift received from agriculturist parents of Rs.2,75,000/-
iv. Receipt of unsecured loan of Rs.32,44,990/-
9. Accordingly, the Assessing Officer determining the total income of the assessee at Rs.74,10,720/-.
10. In appeal the Ld. CIT(A) / NFAC dismissed the appeal by sustaining all the additions by observing as under:
5. Discussion and Decision: I have carefully considered the facts of the case. the grounds of appeal, the written submissions filed by the appellant, and the findings recorded by the Assessing Officer in the impugned order passed under section 143(3) read with sections 144 and 144B of the Income-tax Act, 1961. Each of the issues arising from the appeal is examined in detail, by grouping related grounds where appropriate, in the light of the applicable law and judicial precedents.
6. The first set of grounds pertains to the disallowance of the deduction of Rs. 52,500/- claimed under section 16 of the Act. comprising standard deduction of Rs. 50,000/- under section 160a) and professional tax of Rs. 2,500/- under section 16(iii). The appellant has submitted that he was a part-time employee with M/s Technomax Industries, receiving a monthly salary of approximately Rs. 30,000/-, credited to his ICICI Bank account, and that his total salary for the year, inclusive of a Diwali bonus of one month’s salary, amounted to Rs. 3,90,000/-. He stated that he had declared a slightly higher figure of Rs. 4.06.048/- in the return on the basis of on-going negotiations for an additional bonus that was ultimately not paid. The appellant contends that the absence of Form 16 cannot be a valid reason for denying the deduction under section 16, as the bank entries clearly demonstrate the receipt of salary. The Assessing Officer, on the other hand, has recorded that no Form 16, salary slips, or employer’s certificate were produced, and that the bank statement entries do not consistently carry a salary narration. He has concluded that the claim of salary appears to have been made primarily to claim the deduction, without adequate corroborative evidence.
6.1. It is settled law that the onus is on the assessee to establish the existence of salary income before claiming any deduction thereon. The decision of the Madhya Pradesh High Court in CIT v. Shiv Shakti Timbers (229 ITR 505) and the principle enunciated by the Supreme Court in Kalwa Devadattam v. Union of India (49 ITR 165) make it clear that the deduction can only be allowed if the underlying income is established by credible evidence. In the present case, the appellant has not produced any independent confirmation from the employer, salary slips, appointment letters, or proof of statutory compliance such as provident fund or ESI contributions. The bank entries, without consistent narration or other supporting evidence, cannot by themselves be regarded as conclusive proof of a salaried relationship. The primary onus to establish this fact rests with the appellant, and in the absence of such proof, I find no infirmity in the Assessing Officer’s decision to disallow the claim under section 16. Accordingly, the disallowance of Rs. 52,500/- is sustained and these grounds of appeal are dismissed.
7. The next set of grounds, being grounds 3, 4, 6 and 8, relate to the addition of Rs. 65,89,980/- as unexplained credits under sections 68 and 69. The appellant’s position is that the amounts in question represent unsecured loans taken from family members and friends to meet expenses, repay a housing loan, and fund online gaming activities, which ultimately resulted in losses. He claims to have furnished the names, addresses, and PANs of all lenders, along with partial confirmations and income tax return acknowledgments for two lenders. He submits that the other lenders did not share ITR copies for confidentiality reasons and that the Assessing Officer could have verified the transactions by issuing notices under section 133(6). The appellant further argues that the total loans availed were only Rs. 33,44,990/-, matching the sum of Rs. 8,40,000/- and Rs. 25,04,990/-, and that the Assessing Officer has wrongly made a double addition by separately adding Rs. 32,44,990/-.
7.1. The Assessing Officer has, however, recorded that the appellant did not disclose these liabilities in his return of income, despite receiving substantial sums; that the evidence produced was inadequate to prove the identity, creditworthiness, and genuineness of most of the transactions; and that even for the two lenders from whom some documents were obtained, the confirmations did not match the claimed a mounts. The bank entries lacked narrations identifying the lenders, and the alleged loans were interest-free and used for speculative gaming activities, which the Assessing Officer found implausible. He also observed that the appellant’s explanations were inconsistent across submissions.
7.2. Section 68 of the Act imposes a threefold burden on the assessee to prove the identity of the creditor, the creditor’s capacity to advance the sum, and the genuineness of the transaction. Judicial authorities, including the Calcutta High Court in CIT v. Precision Finance Pvt. Ltd. (208 ITR 465) and the Supreme Court in CIT v. P. Mohanakala (291 ITR 278), have held that failure to substantiate any of these conditions renders the sum liable to be treated as unexplained. In the present case, while the appellant has provided some names and PANs, there is no credible evidence of the financial capacity of the majority of lenders. The absence of loan agreements or clear repayment terms, coupled with non-disclosure in the return, undermines the credibility of the claim. The explanation that the Assessing Officer should have verified the details under section 133(6) does not shift the primary onus from the assessee, as held in CIT v. Korlay Trading Co. Ltd. (232 ITR 820).
7.3. As regards the allegation of double addition, I find that the Assessing Officer has made separate additions for amounts linked to housing loan repayment, online gaming transactions, and unexplained bank credits. These are distinct in nature, and the appellant has not demonstrated that they overlap. In the absence of satisfactory evidence, I concur with the Assessing Officer’s conclusion that the sums of Rs. 8,40,000/-, Rs. 25,04,990 and Rs. 32,44,990/- remain unexplained. The addition of Rs. 65,89,980/- under sections 68/69 is therefore upheld, and the related grounds are dismissed.
8. Ground 5 concerns the addition of Rs. 2,75,000/- on account of unexplained cash deposit. The appellant’s explanation in his initial submission was that the cash came from his sister, while in a later submission, he stated that it was a gift from his agriculturist parents, transferred to the sister on the same day along with Rs. 25.000/-from his own funds. No evidence of the parents’ agricultural income, landholding, or their capacity to make such a gift has been produced. The Assessing Officer noted that the sequence of transactions was unusual and lacked commercial rationale. The Supreme Court in Sumati Dayal v. CIT (214 ITR 801) has held that the test of human probabilities can be applied to reject implausible explanations, even in the absence of direct contrary evidence. In the present case, the complete absence of corroborative proof for the revised explanation, coupled with the change in stand, justifies the Assessing Officer’s conclusion that the cash deposit is unexplained. I therefore uphold the addition of Rs. 2,75,000/- under section 68.
9. Ground 7 raises the plea of violation of natural justice on the basis that the Assessing Officer relied on payout data from M/s Gameskraft Technologies Pvt. Ltd. without disclosure or opportunity for cross-examination. The record shows that the data was obtained during a search on the said company and disseminated via CRIU, and that the appellant was confronted with the substance of this data and invited to respond. There is no evidence that adverse statements from any individual were relied upon without disclosure. The Supreme Court in Kishinchand Chellaram v. CIT (125 ITR 713) has laid down that any material used against an assessee must be disclosed to him. but in this case, the Assessing Officer’s reliance was on transaction data, not on testimonial evidence. I therefore find no merit in this ground.
10. The remaining ground is general in nature and requires no specific adjudication.
11. In conclusion, having considered the facts. the explanations offered, and the evidence on record, as well as the applicable legal principles, I find that the disallowance of Rs. 52,500/- under section 16. the addition of Rs. 65.89,980/- as unexplained credits under sections 68/69, and the addition of Rs. 2,75.000/- as unexplained cash deposit under section 68, are all sustainable. The Assessing Officer has correctly applied the provisions of the Act, and the additions are supported by the judicial principle enunciated in Roshan Di Hatti v. CIT (107 ITR 938) that where the nature and source of a receipt cannot be satisfactorily explained. it is open to treat it as income of the assessee. without the burden on the Revenue to prove its precise source. Consequently, the appeal is dismissed in toto.
12. In result, the present appeal is dismissed and not allowed.
11. Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds:
1. The National e-Assessment Centre, Delhi (learned AO) erred in law and on facts in assessing and learned National Faceless Appeal Centre (learned CIT(A)) erred in confirming total income of the appellant at Rs.74,10,720 u/s 143(3) r.w.s. 144B of the ITA, 1961 by making addition of Rs.69,17,100 (Rs.52,200+Rs.65,89,980+Rs.2,75,000) in appellant’s total income u/s 68 and u/s 16 of the ITA, 1961 instead of returned income of Rs.4,93,540.
2. Learned AO and the learned CIT(A) erred in law and on facts in rejecting deduction claim of Rs.52,200 u/s 16 of the ITA 1961 alleging no salary income to the appellant in spite of submitting bank entries and only for the want of Form 16 from M/s Technomax Industries (employer).
3. Learned AO and learned CIT(A) erred in law and on facts in not considering appellant’s plea and making addition of Rs.65,89,980 (Rs.8,40,000+ Rs.25,04,990+Rs.32,44,990) u/s 68/69 of the ITA, 1961 by alleging “unexplained in absence of cogent supporting evidences” in spite of submitting bank entries and all identity details such as Name, PAN and Addresses. Learned AO and the learned CIT(A) erred in law in making addition u/s 68/69 only for the want of loan confirmation statements and copies of ITR although appellant’s bank statement proved identity of the lenders.
4. Learned AO and learned CIT(A) erred in law and on facts in making double addition of unsecured loans to the tune of Rs.32,44,990 (Rs.65,89,980 – Rs.33,44,990) by linking it with withdrawals from online gaming portal of M/s Gameskraft Technologies Private Limited. Learned AO and the learned CIT(A) failed to understand that, in totality, appellant had availed unsecured loans of Rs.33,44,990 only (which matches with Rs .8,40,000 + Rs. 25 ,04 ,990).
5. Learned AD and learned CIT(A) erred in law and on facts in making addition of Rs.2,75,000 in appellant’s total income u/s 68/69 of the ITA, 1961 by alleging unexplained credits in the bank account.
6. Learned AO erred in law and on facts in not disclosing search and seizure action u/s 132 on M/s Gameskraft Technologies Private Limited (the company) and considered amounts of pay-outs from gaming platform disclosed by the company as correct with a prejudiced mind. Therefore, learned AO erred in law in acting against the principles of natural justice for not disclosing and providing a chance to the appellant for seeking cross examination of personnel from M/s Gameskraft Technologies Private Limited.
7. The appellant craves leave to add/modify/delete/amend all /any of the grounds of appeal.
12. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) / NFAC sustaining the additions made by the Assessing Officer. He filed a detailed chart of the debits and credits in the bank account and submitted that the contra entries have been added by the Assessing Officer and upheld by the Ld. CIT(A) / NFAC. Referring to pages 3 to 44 of the paper book he drew the attention of the Bench to the bank statement giving remarks for each and every transaction. Referring to pages 46 to 52 of the paper book he drew the attention of the Bench to the details of unsecured loan creditors along with their PAN numbers, address, opening balances, unsecured loans taken during the year, unsecured loans repaid during the year, closing balance, bank in which loan is received, income tax acknowledgment copy of Shri Kunal Chandrakant Darawade for assessment years 2020-21, 2021-22 and 2022-23 and income tax return acknowledgment of Shri Rahul Ramhari Ubale for assessment year 2021-22, 2022-23 and 2023-24. He submitted that the assessee had borrowed money from friends and family members to repay the home loan and the assessee raised unsecured loans of Rs.33,44,990/-which includes Rs.7,14,665/- accepted from Shri Kunal Chandrakant Darawade and Rs.8,35,000/- received from Shri Rahul Ubale. He submitted that the assessee had submitted a tabular chart of receipts and payments of all his bank accounts which gives clear picture of the assessee’s affairs during the year under consideration including the receipts from and payments to unsecured loan lenders. Relying on various decisions he submitted that the addition made by the Assessing Officer u/s 68 is not warranted and the Ld. CIT(A) / NFAC is also equally not justified in sustaining such addition. The Ld. Counsel for the assessee also filed the following chart to substantiate the cash inflow and outflow:
13. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. He submitted that the assessee was unable to substantiate with evidence to the satisfaction of the Assessing Officer regarding the identity and creditworthiness of the loan creditors and the genuineness of the transactions, therefore, the order of the Ld. CIT(A) / NFAC be upheld.
14. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case disallowed an amount of Rs.52,500/- declared as salary income of the assessee in absence of Form 16 / salary slip and confirmation from the employer. The Assessing Officer similarly made addition of Rs.68,64,980/- u/s 68 r.w.s. 115BBE of the Act details of which are given at para 8 of order, on the ground that the assessee failed to discharge the onus cast on him by providing the identity and creditworthiness of the loan creditors and the genuineness of the transactions. We find the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the Revenue authorities have not appreciated the facts properly and even the contra entries were also added. Further despite giving the full details of the loan creditors such as their PAN numbers, address and income tax return acknowledgements in the case of two major loan creditors, the same were added by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC. It is the submission of the Ld. Counsel for the assessee that given an opportunity the assessee is in a position to substantiate his case by filing the requisite details and re-conciling the contra entries in the bank accounts which caused the major additions. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one last opportunity to the assessee to substantiate his case by filing the requisite details. Needless to say the Assessing Officer shall decide the issue as per fact and law after providing due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
15. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 18th August, 2026.
