Case Law Details
Rakesh Jayantibhai Patel Vs ITO (ITAT Ahmedabad)
Loans from father sisters duly proved with PAN, bank statements, land sale deed confirmations; CIT(A) wrongly sustained addition on mere suspicion
Assessee, engaged in AutoCAD design work, filed his return declaring ₹2,91,400. Based on information that he invested ₹20,00,000 in Cruso Granito Pvt. Ltd., the case was reopened u/s 147. Assessee explained that this investment was funded through savings & unsecured loans from his father and two sisters.
AO partly accepted the explanation but treated ₹11,70,000 as unexplained cash credit u/s 68 and taxed it u/s 115BBE. The loans disputed were:
– ₹4,80,000 from father
– ₹4,40,000 from sister Nitaben
– ₹2,50,000 from sister Alpaben
CIT(A) examined the bank accounts & accepted most of the loans but doubted ₹1,30,000 from the father, only because there were some cash deposits (₹49,500 each) in his bank account before giving the loan. CIT(A) held that only ₹1,20,000 could be explained from land sale proceeds already accepted by AO, and sustained an addition of ₹1,30,000 while deleting ₹10,40,000.
Before Tribunal, Assessee submitted full evidence for the father’s loan:
– PAN & Aadhaar of father
– Confirmation letter
– Complete bank statement
– Agricultural landholding (Form 7/12)
– Registered sale deed showing ₹6,00,000 received from sale of land
Tribunal noted that the father’s identity, capacity & genuineness were fully established. Out of ₹10,80,000 loan from father, ₹6,00,000 came from land sale-accepted by AO. The remaining was explained through past agricultural income & normal banking transactions. Tribunal held that CIT(A) rejected ₹1,30,000 only on assumptions, ignoring evidence. Cash deposits of ₹49,500 each do not prove lack of source when the lender has agricultural income, land sale receipts & banking history.
Tribunal also found that loans from both sisters were fully through banking channels, with confirmations & no suspicious cash deposits. No adverse material was brought by Revenue.
Therefore, Tribunal held Assessee had discharged the burden under Section 68. Once identity, creditworthiness & genuineness are proved, no addition can be made. In absence of any contrary evidence, even the sustained addition of ₹1,30,000 was unjustified. Tribunal directed deletion of the entire balance addition u/s 68.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, vide order dated 13.12.2024 relevant to the Assessment Year 2018-19.
2. The assessee has raised the following grounds of appeal:
1. Order u/s. 147 r.w.s 144 r.w.s 144B of the Act is bad in law.
2. The Ld.AO has erred in law as well as on facts in making the addition of Rs.11,70,000/- under section 58 r.w.s 115BBE of the Income-tax Act. The Ld.CIT(A) has further erred in law and on facts in confirming the addition to the extent of Rs.1,30,000/-
3. The brief facts of the case are that the assessee is an individual engaged in retail Auto CAD design work. The assessee e-filed his return of income for the year under consideration on 11.07.2018, declaring a total income of ₹2,91,400/-. The assessee’s case was reopened based on information received that he had introduced share capital and unsecured loans amounting to Rs. 20,00,000/- in M/s. Cruso Granito Private Limited. The Assessing Officer, after partially accepting the assessee’s contentions and evidences, made an addition of Rs.11,70,000/- under section 68 and charged tax under section 115BBE of the Act.
4. Aggrieved against the Assessment Order, the assessee filed appeal before the Ld. CIT(A), who partly allowed the appeal of the assessee by observing as follows:
“…Third ground of appeal is against the addition of Rs.11,70,000/- made under section 68 of the Income Tax Act 1961. The facts relating to this addition are that during the year the appellant made an investment of Rs.20 lacs. For this purpose he raised funds from various sources including his own savings and loan from father and two sisters. The assessing officer partially accepted his contentions and evidences. However he held that the appellant was not able to justify the loans given by the various persons as below
a. Jayantibhai Bhavji Bhai Patel (father) 4,80,000/-
b. Nitaben Patel (sister) 4,40,000/-
c. Alpaben Khambalia (sister) 2,50,000/-
Accordingly he made addition of Rs. 11,70,000/- in the hands of the appellant and charged tax under section 115BBE of the Income Tax Act 1961. From the assessment order pages 8 and 9 it is observed that the AO rejected the contentions and claims of the appellant without going into the copies of bank accounts in detail. The only major reason cited is non-response to requisition us 133(6), forgetting that these persons are close family members of the appellant and their confirmations etc. have been duly furnished.
6.2.1 On going through the copy of bank account of Sh. Jayantibhai Bhavji Bhai Patel it is observed that till August 2017 the banking behavior was normal and the transactions have been made in normal manner. However during the period 15.09.2017 to 11.11.2017 there are 5 items of cash deposit of Rs. 49,500/- each. Out of these deposits, Rs. 2,50,000/- has been advanced to the appellant during this period. Whereas it cannot be denied that Jayantibhai Bhavji Bhai Patel was having agricultural income and must be having past savings also, it can also not be denied that he would be incurring expences on the maintenance and well being of his family…. Moreover till 11.08.2017 also he had deposited cash from time to time. In these circumstances, the justifiable availability of explained cash of Rs. 2,50,000/- at this stage is not acceptable. However he had received cash of Rs. 1,20,000/- as part consideration for land sold, which has been accepted by the AO. After giving credit. for the same, Rs 1,30,000/- still remains unexplained. Accordingly the addition to that extent deserves to be confirmed and the balance Rs. 3,50,000/- is deleted.
6.2.2 From the bank account of Nitaben Patel it is observed that the transactions in her bank account show a normal pattern. No major cash has been deposited before being advanced to the appellant. There is no valid reason not to accept the claim. Her identity and credit worthiness stands established. Hence addition made on account of this too deserves to be deleted.
6.2.3 The loan of Rs. 2,50,000/- from the other sister is too small an amount. The identity has been duly proved and copy of bank account furnished. The bank account does not show any lump-sum cash deposit. As such this addition too is not justified and deserves to be deleted.
6.3 To sum up, the appellant gets relief of Rs.10,40,000/- and addition of Rs, 1,30,000/- stands confirmed. This ground of appeal is partly allowed…”
5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
6. The Ld. Counsel for the assessee submitted that the assessee had received a total amount of ₹10,80,000/- as an unsecured loan from his father, Shri Jayantibhai Patel. During the course of assessment proceedings, the assessee furnished the following documents in support of the said loan:
- PAN and Aadhaar card of Shri Jayantibhai Patel
- Confirmation letter from the lender
- Copy of bank statement of Shri Jayantibhai Patel
- Landholding proof (Form 7/12 extract)
- Copy of the sale deed of agricultural land
The Ld. Counsel further submitted that out of the total loan of Rs.10,80,000/-, a sum of Rs.6,00,000/- was received by Shri Jayantibhai Patel from the sale of agricultural land. This fact was supported by the sale deed, and no adverse inference was drawn by the Assessing Officer regarding this transaction.
7. We have perused the material available on record and considered the submissions of the Ld. Counsel. It is observed that the assessee has duly established the identity, genuineness, and creditworthiness of the lender. The transactions have been routed through banking channels, and the source of the cash credit has been satisfactorily explained. In the absence of any contrary evidence brought on record by the Revenue, we are of the considered opinion that the addition sustained by the Ld. CIT(A) is not justified. Accordingly, we direct to delete the remaining addition made on account of unexplained cash credit under section 68 of the Act.
8. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open Court on 10.10.2025.
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