Cash Loans from Relatives Accepted After Proving Identity, Creditworthiness & Genuineness: ITAT Panaji

Anilkumar Narayanrao Mudradattu Vs ITO (ITAT Panaji)

Material Facts: The assessee, an individual, filed his return for A.Y. 2017-18 declaring income of ₹2,65,000. The case was selected for limited scrutiny under CASS on the issue of large cash deposits during the demonetisation period. During assessment under Section 143(3), the Assessing Officer noted cash deposits of ₹12,91,000. The assessee explained that ₹4 lakh was received as an interest-free loan from his co-brother, ₹2 lakh as an interest-free loan from his sister-in-law’s son, ₹2 lakh represented his wife’s savings and ₹3 lakh represented his own accumulated savings over 20 to 25 years. The Assessing Officer treated ₹12,06,000 as unexplained money under Section 69A read with Section 115BBE of the Income-tax Act. The CIT(A) accepted the explanation regarding ₹2 lakh received from the wife and sustained an addition of ₹9 lakh.

Legal Issue: The issue before the Tribunal was whether the addition of ₹9 lakh sustained under Section 69A was justified in respect of interest-free loans from relatives and the assessee’s accumulated savings.

Relevant Statutory Provisions

The Tribunal considered Sections 69A, 68, 115BBE and 143(3) of the Income-tax Act, 1961.

Assessee’s Submissions

The assessee reiterated that ₹4 lakh and ₹2 lakh were interest-free loans from relatives and filed their names, addresses, PAN, Income-tax Returns and an affidavit. He also filed an affidavit regarding his employment history, salary certificate from Bombay Restaurant and claimed accumulated savings of ₹3 lakh.

Revenue’s Submissions

The Departmental Representative supported the order of the CIT(A).

Tribunal’s Observations and Findings

The Tribunal observed that although the Assessing Officer invoked Section 69A, the assessee’s explanation that the cash represented interest-free loans attracted Section 68, requiring proof of identity, creditworthiness and genuineness. It found that the assessee had furnished names, addresses, PAN and Income-tax Returns of both lenders and noted that the Assessing Officer had not issued notices to verify the documents. The Tribunal held that the assessee had discharged the primary onus under Section 68 and accepted the explanation for the ₹6 lakh received from relatives.

Regarding accumulated savings, the Tribunal considered the assessee’s age, employment history, salary certificate and affidavit and accepted accumulated savings of ₹2 lakh, while observing that the assessee had not maintained detailed records supporting the entire claim of ₹3 lakh.

Final Ruling

The Tribunal deleted ₹6 lakh relating to interest-free loans from relatives and ₹2 lakh representing accumulated savings. Out of the ₹9 lakh addition sustained by the CIT(A), ₹8 lakh was deleted and the balance addition of ₹1 lakh was confirmed. The order of the CIT(A) was set aside to that extent and the assessee’s appeal was partly allowed.

FULL TEXT OF THE ORDER OF ITAT PANAJI

The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 29.09.2025 framed by Addl/JCIT(A)-3, Ahmedabad arising out of Assessment Order dated 17.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’).

2. The sole grievance of the assessee is that ld.CIT(A) erred in confirming the addition of Rs.9.00 lakh made by the Assessing Officer invoking section 69A r.w.s.115BBE of the Act.

3. Brief facts of the case are that the assessee is an individual and declared income of Rs.2,65,000/- in the return for A.Y. 2017-18 filed on 12.04.2017. Case selected for Limited Scrutiny under CASS for the issue “Large value of Cash deposits during demonetization period as compared to returned income”. During the course of assessment proceedings which was carried out after validly serving notices, ld. Assessing Officer observed that assessee had deposited cash of Rs.12,91,000/-. Assessee was asked to explain the sources thereof to which submissions were filed stating that assessee has received interest free loan from Co-brother Mr. Ashoka Narayana Rao Maliye at Rs.4.00 lakh and Rs.2.00 lakh received as interest free loan from Sister-in-law’s son Mr. Amit Maliye Ashok for purchase of property, Rs.2.00 lakh savings of his Wife Smt. Suvarna Anil Kumar Mudrabettu and Rs.3.00 lakh from his own savings from last 20 to 25 years. However, ld. Assessing Officer concluded the assessment proceedings making addition of Rs.12,06,000/- for unexplained money u/s.69A r.w.s. 115BBE of the Act and assessed income at Rs.13,44,077/-.

4. Aggrieved assessee preferred appeal before ld.CIT(A) and assessee got part relief as ld.CIT(A) accepted the assessee’s claim of receiving Rs.2.00 lakh from his Wife who has also filed the return of income for A.Y. 2017-18 on 11.04.2017.

5. Now the assessee is in appeal before this Tribunal against the addition sustained at Rs.9.00 lakh.

6.Ld. Counsel for the assessee reiterated the submissions filed before the lower authorities and further filed an Affidavit stating that the assessee is 65 years old and assessee was employed with ITC for two years and thereafter worked with Bombay Restaurant for almost 22 years. He has also filed the certificate from the Bombay Restaurant mentioning the salary received by the assessee. Assessee has also filed Income Tax Return of his co-brother Mr. Ashoka Narayana Rao Maliye for three financial years as well as Sister-in-law’s son Mr. Amit Ashok Maliye, copies of which are placed at page 6 to 32 of the paper book.

7. On the other hand, ld. DR supported the order of ld.CIT(A).

8. We have heard the rival contentions and perused the record placed before us. The issue for our consideration is regarding the addition of Rs.9.00 lakh sustained by ld.CIT(A) which was made by the Assessing Officer u/s.69A of the Act for the alleged unexplained money which is claimed to have been received from the following parties :

9. We note that even though ld. Assessing Officer has invoked section 69A of the Act, however, since the assessee is claiming that he has received interest free loans from his relatives, section 68 of the Act gets triggered. It has been consistently held that the assessee in order to discharge the burden as provided u/s.68 of the Act has to prove the Identity, Creditworthiness of the cash creditors and genuineness of the transaction.

10. So far as the amount of interest free loan received at Rs.4.00 lakh and Rs.2.00 received from Mr. Ashoka Narayana Rao Maliye and Mr. Amit Ashok Maliye, we note that the assessee has furnished their Names, Addresses, PAN and Income Tax Returns. All these details were filed before the ld. Assessing Officer also. There is no observation of the Assessing Officer as to whether any notice(s) have been issued to these parties to verify the documents filed by the assessee. In absence thereof, it is so presumed that assessee has discharged its primary onus casted u/s.68 of the Act. Assessee has also filed an Affidavit along with providing the Income Tax Returns for past three Assessment years 2015-16, 2016-17 and 2017-18 of the above cash creditors wherein first cash creditor Mr. Ashoka Narayana Rao Maliye showed gross income at Rs.3,30,600/-, Rs.4,18,707/- and Rs.3,98,660/-. Similarly, another person namely Mr. Amit Ashok Maliye has shown gross income at Rs.1,84,926/-; Rs.2,08,557/-; and Rs.2,90,447/- in the Income Tax Returns for A.Y. 2015-16 to A.Y. 2017-18.

11. We note that so far as interest free loans received from Mr. Ashoka Narayana Rao Maliye and Mr. Amit Ashok Maliye are concerned, assessee has furnished all the details which are sufficient to prove the Identity, Creditworthiness of these two parties. Further genuineness of the transaction cannot be disputed because they are relatives of the assessee and they have given funds for meeting the needs of assessee. We therefore are satisfied with the explanation furnished by the assessee explaining the source of interest free cash loan received from relatives Mr. Ashoka Narayana Rao Maliye and Mr. Amit Ashok Maliye at Rs.4.00 lakh and Rs.2.00 lakh respectively and therefore no addition of Rs.6.00 lakh is called for.

12. Further, assessee has claimed that he had Rs.3.00 lakh from accumulated savings for past many years. To this effect, assessee has filed an Affidavit stating that he is 65 years old and has been working with Bombay Restaurant for almost 22 years and also drawing salary of Rs.12,500/- per month since past five years. Certainly, the assessee has not maintained the requisite details. Assessee is 65 years. It is also claimed that his two children are well educated. His Elder son Mr. Arjun Murdrabettu has completed Diploma in Mechanical Engineering and is earning approximately Rs.3.00 lakh per annum and similarly his daughter Ms. Ashwija Mudrabettu completed B.E. (Civil Engineering) and is earning Rs.3.00 lakh per annum. We therefore considering the overall facts and circumstances of the case, age of the assessee, proof of earning income for past many years are satisfied that assessee has accumulated savings of Rs.2.00 lakh for past 22 years and such savings have been utilised making the cash deposit. Therefore, to this extent, the addition is deleted and the remaining amount of addition at Rs.1.00 lakh stands confirmed.

13. To conclude, out of the addition of Rs.9.00 lakh, Rs.8.00 lakh is deleted and remaining Rs.1.00 lakh is sustained in the hands of assessee. Finding of ld.CIT(A) is set aside and Grounds of appeal raised by the assessee are partly allowed.

14. In the result, the appeal of the assessee is partly allowed.

Order pronounced on this 30t^h day of June, 2026.