Delhi ITAT Deletes ₹43.80 Lakh Addition After Assessee Proves Loan Sources

Rajender Raghuvanshi Vs Income Tax Officer (ITAT, Delhi Bench)

AO CANNOT DOUBT A LOAN & TAX THE PROPERTY-ONCE PRIMARY EVIDENCE IS FILED, FURTHER ENQUIRY MUST FOLLOW u/s 68/69

The Delhi ITAT has held that once an assessee furnishes confirmations, PAN details, ITRs & bank statements of the lenders, thereby discharging the primary onus regarding their identity, creditworthiness & genuineness of transactions, the AO cannot summarily reject the explanation. If still dissatisfied, the AO must conduct further enquiries. The addition of ₹43,80,750 representing the assessee’s share in the purchase price of a property was accordingly deleted.

Facts of the case

The assessee, Rajender Raghuvanshi, filed his return of income for AY 2019-20 on 30.10.2019 declaring a total income of ₹10,07,810.

During the relevant year, the assessee jointly purchased an immovable property with his wife for a total consideration of ₹87,61,500. The assessee’s 50% share in the purchase consideration amounted to ₹43,80,750.

The assessment was reopened u/s 148 by notice dated 28.03.2023 on the ground that the assessee had purchased the immovable property during the year & the source of investment required verification.

In the reassessment proceedings, the AO noticed that the assessee had obtained unsecured loans from M/s Padamshree Industries & Shri Prem Goyal. These funds were utilised, among other sources, for purchasing the property.

The AO was not satisfied with the creditworthiness of the lenders & genuineness of the loans. He therefore treated the assessee’s entire share of the purchase consideration amounting to ₹43,80,750 as unexplained investment u/s 69, taxable at the special rate prescribed u/s 115BBE.

The assessment was completed u/s 147 r.w.s. 144B on 06.03.2024. The CIT(A), NFAC, affirmed the addition by order dated 03.12.2025.

Property & transaction already disclosed

Before the ITAT, the assessee contended that the property purchase was never concealed from the Department. The property had been duly recorded in the books of account & reflected in the audited balance sheet filed with the Department.

Tax had also been deducted on the property transaction by filing Form No. 26QB, & the relevant transaction stood reflected in the assessee’s Form 26AS.

Therefore, it was argued that the acquisition of the property could not itself be characterised as an unexplained investment. The only controversy, if any, could relate to the acceptability of the sources explained by the assessee.

Sources of purchase consideration explained

The assessee furnished a detailed statement explaining the sources from which payments towards the property had been made.

Apart from internal accruals routed through the Bank of Baroda & HDFC bank accounts, the assessee had received an unsecured loan of ₹27 lakh from M/s Padamshree Industries.

The assessee had also obtained a loan of ₹30 lakh from Shri Prem Goyal, out of which ₹11,98,868 was utilised towards the purchase of the property, while the balance was utilised in the business.

The total sources demonstrated by the assessee amounted to ₹46,43,700, which was more than sufficient to explain his share of ₹43,80,750 in the property consideration.

The assessee further submitted that a major portion of the loans had been repaid during the same financial year through banking channels & the entire loan liability was discharged in FY 2019-20.

Evidence furnished for the loans

In respect of both lenders, the assessee furnished their confirmations, PAN particulars, bank statements & ITRs before the lower authorities.

According to the assessee, these documents established the identity of the lenders, their creditworthiness & the genuineness of the loan transactions. The receipt as well as repayment of the loans was through normal banking channels.

It was therefore argued that the assessee had discharged the initial burden cast upon him. The AO could not reject the documentary evidence merely on suspicion, presumption or conjecture without conducting an independent enquiry.

The Revenue defended the orders of the lower authorities on the ground that the assessee had not fully established the lenders’ creditworthiness.

ITAT’s decision

The Tribunal observed that the assessee had furnished the primary documentary evidence necessary to establish the identity of the lenders, their creditworthiness & genuineness of the transactions.

Once the confirmations, PAN particulars, ITRs & bank statements were placed on record, the assessee had discharged the primary onus resting upon him.

If the AO continued to entertain doubts regarding the lenders or the loan transactions, it was incumbent upon him to conduct further enquiries. The AO could have examined the bank accounts, verified the lenders’ financial capacity, issued notices to them or called for any additional information considered necessary.

Instead, the AO merely rejected the assessee’s documents & treated the entire property investment as unexplained. Such rejection, without carrying the enquiry forward, could not sustain the addition.

After considering the entire factual matrix, the ITAT deleted the addition of ₹43,80,750 & allowed the assessee’s appeal.

A drafting inconsistency in the order

Although the assessment order & grounds of appeal referred to an addition for unexplained investment u/s 69, the concluding paragraph of the ITAT’s order states that the addition was deleted u/s 68.

This appears to be an inadvertent drafting error. The substance of the dispute was the source of investment in the property, while the actual addition had been made u/s 69 r.w.s. 115BBE. The operative relief, however, is unambiguous-the entire addition of ₹43,80,750 was deleted.

Author’s comments

The decision reiterates that the assessee’s initial burden is to furnish credible primary evidence. Once confirmation, PAN, ITR & bank statement of the lender are produced, the evidentiary ball moves into the AO’s court. The AO may reject the explanation after conducting meaningful enquiries & confronting the assessee with adverse material, but cannot substitute enquiry with suspicion.

More importantly, even if the genuineness of a particular loan is doubted, it does not automatically follow that the entire cost of a disclosed property becomes unexplained, especially when multiple sources of payment are demonstrated.

Section 69 is a rule of evidence, not a shortcut around evidence. An AO may ask where the money came from-but after the answer arrives with documents, he cannot simply say, “I still don’t like it,” & tax the whole house.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, DELHI BENCH

1. This appeal by the assessee is directed against the order dated 03.12.2025 of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Assessment Order dated 06.03.2024 passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Assessment Unit, Income Tax Department (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2019-20.

2. The assessee has raised the following grounds of appeal:-

“1.The Ld. AO has erred in law and on facts in making the addition of Rs 43,80,750/- u/s 69 for purchase of property which is duly recorded in the books of account and reflected in the audited balance sheet filed with IT department.

2. The Ld AO erred in law and on facts of the case for rejecting the explanation and documents offered by the appellant with respect to the nature and source of unsecured loan received from parties:

a) Prem Goel (AKXPG9730E) 30 Lacs

b) Padamshree Industries (AALFP4332P) 27 Lacs without any basis and had acted merely on surmises, conjuncture, suspicious, presumption and assumption, which is not permitted under the law.

3. The Ld AO has erred in making an addition u/s 69 without considering the facts that the loan received for purchase of property had also been repaid major part during the same financial year through banking channels and the complete loan were returned in FY 2019-20.

4. The Ld AO erred in law for reopening of assessment u/s 148 for purchase of property purchased on 31.08.2018 when this information for purchase of property was already available with the Ld AO at the time of filing of Form 26QB and deduction of the TDS on purchase of property much before the time for issue of notice prescribed u/s 143(2) for the verification of source, instead of taking the route of section 148 after 3 years for making fishing enquiries, which is not permitted under the law.

5. That the Appellant craves, leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal. 6. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.”

3. Brief facts are that the assessee filed his return for A.Y. 2019-20 on 30.10.2019 declaring total income of Rs. 10,7,810/-. The case was reopended u/s 148 on 28.03.2023 as the assessee was found to have purchased immovable property worth Rs. 87,61,500/- during the year under consideration. During the course of proceedings, it was noted that the assessee had taken unsecured loan from M/s Padamshree Industries and Sh. Prem Goyal, which were utilized for purchase of the impugned property jointly with his wife in which 50% share of the assessee was Rs. 43,80,750/-. The AO as well as the CIT(A) treated the unsecured loans as non-genuine and the addition of entire consideration paid by the assessee (Rs. 43,80,750/- ) was made as unexplained investment u/s 69 r.w.s. 115BBE of the Act. The assessee is aggrieved and has filed the present appeal before the Tribunal against the order of the CIT(A).

4. Before us, Ld. AR has submitted that the addition on account of unexplained investment u/s 69 of the Act could not have been made by the AO as the property was disclosed in the return of the assessee and TDS on the transaction was duly reflected in the 26AS statement. He has further submitted that requisite details with regard to the source of purchase consideration being the two loans were duly submitted before the lower authorities. In respect of both the loans, the onus to prove the identity, creditworthiness of the lenders and genuineness of the transactions was duly discharged by the assessee.

Ld. AR has further submitted that the sources of payment made for the purchase of property have been explained as under:

4.2 With regard to the unsecured loans, following documents were furnished before the lower authorities:

(i) Confirmation of both the parties

(ii) PAN details

(iii) Bank statements / ITRs

Moreover, loans have also been repaid through banking channels in the subsequent years. In the light of these details, Ld. AR has argued that the addition made u/s 69 is without any basis and is liable to be deleted.

5. On the other hand, Ld. DR has strongly relied on the orders of the lower authorities and has pointed out that the onus to establish the creditworthiness of the lenders was not fully discharged as held by the CIT(A) in his order.

6. We have heard the rival submissions and perused the material available on record. We are of the considered view that once primary onus to establish the identity of the lenders, their PAN/ ITR details and bank statements to establish the creditworthiness and genuineness of transactions had been discharged by the assessee, the AO should have conducted further enquiries in case he was not satisfied, instead of simply rejecting the assessee’s submissions.

After careful consideration of the entire factual matrix, we hereby delete the addition of Rs. 43,80,750/- u/s 68 of the Act.

7. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 09.09.2026.