B.R.A. Textiles Private Limited Vs ITO (ITAT Pune Bench)
Five Lenders, One Borrower, Fully Explained Trail: Pune ITAT Deletes ₹94.46 Lakh Section 68 Addition & Section 14A Disallowance
Summary: The assessee, B.R.A. Textiles Private Limited, was engaged in the textile business. It filed its return declaring nil income. During scrutiny, the AO noticed a fresh unsecured loan of ₹94,46,223 appearing in the name of Shri Yuvraj Dhamale.
The loan confirmation, however, mentioned five other persons: Ajit Shah, Jagdish Shah, Narendra Shah, Ramesh Shah & Sumeet Mandot. The assessee explained that these persons transferred amounts directly from their bank accounts to the company on behalf of Shri Yuvraj Dhamale. Consequently, the loan was recorded in Dhamale’s name, though the money travelled directly from the five persons.
The AO sought explanation regarding the relationship between the assessee, Dhamale & the five remitters. Though confirmations, returns & bank statements were furnished, the AO held that the transaction was not satisfactorily explained because the persons were not produced personally. He therefore added ₹94,46,223 u/s 68 r.w.s. 115BBE.
The AO also noticed investments in shares of various companies. Although no exempt income was earned during the year, he invoked section 14A r.w. Rule 8D & disallowed ₹51,516. The CIT(A) confirmed both additions. The assessee appealed before the Tribunal.
Issues before the Tribunal
The first issue was whether the assessee had discharged the burden u/s 68 by establishing the identity & creditworthiness of the five remitters, genuineness of banking transactions & their relationship with Shri Yuvraj Dhamale.
The second issue was whether disallowance u/s 14A could be made for AY 2015-16 when the assessee had earned no exempt income, based upon the amendment introduced by the Finance Act, 2022.
Assessee’s submissions
The assessee submitted affidavits from Shri Yuvraj Dhamale & all five remitters, recording the cheque numbers, dates & amounts paid. Their ITR acknowledgements, bank statements, balance sheets & confirmations were also furnished.
The advances during the year comprised ₹20,13,871 each from Ajit Shah, Jagdish Shah, Narendra Shah & Ramesh Shah, besides ₹13,90,744 from Sumeet Mandot, aggregating to ₹94,46,228 approximately.
The assessee pointed out that Dhamale’s balance sheet reflected loans & advances of ₹3,75,29,491 to B.R.A. Textiles, while his liabilities showed corresponding unsecured loans from the five persons. Thus, the accounting treatment reconciled the direct bank transfers with the loan standing in Dhamale’s name.
All transactions were made through account-payee cheques. The remitters had adequate bank balances, substantial returned income or exempt partnership income & there were no immediate cash deposits before transfer of funds.
Similar advances had been made by the same persons on Dhamale’s behalf in the preceding year. Those transactions had been accepted without addition, reopening or revision u/s 263. In a subsequent year, the loan was also adjusted against consideration payable by Dhamale for purchase of shares from the assessee.
Regarding section 14A, the assessee argued that no exempt income was earned. The Finance Act, 2022 amendment could not be applied retrospectively to AY 2015-16.
Revenue’s contentions
The Revenue supported the orders of the AO & CIT(A). It contended that the assessee had shown the loan in Dhamale’s name even though money came from five different parties. The assessee failed to produce those parties personally or satisfactorily explain the tripartite arrangement.
The Revenue therefore argued that identity, creditworthiness & genuineness were not fully established. It also supported the section 14A disallowance based upon the existence of investments capable of yielding exempt income.
Tribunal’s findings on section 68
The Tribunal found substantial force in the assessee’s explanation. Every remitter had filed an affidavit confirming that the amount was advanced directly to the assessee on behalf of Dhamale. Their returns, balance sheets & bank accounts established their identities & financial capacity.
The funds moved through regular banking channels, with no cash deposited immediately before the transfers. Dhamale’s accounts showed the investment in the assessee-company as well as corresponding borrowings from the five parties.
The Tribunal also considered the consistent treatment of similar transactions in the preceding year. The Revenue had accepted those loans without taking any corrective action. On the totality of evidence, there was no reason to treat the current-year loan differently.
Accordingly, the Tribunal held that the loan was genuine & directed deletion of the entire ₹94,46,223 addition u/s 68.
Findings on section 14A
It was undisputed that the assessee earned no exempt income during AY 2015-16. The CIT(A) relied upon the Finance Act, 2022 amendment to hold that disallowance could be made even without exempt income.
The Tribunal held that the amendment effective from 1 April 2022 could not be applied retrospectively to AY 2015-16. Under the law applicable to the relevant year, settled judicial decisions prohibited disallowance u/s 14A where no exempt income was earned.
The disallowance of ₹51,516 was therefore deleted & the appeal was allowed.
Practical implications
The ruling confirms that a loan need not be rejected merely because funds are remitted by third parties on behalf of the recorded lender. What matters is a complete evidentiary trail connecting the remitters, lender & recipient.
Affidavits, bank statements, ITRs, balance sheets, ledger reconciliation & absence of cash deposits can collectively discharge the burden u/s 68. Personal production is not decisive where documentary evidence remains uncontroverted.
The decision also reiterates that the Finance Act, 2022 amendment to section 14A is not retrospective. For earlier years, no disallowance can ordinarily be made without exempt income. The central principle is that commercial routing through third parties is not unexplained credit when every link in the transaction is documented & financially supported.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, PUNE
This appeal filed by the assessee is directed against the order dated 24.10.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2015-16.
2. Facts of the case, in brief, are that the assessee is a company engaged in the business of textiles. It filed its return of income on 12.02.2016 declaring total income at Nil. 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 through CASS and accordingly statutory notice u/s 143(2) of the Act was issued. Subsequently notice u/s 142(1) along with a questionnaire was issued and served on the assessee in response to which the assessee filed the requisite details from time to time.
3. During the course of assessment proceedings the Assessing Officer noted that the assessee has taken fresh loan from Shri Yuvraj Dhamale. Accordingly, loan confirmation was called for. The Assessing Officer noted from the said confirmation letter filed by the assessee that the names of various persons such as Ajit Shah, Jagdish Shah, Ramesh Shah, Narendra Ghanshyam Shah and Sumit Mandot have been mentioned. Since the transaction between the assessee and the loan creditors were mentioning the names of third parties also, the Assessing Officer asked the assessee to explain the nature of relationship between the assessee and these persons and Mr. Yuvraj Dhamale and also to explain the identity of loan givers and creditworthiness as well as the genuineness of the transaction. The assessee in response to the same submitted that these 5 persons have made payments through their bank account to the assessee which is paid on behalf of Mr. Yuvraj Dhamale and therefore, the names of all these persons appearing in the loan confirmation of Mr. Yuvraj Dhamale filed. It was submitted that actually money has been received from these persons and they have creditworthiness and the transactions of loan are genuine.
4. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He noted that in this reply the assessee could not explain anything regarding reasons for showing these loans as having been taken from Mr. Yuvraj Dhamale and the nature of transaction between the assessee, its director Mr. Yuvraj Dhamale and these five persons. He, therefore, again confronted the same to the assessee. However, the assessee failed to produce these persons and also did not elaborate on the clear cut query raised in this regard. Further, it was submitted that it had filed the copies of return, loan confirmation, bank account of Ajit Shah, Jagdish Shah, Ramesh Shah and Sumit Mandot. Since the assessee failed to produce these persons, the Assessing Officer, rejecting the various explanations given by the assessee and invoking the provisions of section 68, made addition of Rs.94,46,223/- being fresh receipt of loan of Rs.94,46,223/- claimed to have been taken from Mr. Yuvraj Dhamale.
5. The Assessing Officer on verification of the Balance Sheet of the assessee noted that the assessee has made investment in equity of various companies. However, no disallowance u/s 14A has been made by the assessee. He, therefore, confronted the same to the assessee. It was explained that no fresh investment was made by the company during the current financial year and all the investments made were in the preceding years. Further, the company has not earned any tax free income during the year under consideration and therefore has not charged any expenditure to the Profit and Loss Account. Hence, the provisions of section 14A are not applicable.
6. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. Relying on various decisions and invoking the provisions of section 14A read with Rule 8D of the IT Rules, 1962, he made disallowance of Rs.51,516/- being 0.5% of the average value of investments of Rs.1,03,03,375/-. He accordingly determined the total income of the assessee at Rs.94,61,024/-.
7. In appeal, the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer. So far as the addition u/s 68 is concerned, he sustained the same by observing as under:
5.1.5. I have carefully considered the arguments from both sides. To discharge the onus under Section 68, the assessee must prove the identity and creditworthiness of the creditor, and most importantly, the genuineness of the transaction.
5.1.6. The primary test under Section 68 is the genuineness of the transaction in the year it is recorded. The appellant’s explanation has evolved significantly from the assessment stage to the appellate stage. The initial simple explanation that payments were made “on behalf of Shri Dhamale” has now been replaced with a complex “advance for share purchase” narrative. This change in stance weakens the appellant’s credibility.
5.1.7. The weakest evidence, as rightly pointed out by the AO, is the complete absence of any loan receivable in the balance sheets of the third parties. The appellant’s explanation that these amounts were grouped under a generic head “G.M Rajdhan Group” is a weak and unsubstantiated assertion. No detailed ledger or reconciliation was provided to prove that the specific advances to the appellant were part of the group heading.
5.1.8. The onus is on the assessee to produce its witnesses. The failure to produce Shri Dhamale (a director of the appellant company) and the third parties before the AO is a significant failure. An affidavit, while being a sworn statement, cannot substitute for direct examination and cross-examination by the AO.
5.1.9. The “share purchase” story, while plausible in hindsight, is not supported by a single piece of evidence from the relevant period (AY 2015-16). In matters of finance and corporate transactions, the absence of an agreement, MoU, or even a Board resolution for a transaction of nearly Rs.1 crore is highly suspect and points towards it being an afterthought to cover the trail of unexplained funds.
5.1.10. While the appellant has provided documents but, it has failed to prove the creditworthiness and genuineness of the transaction. The convoluted manner of the fund flow, the lack of reflection in the lenders’ balance sheets, and the absence of any contemporaneous evidence for the share purchase agreement tilt the balance of probabilities heavily against the appellant. The subsequent share sale in a later year does not automatically legitimize an unexplained credit in the current year. The AO’s conclusion is based on sound reasoning and factual discrepancies that the appellant has failed to satisfactorily resolve.
Therefore, the addition of Rs. 94,46,223 made by the AO under Section 68 is confirmed. Grounds of Appeal No. 1 and 2.1, 2.2 & 2.3 are dismissed.
8. So far as the disallowance u/s 14A is concerned, the Ld. CIT(A) / NFAC upheld the same relying on the amendment made by the Parliament in section 14(A) vide Finance Act, 2022 whereby a non-obstante clause has been inserted in the opening portion of section 14(A) of the Act. According to him, the effect of this amendment is that the disallowance u/s 14(A) shall be attracted even if the exempt income is not earned during the year.
9. Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds:
The following grounds are taken without prejudice to each other
On facts and in law,
1] The ld. CIT(A) erred in confirming an addition of Rs.94,46,223/- made u/s 68 r.w.s. 115BBE of the Act on the ground that the assessee had failed to prove creditworthiness of the lender and the genuineness of the transaction.
2] The ld. CIT(A) erred in holding that the assessee had failed to prove that the five parties namely, Sumeet Mandot, Ramesh Shah, Jagdish Shah Ajit Shah and Narendra Shah had lent the money to the assessee on behalf of Shri Yuvraj Dhamale and hence, the addition u/s 68 was rightly made by the ld. Α.Ο.
3] The ld. CTT(A) erred in holding that
a. The claim of the assessee that the above five parties had lent the money on behalf of Shri Yuvraj Dhamale could not be proved by the assessee.
b. The above referred five parties had not shown any loan given to the assessee in their balance sheets.
c. The contention that subsequently, Shri Dhamale had purchased the shares from the assessee company had no relevance for deciding the genuineness of the loan transaction.
d. No reconciliation was provided by the assesssee in support of its claim that the funds were lent by the above five parties on behalf of Shri Dhamale.
4] The ld. CTT(A) failed to appreciate that the above five parties had lent the funds to the assessee on behalf of Shri Dhamale and the said fact was confirmed by Shri Dhamale and the said five persons and accordingly, there was no reason to confirm the addition of Rs.94,46,223/- made u/s 68 of the Act.
5] The ld. CIT(A) erred in not appreciating that the addition made u/s. 68 of Rs.94,46,223 was not justified because-
a. The assessee had provided the name, creditworthiness and genuineness of the transaction of the loan taken of Rs.94,46,223/- and hence, the addition made was not justified.
b. One of the party, namely Narendra Shah had disclosed the loan given to the assessee under the head ‘G. M. Rajdhan Group’ and the detailed reconciliation was also submitted and hence, there was no reason to hold that the said transaction was not reflected in the balance sheet of the said parties.
c. Shri Dhamale had also confirmed that the funds were lent by the said five persons on his behalf and he had duly shown the loan given to the assessee in his balance sheet.
d. In the subsequent year, the assessee had sold the shares of Wellbuild Merchants Pvt. Ltd. to Shri Dhamale and the loan received in the year under consideration was adjusted against the sale consideration.
6] The ld. CIT(A) erred in confirming the disallowance made u/s. 14A of Rs.51,516/- without appreciating that no such disallowance was warranted on the facts of the case.
10. Grounds of appeal No.1 to 5 relate to the order of the Ld. CIT(A) / NFAC in confirming the addition of Rs.94,46,223/- made by the Assessing Officer u/s 68 r.w.s. 115BBE of the Act.
11. The Ld. Counsel for the assessee strongly challenged the order of the Ld. CIT(A) / NFAC in sustaining the addition made by the Assessing Officer. Referring to para 5 of the assessment order he submitted that the assessee has filed various details to substantiate his claim that the 5 persons have made payments through their bank accounts to the assessee which is paid on behalf of Shri Yuvraj Dhamale. Therefore, the names of these persons are appearing in the loan confirmation of Shri Yuvraj Dhamale. Referring to para 6 of the assessment order he submitted that the assessee has filed the copies of returns, loan confirmation, bank account of Narendra Shah, Ajit Shah, Jagdish Shah, Ramesh Shah and Sumit Mandot. Referring to page 17 of the paper book he drew the attention of the Bench to the Long term borrowings of Rs.3,85,29,491/- as on 31.03.2015. Referring to page 19 of the paper book he drew the attention of the Bench to the breakup of the loan of Rs.3,85,29,491/- which includes unsecured loan of Rs.3,75,29,491/- from Shri Yuvraj Dhamale. Referring to page 24 of the paper book he drew the attention of the Bench to the affidavit of Shri Yuvraj Dhamale giving the details of cheque number, date and the amount received from the 5 persons in question. Referring to page 28 of the paper book he drew the attention of the Bench to the copy of income tax return of Shri Yuvraj Dhamale filed for assessment year 2015-16 on 22.12.2015 declaring total income of Rs.39,70,620/-. Referring to page 33 of the paper book he drew the attention of the Bench to the Balance Sheet of Shri Yuvraj Dhamale as on 31.03.2015 showing unsecured loan of Rs.33,20,90,939.55 as per Schedule ‘C’. Referring to page 37 of the paper book he drew the attention of the Bench to the loans and advances given in the name of BRA Textile Pvt. Ltd. of Rs.3,75,29,491/-. Referring to page 36 of the paper book he drew the attention of the Bench to the unsecured loan as per Shceudle ‘C’ shown by Shri Yuvraj Dhamale in the name of the following 5 parties:
| i) | Ajit Shah | Rs.89,21,238/- |
| ii) | Jagdish Shah | Rs.89,21,238/- |
| iii) | Narendra Shah | Rs.89,21,238/- |
| iv) | Ramesh Shah | Rs.89,21,238/- |
| v) | Sumeet Mandot | Rs.63,37,564/- |
12. Referring to page 44 of the paper book he drew the attention of the Bench to the affidavit filed by Shri Ajit Ghansham Shah showing the advance of Rs.20,13,871/- during the year and also advance of Rs.22,16,205/- in the preceding assessment year to M/s BRS Textile Limited on behalf of Shri Yuvraj S Dhamale. Referring to page 47 of the paper book he drew the attention of the Bench to the copy of the acknowledgment of the income tax return for assessment year 2015-16 filed on 30.09.2015 disclosing the gross total income of Rs.16,95,205/- after deduction claimed under Chapter VI-A at Rs.1,74,710/- the taxable income has been declared at Rs.15,20,500/-.
13. Referring to pages 57 to 59 of the paper book he drew the attention of the Bench to the copy of affidavit of Shri Jagdish Ghansham Shah showing the advance of Rs.20,13,871/- to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale during the financial year 2014-15. He submitted that the said Shri Jagdish Ghansham Shah is also a partner along with Shri Yuvraj S Dhamale in the firm BRA Textiles Private Limited and is maintaining separate books of account in the individual capacity in respect of the transactions with BRA Textiles Private Limited. Referring to page 60 of the paper book he drew the attention of the Bench to the income tax return acknowledgement of Shri Jagdish Ghansham Shah declaring taxable income of Rs.42,920/- and exempt income of Rs.1,15,89,259/- on account of share of profit from the partnership firm, dividend income and income from security.
14. Referring to pages 71 to 73 of the paper book he drew the attention of the Bench to the affidavit of Shri Naredra Ghansham Shah showing the advance of Rs.22,16,205/- to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale. It has also been confirmed that he has paid an advance of Rs.22,16,205/- in the preceding financial year on behalf of Shri Yuvraj S Dhamale to BRA Textiles Private Limited. Referring to page 74 of the paper book he drew the attention of the Bench to the copy of the income tax return declaring the gross total income of Rs.10,42,071/- and the exempt income of Rs.1,15,38,742/- being the share of profit exempt u/s 10(2A) of the Act and the exemption on securities.
15. Referring to pages 87 to 89 of the paper book he drew the attention of the Bench to the affidavit filed by Shri Ramesh Ghansham Shah confirming the advance of Rs.20,13,871/- to BRA Textiles Private Limited during the financial year 2014-15 on behalf of Shri Yuvraj S Dhamale. It has also confirmed that an amount of Rs.22,16,205/- was paid to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale in the immediately preceding assessment year. Referring to page 90 of the paper book he drew the attention of the Bench to the copy of the income tax return acknowledgement of Shri Ramesh Ghansham Shah filed on 30.09.2015 declaring the gross total income of Rs.45,35,440/- and the exempt income of Rs.29,70,621/-.
16. Referring to pages 100 and 101 of the paper book he drew the attention of the Bench to the affidavit filed by Shri Sumeet Champalal Mandot (HUF) showing the advane of Rs.13,90,744/- to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale during the financial year 2014-15. It has also been confirmed that an amount of Rs.9,47,971/- was given as advance to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale during the preceding assessment year i.e. financial year 2013-14. Referring to page 102 of the paper book he drew the attention of the Bench to the copy of the income tax return acknowledgment of Shri Sumeet Champalal Mandot (HUF) declaring the gross total income of Rs.31,59,040/- filed on 31.08.2015. He submitted that all these payments were made by account payee cheques. The persons were having sufficient bank balance and no immediate cash was deposited in any of the accounts. Therefore, the allegation of the Assessing Officer in the remand report that the assessee has not filed sufficient details is uncalled for. He accordingly submitted that the addition made by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC be deleted.
17. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.
18. 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 made addition of Rs.94,46,223/- u/s 68 r.w.s. 115BBE of the Act on the ground that the assessee has taken fresh loans from Shri Yuvraj S Dhamale during the year whereas in the confirmation letters filed by the assessee the names of 5 persons i.e. Ajit Shah, Jagdish Shah, Ramesh Shah, Narendra Ghanshyam Shah and Sumit Mandot have been mentioned. Since the assessee failed to produce these persons and was unable to satisfy the Assessing Officer regarding the nature of these transactions, therefore, the Assessing Officer made addition of Rs.94,46,223/- u/s 68 r.w.s. 115BBE of the Act.
19. We find the Ld. CIT(A) / NFAC upheld the addition made by 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 above 5 persons have given loan to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale which have been confirmed by them by filing their affidavits, copies of their bank statements, their income tax returns, Profit and Loss Account, Balance Sheet etc. All these persons have sufficient funds available in their bank accounts to explain the source of the loan on behalf of Shri Yuvraj S Dhamale given to BRA Textiles Private Limited. It is also his submission that in the preceding year also similar loans were given on behalf of Shri Yuvraj S Dhamale to BRA Textiles Private Limited and the same was accepted by the Assessing Officer. Therefore, making the addition u/s 68 is uncalled for.
20. We find some force in the above arguments of the Ld. Counsel for the assessee. We find the assessee before the Assessing Officer filed an affidavit which reads as under:
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21. We find the assessee has filed the affidavit of Shri Ajit Ghansham Shah before the Assessing Officer which reads as under:
22. We find the assessee has filed the affidavit of Shri Jagdish Ghansham Shah before the Assessing Officer which reads as under:
23. We find the assessee has filed the affidavit of Shri Narendra Ghansham Shah before the Assessing Officer which reads as under:
24. We find the assessee has filed the affidavit of Shri Ramesh Ghansham Shah before the Assessing Officer which reads as under:
25. We find the assessee has filed the affidavit of Shri Sumeet Champalal Mandot (HUF) before the Assessing Officer which reads as under:
26. From the perusal of the affidavits and other details we find the persons who have given advances to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale are as under:
| i) | Ajit Shah | Rs.20,13,871/- |
| ii) | Jagdish Shah | Rs.20,13,871/- |
| iii) | Narendra Shah | Rs.20,13,871/- |
| iv) | Ramesh Shah | Rs.20,13,871/- |
| v) | Sumeet Mandot | Rs.13,90,744/- |
27. It is also an admitted fact that similar amounts were given by Ajit Shah amounting to Rs.22,16,205/-, Jagdish Shah amounting to Rs.22,16,205/-, Narendra Shah amounting to Rs.22,16,205/-, Ramesh Shah amounting to Rs.22,16,205/- and Sumeet Mandot amounting to Rs.9,47,971/- in the immediately preceding assessment years to BRA Textiles Private Limited on behalf of Shri Yuvraj S Dhamale which has been accepted by the Assessing Officer and neither any addition has been made nor any reopening has taken place or 263 proceedings initiated. All the above 5 persons, who have advanced loans to BRA Textiles Pvt. Ltd. on behalf of Shri Yuvraj S Dhamale, are persons of means having sufficient income declared during the impugned assessment year in their returns of income which have been filed prior to filing of return by BRA Textiles Pvt Ltd. All the transactions have taken place through proper banking channel and the bank accounts also reflect that there was no immediate cash deposit in the said bank accounts before extending the loan to BRA Textiles Pvt. Ltd. on behalf of Shri Yuvraj S Dhamale. It is also an admitted fact that Shri Yuvraj S Dhamale has shown the investment in BRA Textiles Pvt. Ltd. and shown the unsecured loans from these persons in his Balance Sheet. Under these circumstances, when the Assessing Officer has accepted similar loans taken by BRA Textiles Pvt. Ltd. from Shri Yuvraj S Dhamale which in turn have been paid by different persons directly to BRA Textiles Pvt. Ltd. on behalf of Shri Yuvraj S Dhamale and when these persons have filed their returns of income declaring substantial income, payments were made through proper banking channel, therefore, we do not find any reason for not accepting the loan as genuine. We, therefore, set aside the order of the Ld. CIT(A)/ NFAC and direct the Assessing Officer to delete the addition.
28. Ground of appeal No.6 raised by the assessee relates to the order of the Ld. CIT(A) / NFAC in confirming the disallowance of Rs.51,516/- made by the Assessing Officer u/s 14A.
29. After hearing both the sides we find the Assessing Officer made addition of Rs.51,516/- by invoking the provisions of section 14A read with Rules 8D of the IT Rules, 1962 which has been sustained by the Ld. CIT(A) / NFAC. It is an admitted fact that no exempt income has been received by the assessee during the year. We find the Ld. CIT(A) / NFAC upheld the disallowance made by the Assessing Officer on the ground that an amendment has been made to the provisions of section 14A vide the Finance Act, 2022 whereby clause (d) has been inserted in the opening portion of section 14A and therefore, addition can be made even if no exempt income earned during the year. It is the submission of the Ld.
30. We find some force in the above arguments of the Ld. Counsel for the assessee. Admittedly, the assessment year involved in the instant appeal is assessment year 2015-16 and the amendment to the provisions of section 14A was made by the Finance Act, 2022. Therefore, the said amendment cannot be applied retrospectively for assessment year 2015-16. It has been held in various decisions that no addition / disallowance u/s 14A can be made in absence of any exempt income. Since, admittedly in the instant case the assessee has not earned any exempt income during the impugned assessment year a fact stated before the Assessing Officer and not controverted by him or the Ld. CIT(A) / NFAC, therefore, we hold that no disallowance u/s 14A is called for in absence of any exempt income. Ground No.6 raised by the assessee is accordingly allowed.
31. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 27th August, 2026.
