ITAT Delhi Deletes Section 69B Jewellery Addition for Items in Siblings’ Locker

Luv Bhardwaj Vs DCIT (ITAT Delhi)

ITAT Delhi Deletes ₹2.45 Crore Section 68 Addition on Customer Advances; ITAT Delhi Deletes Section 68 Additions on Loans Supported by Bank Records

The Delhi Bench of the Income Tax Appellate Tribunal disposed of seven cross-appeals filed by the Revenue and the assessee arising from assessments for Assessment Years 2019-20 to 2022-23. The appeals arose from a search and seizure action conducted under Section 132 of the Income-tax Act, 1961 at the assessee’s business and residential premises on 10.10.2021, during which cash and jewellery were found and seized. The seven appeals involved common issues and were therefore decided by a common order.

The Tribunal ultimately dismissed all four Revenue appeals, partly allowed the assessee’s appeals for AYs 2019-20 and 2020-21, and allowed the assessee’s appeal for AY 2022-23.

AY 2019-20

For AY 2019-20, the Revenue challenged deletion of additions under Section 68 relating to customer advances of ₹2,45,11,712, an unsecured loan of ₹15 lakh, and unsecured loans of ₹90 lakh. It also challenged relief granted against an addition of ₹15,42,000 under Section 69A for cash deposits. The assessee separately challenged the balance addition of ₹6,92,000 under Section 69A and a disallowance of ₹1,06,582 towards penalty/late fee under Section 37.

The assessee was assessed at total income of ₹4,20,03,454 after additions of ₹2,45,11,712 under Section 68 read with Section 115BBE, ₹15 lakh under Section 68, ₹1,06,582 under Section 37, ₹15,42,000 under Section 69A and ₹90 lakh under Section 68. The CIT(A) deleted the major additions but sustained ₹6,92,000 out of the cash-deposit addition and the penalty/late-fee disallowance.

Customer Advances of ₹2.45 Crore

The Revenue contended that the assessee had failed to establish the nature of the transactions, identity and creditworthiness of the parties and had not furnished confirmations. The Revenue also argued that evidence accepted by the CIT(A) had not been confronted to the Assessing Officer.

The assessee submitted that it had regular business transactions with the parties and had received ₹16,04,82,697 as advances during the year, out of which ₹14,76,22,549 was adjusted against sales/supplies. The closing balance of ₹2,45,11,712 remained outstanding. The assessee argued that the receipts and corresponding sales had not been doubted.

The Tribunal observed that the assessee had furnished the names, addresses and PANs of the parties. The Assessing Officer had accepted the receipts of more than ₹16 crore and sales of ₹14.76 crore and had not conducted independent enquiries with the parties. The Tribunal reproduced the CIT(A)’s finding that the advances arose in the ordinary course of business and that the books and trading results had been accepted.

The Tribunal explained that Section 68 applies where a sum is credited in the assessee’s books during the previous year and the assessee either offers no explanation regarding its nature and source or the explanation is not satisfactory. It observed that the Assessing Officer’s opinion regarding the explanation must be based objectively on the material available on record.

Since the sales and advances were accepted and the Revenue failed to controvert the CIT(A)’s findings, the Tribunal held that the outstanding balances could not be treated as unexplained merely on assumptions and presumptions. The deletion of the ₹2,45,11,712 addition was upheld and the Revenue’s ground was dismissed.

₹15 Lakh Opening Loan Balance

The ₹15 lakh unsecured loan was treated by the assessee as an opening balance brought forward from an earlier year. The assessee furnished the relevant party particulars and stated that the amount related to loans taken in its proprietorship firm, M/s Fun N Joy, and that no fresh credit was received during the relevant year.

The Tribunal held that since the amount was not received during the relevant year and represented an opening balance brought forward from earlier assessment years, Section 68 was not applicable to the credit in the year under appeal. The CIT(A)’s deletion of the addition was therefore upheld.

₹6.92 Lakh Cash Deposit Addition

The assessee challenged the balance ₹6,92,000 addition under Section 69A, while the Revenue challenged the CIT(A)’s deletion of ₹8,50,000 out of the total ₹15,42,000 addition.

The assessee furnished the cash book and bank statements. The cash book showed an opening balance of ₹11,96,028, while bank statements showed cash withdrawals of ₹8.50 lakh. The Tribunal found that the deposits were made out of cash withdrawals and the opening cash balance. Since these entries were reflected in the cash book and were not doubted by the Assessing Officer, the Tribunal held that the addition could not be sustained merely on assumptions and presumptions.

The Tribunal accordingly deleted the remaining ₹6,92,000 addition, allowed the assessee’s ground and dismissed the corresponding Revenue ground.

₹90 Lakh Unsecured Loans

The assessee had received ₹10 lakh from M.G. Metalloy Pvt. Ltd. and ₹80 lakh from M/s Sincerely Finance & Investment Pvt. Ltd. The Assessing Officer treated the loans as unexplained under Section 68, principally noting that the lender companies had reported losses and the loans were interest-free.

The assessee furnished confirmations, ITR acknowledgements, bank statements and financial statements of both lenders. The Tribunal found that sufficient funds were available in their bank accounts when the loans were advanced. It also noted that M.G. Metalloy Pvt. Ltd. had turnover exceeding ₹5.22 crore and reserves and surplus of ₹210 crore, while Sincerely Finance & Investment Pvt. Ltd. had a net worth of ₹1.78 crore.

The Tribunal held that the assessee had discharged the burden under Section 68 by establishing the identity and genuineness of the transactions and creditworthiness of the lenders. It found that the Assessing Officer had not identified any error or discrepancy in the documentary evidence. The ₹90 lakh addition was therefore deleted and the Revenue’s ground was dismissed.

The assessee’s remaining grounds for AY 2019-20 were dismissed as not pressed. Its appeal was therefore partly allowed.

AY 2020-21

For AY 2020-21, the Revenue challenged deletion of a ₹2,59,64,342 Section 68 addition relating to customer advances, a ₹2 lakh disallowance concerning housing-loan interest, and a ₹11.17 lakh rent-related disallowance under Section 40(a)(ia). The assessee challenged the reassessment proceedings and a ₹16.20 lakh Section 69A addition relating to cash deposits.

The Tribunal followed its findings for AY 2019-20 and dismissed the Revenue’s challenge concerning customer advances.

Regarding housing-loan interest, the assessee had furnished a bank certificate showing payment of interest. The Tribunal noted that the deduction under Section 24B had subsequently been allowed by the Assessing Officer on the basis of the same certificate. It therefore upheld the CIT(A)’s deletion of the ₹2 lakh disallowance.

Regarding rent, the assessee had paid ₹11.17 lakh and claimed it in the profit and loss account. The assessee had declared a business loss of ₹20,49,596, which was carried forward. The CIT(A) had already upheld the applicable Section 40(a)(ia) disallowance, which was to be reduced from the business loss carried forward. The Tribunal held that a separate addition was therefore not warranted and dismissed the Revenue’s ground.

The assessee’s ₹16.20 lakh cash-deposit addition was also deleted. The cash book showed an opening balance of ₹5,04,028, and the assessee had disclosed income from trading agricultural produce. The Tribunal observed that the trading activity had been disclosed in the turnover, its profit had been accepted and the source of the cash deposit had been explained through the cash book. The addition was therefore deleted.

The assessee’s remaining grounds concerning initiation of proceedings under Section 148 and approval under Section 148B were dismissed as no separate submissions were made. The assessee’s appeal for AY 2020-21 was partly allowed, while the Revenue’s appeal was dismissed.

AY 2021-22

For AY 2021-22, the Revenue challenged deletion of additions under Sections 68 and 69C, including ₹9,43,16,450 relating to M/s Richfield Industries Pvt. Ltd., ₹1,76,67,419 of customer advances, ₹18.20 lakh of alleged unexplained credit-card payments, ₹15 lakh of unsecured loans and ₹12,23,686 arising from a difference between purchases recorded in the books and GST/Insight Portal data.

The Tribunal noted that ₹8,42,46,710 of the ₹9.43 crore balance was an opening balance. Purchases exceeding ₹19.60 crore from Richfield Industries had been examined in the preceding year and accepted. The CIT(A) had also considered the assessee’s online reply, confirmation, ITR acknowledgement, purchase details and GST returns. Since the Revenue did not controvert these findings, deletion of the addition was upheld.

The customer-advance issue was decided by following the Tribunal’s AY 2019-20 findings.

The ₹18.20 lakh credit-card payment addition under Section 69C was deleted because the payments had actually been made from the assessee’s bank account and were reflected in the regular books, contrary to the information relied upon by the Assessing Officer suggesting cash payments.

The ₹15 lakh unsecured-loan addition was also deleted because it represented an opening balance and the same amount had already been added in an earlier assessment year.

Regarding the ₹12,23,686 difference between book purchases and GST/Insight Portal figures, the assessee furnished a reconciliation explaining that the GST-reported amount included purchases of fixed assets and various expenses on which GST had been paid and reported. The Tribunal found that the Revenue had not produced contrary material and upheld deletion of the addition.

The Revenue’s appeal for AY 2021-22 was therefore dismissed.

AY 2022-23

For AY 2022-23, the Revenue challenged deletion of a ₹1,36,64,436 Section 68 addition concerning customer advances and a ₹6 lakh Section 69A addition concerning cash found during the search. The assessee challenged additions of ₹1,77,290 and ₹13,15,942 under Section 69B relating to gold/jewellery, besides other grounds.

The Tribunal followed its earlier findings on customer advances and dismissed the Revenue’s ground.

During the search, total cash of ₹14,79,500 was found. The assessee explained that it was recorded in the regular books and also represented savings of the assessee and family members. Of the total cash, ₹6 lakh was recorded in the books and had been released at the time of search. The Tribunal held that the CIT(A) had reasonably deleted the addition relating to the ₹6 lakh because the amount was recorded in the regular books. The Revenue’s challenge was dismissed.

Gold Coin and Two Ginnis

The assessee challenged an addition of ₹1,77,290 under Section 69B concerning one gold coin and two Ginnis found during the search. The assessee stated that the items were found in Locker No. 2 belonging to Smt. Deepa Bhardwaj, the assessee’s sister, and Shri Ankush Bhardwaj, the assessee’s brother.

The Tribunal examined the inventory and valuation report and noted that the items were found in the locker belonging to the assessee’s sister and brother. It further observed that the items were neither found from the assessee’s possession nor had the assessee admitted ownership of them. Accordingly, the Tribunal held that there was no reason to make the addition in the assessee’s hands and deleted the ₹1,77,290 addition.

Jewellery Addition of ₹13.15 Lakh

The assessee also challenged the ₹13,15,942 addition under Section 69B relating to jewellery. Total jewellery weighing 2,491.940 grams and valued at ₹1,78,75,757 was found during the search, of which jewellery valued at ₹13,15,942 was seized.

The Assessing Officer had treated 2,200 grams as explained by applying CBDT Instruction No. 1916 and made an addition for the balance.

The assessee submitted that Smt. Deepa Bhardwaj owned 2,500 grams of gold jewellery, as reflected in her Wealth Tax assessment. The Tribunal noted that the Assessing Officer had already accepted her ownership of 2,500 grams but had allowed only 500 grams as part of the 2,200 grams treated as explained.

The Tribunal observed that Smt. Deepa Bhardwaj was living jointly with the assessee and held that credit for the total jewellery owned by her should be given. It consequently held that the balance 291.940 grams could safely be presumed to belong to Smt. Deepa Bhardwaj and deleted the corresponding addition of ₹13,15,942.

The assessee’s appeal for AY 2022-23 was therefore allowed.

Final Result

The Tribunal dismissed all four Revenue appeals for AYs 2019-20, 2020-21, 2021-22 and 2022-23. The assessee’s appeals for AYs 2019-20 and 2020-21 were partly allowed, while its appeal for AY 2022-23 was allowed. The order was pronounced in the open court on 29.07.2026.

Cases Discussed

• Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd. (Allahabad High Court), [2024] 162 com 792 (Allahabad)
• Deputy Commissioner of Income-tax v. Paswara Papers Ltd. (Allahabad High Court), [2024] 159 com 604 (Allahabad)
• PCIT-07, Delhi vs. M/s Wel Intertrade Pvt. Ltd. (Delhi High Court), ITA No.135/2023
• PCIT (Central 1) v. Goodview Trading Pvt. Ltd. (Delhi High Court), 2016 (12) TMI 617
• Orissa Corporation Ltd. (Supreme Court), [1986] 159 ITR 78 (SC)

FULL TEXT OF THE ORDER OF ITAT DELHI

These are seven [07] appeals filed by the Revenue and the Assessee against the common order of Learned Commissioner of Income Tax (Appeals)-31, Delhi [“Ld. CIT(A)”] all dated 11.09.2025 arising out of the different assessment orders passed for Assessment Years 2019-20 to 2022-23 respectively. The seven [07] captioned Appeals filed by the Revenue and the Assessee are tabulated as under:

S. No.	Appeals	Asstt. Year	CIT(A)-31, Delhi Order dated	Assessment Order dated	Assessment Order passed under section
1	ITA No.1139/Del/2026 [Revenue’s appeal]	2019-20	07.11.2025	28.03.2024	147 of the I.T Act.
2.	ITA No.9054/Del/2025 [Assessee’s appeal]	2019-20	– do –	– do –	– do –
1.	ITA No.1140/Del/2026 [Revenue’s appeal]	2020-21	– do –	– do –	– do –
2.	ITA No.9055/Del/2025 [Assessee’s appeal]	2020-21	– do –	– do –	– do –
3.	ITA No.1141/Del/2026 [Revenue’s appeal]	2021-22	– do –	10.02.2023	143(3) of the I.T.Act
4.	ITA No.9056/Del/2025 [Assessee’s appeal]	2022-23	– do –	28.03.2024	– do –
5.	ITA No.1142/Del/2026 [Revenue’s appeal]	2022-23	– do –	– do –	– do –

2. All captioned seven (07) appeals filed by the Revenue and the assessee are having common issues, therefore, all appeals filed by the Revenue and the assessee are decided by a common order for the sake of convenience.

3. First of all, the Grounds of appeal taken in all the appeals filed by the Revenue and the assessee are reproduced as under:-

ITA 1139/DEL/2026 [Assessment Year: 2019-20]
[Revenue’s appeal]

1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,45,11,712/- made u/s 68 of the Income-tax Act, 1961, on account of unexplained advances from customers, without appreciating that the assessee failed to establish the identity, creditworthiness and genuineness of the credits.

2. The Ld. CIT(A) has erred in deleting the addition of Rs.15,00,000/- u/s 68, being unsecured loans, merely on the ground that the amounts were opening balances, without appreciating that the assessee failed to furnish confirmations, mode of receipt and creditworthiness of the lenders.

3. The Ld. CIT(A) has erred in granting relief of Rs.8,50,000/- out of cash deposit addition of Rs. 15,42,000/- u/s 69A, without establishing a direct nexus between cash withdrawals and subsequent cash deposits and without proper verification of cash flow.

4. The Ld. CIT(A) has erred in deleting the addition of Rs.90,00,000/- u/s 68 in respect of unsecured loans received from M/s M.G. Metalloy Pvt. Ltd. and M/s Sincerely Finance & Investment Pvt. Ltd., without properly appreciating the lack of creditworthiness, commercial improbability and interest-free nature of the transactions.

5. The order of the Ld. CIT(A) is erroneous in law and on facts to the extent of the relief granted and is liable to be set aside, as the findings are based on incomplete appreciation of evidence and incorrect application of law.

6. The appellant craves leave to add, amend, modify or withdraw any of the above grounds of appeal at the time of hearing.”

ITA 9054/DEL/2025 [Assessment Year: 2019-20]
[Assessee’s appeal]

1. “On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is bad-in-law without jurisdiction and barred in limitation and CIT(A) erred in not holding so.

2. On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, illegal, without jurisdiction and barred by limitation and, therefore, the said notice u/s 148 along with assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

3. On the facts and circumstances of the case and in law, the reassessment proceedings initiated are contrary to the provisions of law including the specific provisions of section 147 to section 151 of Income Tax Act, 1961 and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed and CIT(A) erred in not holding so.

4. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 1,06,582/- on account of disallowance of penalty/late fees u/s 37 of the Act.

5. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 6,92,000/- on account of alleged unexplained cash deposits u/s 69A of the Act.

6. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act, 1961 and CIT(A) erred in not holding so.”

ITA 1140/DEL/2026 [Assessment Year: 2020-21]
[Revenue’s appeal]

1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,59,64,342/-made u/s 68 of the Income-tax Act, 1961, on account of unexplained advances from customers, without appreciating that the assessee failed to establish the identity, creditworthiness and genuineness of the credits.

2. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.2,00,000/- made on account of interest on housing loan, without appreciating that the assessee failed to substantiate the eligibility of the claim in accordance with the provisions of the Income-tax Act, 1961.

3. The Ld. CIT(A) has erred in deleting the disallowance of Rs.11,17,000/- made on account of rent expenses, despite the admitted fact that tax was not deducted at source, thereby attracting the provisions of section 40(a)(ia) of the Income-tax Act, 1961.

4. The order of the Ld. CIT(A) is erroneous in law and on facts to the extent of the relief granted and is liable to be set aside, as the findings are based on incomplete appreciation of evidence and incorrect application of law.

5. The appellant craves leave to add, amend, modify or withdraw any of the above grounds of appeal at the time of hearing”

ITA 9055/DEL/2025 [Assessment Year: 2020-21]
[Assessee’s appeal]

1. “On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is bad-in-law without jurisdiction and barred in limitation and CIT(A) erred in not holding so.

2. On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, illegal, without jurisdiction and barred by limitation and, therefore, the said notice u/s 148 along with assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

3. On the facts and circumstances of the case and in law, the reassessment proceedings initiated are contrary to the provisions of law including the specific provisions of section 147 to section 151 of Income Tax Act, 1961 and therefore, the reassessment proceeding initiated along with assessment order passed are liable to be quashed and CIT(A) erred in not holding so.

4. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 16,20,000/- on account of alleged unexplained cash deposits u/s 69A of the Act.

5. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act, 1961 and CIT(A) erred in not holding so.”

ITA 1141/DEL/2026 [Assessment Year: 2021-22]
[Revenue’s appeal]

1. “The Ld. CIT(A) erred in deleting the addition of Rs.9,43,16,450/-made u/s 68 in respect of sundry creditor M/s Richfield Industries Pvt. Ltd., ignoring the fact that the assessee failed to establish the identity, creditworthiness and genuineness of the credit.

2. The Ld. CIT(A) erred in deleting the addition of Rs.1, 76,67,419/-made u/s 68 on account of advances from customers without appreciating that the nature and genuineness of such credits remained unsubstantiated.

3. The Ld. CIT(A) erred in deleting the addition of Rs.18,20,000/-made u/s 69C on account of unexplained credit card payments, without properly appreciating the information available from third-party sources indicating unexplained expenditure.

4.The Ld. CIT(A) erred in deleting the addition of Rs.15,00,000/-made u/s 68 in respect of unsecured loans, ignoring the absence of confirmations, lender details and supporting documentary evidence.

5. The Ld. CIT(A) erred in deleting the addition of Rs. 12,23,686/-made u/s 69C on account of difference between purchases recorded in the books and purchases reflected in GST/Insight Portal data.

6. The appellant craves leave to add, amend, modify or withdraw any of the above grounds of appeal at the time of hearing”

ITA 1142/DEL/2026 [Assessment Year: 2022-23]
[Revenue’s appeal]

1. “On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,36,64,436/-made u/s 68 of the Income-tax Act, 1961, on account of unexplained advances from customers, without appreciating that the assessee failed to establish the identity, creditworthiness and genuineness of the credits.

2. “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in restricting the addition made under section 69A of the Income-tax Act, 1961 in respect of unexplained cash found from the possession of the assessee, by granting relief of Rs. 6,00,000/-, without appreciating that the assessee failed to explain the source of the entire cash found during search.

3. “The order of the Ld. CIT(A) is erroneous in law and on facts to the extent of the relief granted and is liable to be set aside, as the findings are based on incomplete appreciation of evidence and incorrect application of law.

4. The appellant craves leave to add, amend, modify or withdraw any of the above grounds of appeal at the time of hearing.”

ITA 9056/DEL/2025 [Assessment Year: 2022-23]
[Assessee’s appeal]

1. “On the facts and circumstances of the case and in law, the assessment proceedings initiated and the assessment order passed by the assessing officer is bad-in-law without jurisdiction and barred in limitation and CIT(A) erred in not holding so.

2. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 1,77,290/- on account of alleged unexplained investment u/s 69B of the Act.

3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 13,15,942/- on account of alleged unexplained investment u/s 69B of the Act.

4. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 10,50,000/- on account of alleged unexplained cash found in locker as unexplained money u/s 69A of the Act.

5. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 8,79,500/- on account of alleged unexplained cash found as unexplained money u/s 69A of the Act.

6. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the Ld. Assessing Officer to the extent of Rs. 1,37,730/- on account of disallowance u/s 37(1) of the Act.

7. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 148B of the Income Tax Act, 1961 and CIT(A) erred in not holding so.”

8. First we take appeals filed by both the parties i.e. Revenue and the assessee for assessment Year 2019-20.

ITA 1139/DEL/2026[Revenue’s appeal]
ITA 9054/DEL/2025 [Assessee’s appeal]
[Assessment Year: 2019-20]

5. Brief facts of the case are that the assessee is an individual and a search and seizure action was carried out u/s 132 of the Act at the business & residential premises of the assessee on 10.10.2021 wherein cash and jewellery was found and seized. Thereafter, case of the assessee was centralized with the DCIT, Central Cirlce-26, Delhi in terms of order passed u/s 127 of the Act dated 29.01.2022. Subsequently, notice u/s 148 was issued with the prior approval of ld. PCIT, Central-3, Delhi on 31.08.2022. In response, the assessee has filed the return of income on 22.09.2022 declaring total income of INR 53,43,160/- as was declared in the return filed on 31.10.2019 u/s 139(1) of the Act. The AO issued various notices which were duly replied and after considering the submissions made by the assessee, total income of the assessee was assessed at INR 4,20,03,454/- by making following additions/disallowance:-

a. INR 2,45,11,712/- u/s 68 r.w.s. 115BBE of the Act;

b. INR 15,00,000/- on account of unsecured loan u/s 68 of the Act;

c. INR 1,06,582/- on account of disallowance of penalty/late fee u/s 37 of the Act;

d. INR 15,42,000/- on account of unexplained cash deposits u/s 69A of the Act; and

e. INR 90,00,000/- on account of bogus unsecured loans u/s 68 of the Act.

6. Against the said order, the assessee is in appeal before Ld. CIT(A) who has confirmed the addition of INR 6,92,000/- out of total addition of INR 15,42,000/- made on account of cash deposited u/s 69A of the Act and further confirmed the disallowance of INR 1,06,582/- of penalty/late fee and remaining additions / disallowance made were deleted.

7. Aggrieved by the order of Ld. CIT(A), both the Revenue and the assessee are in appeal before the Tribunal by taking various Grounds of appeal as reproduced herein above.

8. Ground of appeal No.1 raised by the Revenue is with respect to the deletion of addition of INR 2,45,11,712/- made of the balances of Sundry creditors outstanding at the end of the previous year relevant to year under appeal.

9. Before us, Ld. CIT DR vehemently supported the orders of the AO and submits that the assessee has failed to establish the nature of transactions and no confirmations were filed of any of the parties. He submits that parties remained unidentified and transactions with them also remained unverified, therefore the AO has rightly treated the balances outstanding as unexplained. Ld. CIT DR submits that AO had observed that the assessee has failed to prove the creditworthiness of the parties who had given advances to the assessee by not filing their ITR, confirmations and other particulars. Ld. CIT DR further submits that Ld. CIT(A) has accepted the submissions filed by the assessee and the evidences produced without providing opportunity to the AO nor they were confronted to the AO therefore, the entire addition made by the AO deserves to be restored.

10. On the other hand, Ld.AR for the assessee vehemently supported the order of Ld. CIT(A) and submits that during the course of assessment proceedings, AO has asked the assessee about the details of outstanding balances, which was duly replied by the assessee and detailed chart of the Sundry creditors was filed alongwith the letter in reply to show cause notice dated 13.03.2024 filed on 16.03.2024, placed at page 72 to 76 of the Paper Book and reproduced by ld. CIT(A) in its order. Ld. AR submits that assessee was having regular transactions of supply of goods with all these parties and had received total sum of INR 16.00 crores as advance from them during the year out of which INR 14,76,22,549/- were adjusted against the sales / supplies made to them and closing balance of INR 2,45,11,712/- was remained outstanding at the end of the year which was treated as unexplained. Ld.AR submits that when the opening balance was not doubted nor the receipts of more than INR 16.04 crores were doubted and the sales/supplies made of more than INR 14.76 crores stood accepted, there was no reason to disbelieve the closing balances of INR 2.45 crores payable to these parties. Ld. AR submits that ld. CIT(A) after appreciating these facts, has deleted the addition and thus requested for the confirmation of order of ld. CIT(A) on this issue.

11. Heard the contentions of both the parties at length and perused the material on record including the orders of the lower authorities. It is observed that the AO has alleged that assessee has not filed any details of the transactions carried out with the parties. Further the AO has doubted the creditworthiness of the parties and genuineness of the transactions made with them. The observations as made by AO as contained in para 7 at page 13 are very vague where the AO has failed to appreciate the fact that the same were the closing balances which was held as unexplained credits u/s 68 of the Act. It is an admitted fact that during the year under appeal, assessee has received a sum of INR 16,04,82,697/- from these parties and there was opening balances of INR 1,16,51,564/- out of which INR 14,76,22,549/- were adjusted against the sales made to them. The AO neither doubted the receipt of advance of more than INR 16.00 crores from these parties, whose names and addresses alongwith their PAN Nos. were submitted before the AO nor doubted the fact that assessee has made sales of INR 14.76 crores to these parties which has also been accepted. Once the total receipts of INR 16.04 crores from these parties were accepted and consequent sales made was never doubted nor any independent inquiries were made from any of these parties by issuing summons and doubted their creditworthiness. The ld. CIT(A) deleted the additions after appreciating these facts by observing as under:-

13. “Upon careful consideration of the remarks of the AO made in the assessment order and also the submission of the appellant, it is noticed that the appellant has furnished before the AO complete details of advances in the prescribed format as required by the AO. The details and submission given by the appellant before the AO included name and address of the parties, their PAN, details of opening balance, sales, amount received during the year and their closing balance. The AO has not pointed out any specific discrepancy or adverse remarks in respect of any of the party. As a matter of fact, the AO has accepted all the transactions with the parties but made addition of closing balance which is without any rationale. These amounts are not the loans or any other form of cash credit. These are amount received during ordinary course of business and sales of goods. The AO has not pointed out any discrepancy in respect of any of the party. The remarks of the AO that current status of advances was not furnished is also not correct.

14. Although, the AO has not asked for the current status, however, it is a matter of record that the AO has himself passed assessment order for subsequent order i.e. A.Y. 2020-21, Α.Υ. 2021-22 & Α.Υ. 2022-23 in which also the details of advances were furnished. In my considered opinion, the AO was not justified in applying provisions u/s 68 in respect of trade advances. The AO has accepted the sales transactions with the parties. The AO has accepted all the amounts received from the parties during the year except closing balance. The appellant is registered with GST. The books of accounts of the appellant have been accepted by the AO and trading results have not been disturbed by the AO. In view of the above factual position, the addition of Rs. 2,45,11,712/ made by the AO is not sustainable in law as well as on facts. Accordingly, the addition of Rs. 2,45,11,712/-made by the AO is liable to be deleted. I hold accordingly. Hence, the addition of Rs. 2,45,11,712/- made by the AO hereby deleted.”

12. The provisions of section 68 of the act, reads as under:

68. “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :

[Provided that where the assessee is a company (not being a company in which the public are substantially Interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

a. the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

b. such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]”

13. That a bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression “the assessee offer no explanation” means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion.

14.In the instant case, as observed above, the assessee has filed all the details of the parties and the AO has accepted the sales made to them and further the amount of advances received and only treated the closing balances as unexplained. Before us, except retreating the allegations made by the AO, Revenue has failed to controvert the findings of Ld. CIT(A) which are very specific and made after considering the fact that sales have regularly been made to these parties which were never doubted nor the receipt of advances from these were doubted. Once the trading results declared were accepted which includes the sales made to these, merely on assumptions and presumptions the balances outstanding cannot be held as unexplained.

15. Considering the overall facts and circumstances of the case, we find no reason to interfere int eh order of ld. CIT(A) which is hereby, upheld. Accordingly, Ground of appeal No.1 raised by the Revenue is dismissed.

16. Ground of appeal No.2 raised by the Revenue is with respect to the addition of INR 15.00 Lakhs made by AO u/s 68 treating the unsecured loans as explained and deleted by ld. CIT(A).

17. Heard the contentions of both the parties at length and perused the material on record. The AO has made the addition by observing that a sum of Rs. 15.00 lacs was appearing in the Balance Sheet as unsecured loans and no explanation was given about the source of the same. On the contrary, claim of the assessee was that the same was the opening balance brought forward from previous year and was duly appearing in the Balance Sheet of immediately preceding assessment year also. In support, assessee filed the list of the parties containing their name and PAN and other particulars, placed at page 34 of PB and copy of which was also filed before the AO in reply to show cause notice dated 13.03.2024 and it was specifically stated by the assessee that INR 15.00 Lakhs pertained to the loans taken in his proprietorship firm M/s Fun N Joy and is the opening balance and no fresh credits were received during the year under appeal.

18. Section 68 of the Act provides that if any sum is found credited in the books of accounts during the year and for which no explanation is given or the assessee has failed to prove the genuineness of the transactions and creditworthiness of the parties then only the addition could be made u/s 68 of the Act. However, in the instant case the alleged sum of Rs. 15.00 lacs were not received during the year under appeal and it was the opening balance brought forward from preceding AYs therefore, provision of section 68 are not applicable to such credits brought forward from preceding years. Ld. CIT(A) after appreciating these facts, has deleted the additions and in our opinion, such observations require no interference therefore, Ground of appeal No.2 raised by the Revenue is dismissed and order of ld. CIT(A) is sustained on this issue.

19. Ground of appeal No. 3 raised by the Revenue is with respect to the deletion of addition of INR 8,50,000/- made u/s 69A of the Act out of the total addition of Rs. 15,42,000/- made by the AO. The assessee is also in appeal against the confirmation of the addition of INR 6,92,000/- for which Ground of appeal No.5 was taken by the assessee. Since the Grounds of appeal taken by the Revenue and by the assessee are for similar issue therefore, they are taken together.

20. Before us, Ld.AR for the assessee submits that during the course of assessment proceedings, assessee has filed the copy of the cash book for the year under appeal wherein there was opening balance of INR 11,96,028/- and assessee has made cash withdrawals of INR 8,50,000/- from the bank accounts thus the immediate source of deposits was duly explained. Ld. AR submits that ld. CIT(A) though has accepted this factual position however, on assumption and presumptions, has sustained the addition of INR 6,92,000/- ignoring the fact that INR 11,96,028/- was available with the assessee brought forward from the previous year and was duly disclosed in the audited financial statements and once it was brought forward from earlier year, the same cannot be held as unexplained in the year under appeal. Ld.AR submits that AO and ld. CIT(A) has incorrectly made the addition of the opening balance declared by the assessee and requested that same should be treated as explained and additions made be deleted.

21. On the other hand, Ld. CIT DR for the Revenue vehemently supported the order of AO and submits that AO has made the additions after considering the cash book and other particulars filed by the assessee. As per AO, balance shown by the assessee and the withdrawals made for the purpose of re-deposit and immediate source of the cash was not fully explained by the assessee and therefore, requested for the confirmation of the addition made.

22. Heard the contentions of both the parties at length and perused the material on record. It is observed that the assessee has filed the copy of cash book before the AO alongwith the bank statement. As per bank statement, withdrawals of INR 8.50 Lakhs were made on different dates by the assessee. Further, from the perusal of cash books, it is observed that there was an opening cash balance of INR 11,96,028/- and closing balance was of INR 5,04,028/-. The deposits were made out of the cash withdrawals and further out of the opening balance available with the assessee. All these fact are borne out from the perusal of the cash book. Once the AO has not doubted the entries made in the cash book, merely on assumptions and presumption, addition cannot be made with respect cash deposited in the bank account for which the immediate source was explained as out of withdrawal made and opening cash in hand. In view of these facts, we hereby delete the addition of INR 6,92,000/- upheld by ld. CIT(A) and accordingly, Ground of appeal No.5 raised by the assessee is allowed and Ground of appeal No.3 raised by the Revenue is dismissed.

23. Ground of appeal No.4 of the Revenue is with respect to the deletion of addition of INR 90.00 Lakhs made u/s 68 in respect to the loans taken from two parties.

24. Briefly stated the facts leading to this issue are that during the year under appeal, assessee has taken loan of INR 10.00 Lakhs from M. G. Metalloy Pvt. Ltd. and of INR 80.00 Lakhs from M/s. Sincerely Finance & Investment Pvt. Ltd. The AO observed that the loans were taken interest free and assessee has failed to establish the creditworthiness of these companies who both have declared losses in their return of income filed therefore the loans taken from them were treated as unexplained and addition was made u/s 68 of the Act.

25. Ld. CIT DR for the Revenue submits that AO in para 13 of the assessment order has clearly observed that assessee has failed to prove the creditworthiness of the parties. Both the companies have filed their return of income wherein they were having losses and despite the facts that both the companies are in loss, no interest was charged on the loan given to the assessee which is very unusual and against the business interest. He, therefore, submits that the AO has rightly made the addition which deserves to be restored.

26. On the other hand, ld.AR for the assessee submits that during the course of assessment proceedings, assessee has filed confirmations of both the lenders, their ITRs and their financial statements. Ld.AR submits that copies of the bank statements of both the lenders were filed to prove that transactions as genuine and both the parties have sufficient creditworthiness as there were sufficient funds available when they were transferred to the assessee. Ld.AR submits that ld. CIT(A) had appreciated these facts and deleted the additions made. He therefore, prayed that the order of ld. CIT(A) be sustained on this issue.

27. Heard the contentions of both the parties at length and perused the material on record. It is observed that the assessee has discharged the burden casted upon it u/s 68 of the Act of proving the identity and genuineness of the transaction by filing the bank statements, ITRs and financial statements of bot the lender. From the perusal of banks statements of both the parties, it is observed that sufficient funds were available when the loans were given to the assessee. The AO has failed to point out any error or discrepancy in the documents filed by the assessee. The sole allegation of the AO for disbelieving the creditworthiness is that both the companies are in losses. It is further observed that M.G. Metalloy Pvt. Ltd. has turnover of more than INR 5.22 crores and also have the Reserves and Surpluses of INR 210.00 crores. From the Balance Sheet of M/s. Sincerely Finance & Investment Pvt. Ltd., it is observed that the company has net worth of INR 1.78 crores and further advance given to the assessee is duly appearing in the list of advances. Both the companies are assessed to tax and their complete particulars were filed, more particularly, the bank statements. Ld. CIT(A) after considering these facts, deleted the additions by making following observations:-

22. “Upon careful consideration of the remarks of the AO made in the assessment order and also the submission of the appellant, it is seen that the AO has made the addition u/s 68 of the Act in respect of loans received from following parties: –

i.	M/s M.G. Metalloy Pvt Ltd	Rs. 10,00,000/-
ii.	M/s Sincerely Finance and Investment Pvt Ltd	Rs. 80,00,000/-
	Total	Rs. 90,00,000/-

23. Under Section 68 of Act where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source therefore or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Under section 68 of the Act, the onus of the assessee is discharged if he proves the identity of the Creditors, genuineness of the transaction and creditworthiness of the creditors. In the present case, the appellant submitted before the AO the following documentary evidences: –

Documents

M/s M.G. Metalloy Pvt Ltd

– Confirmation of Account of the Loan creditor

– ITR acknowledgement of the loan creditor

– Copy of bank statement of the loan creditor

– Balance Sheet of the loan creditor

M/s Sincerely Finance and Investment Pvt Ltd

– Confirmation of Account of the Loan creditor

– ITR acknowledgement of the loan creditor

– Copy of bank statement of the loan creditor

– Balance Sheet of the loan creditor

24. The AO has not pointed out any discrepancy in the above documentary evidences submitted by the appellant. There can be no dispute about the identity of the loan creditors. The loan creditors are companies incorporated under the Companies Act. The AO has not even disputed the identity of the creditors. As regards the creditworthiness of the creditors, the creditors have duly confirmed about giving loans to the company. As regards the reason given by the AO that the loan creditors companies are loss making companies, there is substance in the submission of the appellant that merely because the loan creditor companies are having losses in current year, it cannot be a ground for making the addition and that in the context of Section 68 of the Act, what is relevant is “source” of loan and such “source” is not confined to current year income. The loan creditor can have many sources such as owned funds and borrowed funds. In the present case of the appellant, both the loan creditors are having sufficient and substantial sources available with them as given in the submission of the appellant. The Hon’ble Jurisdictional Delhi High Court in case of PCIT (Central 1) v. Goodview Trading Pvt. Ltd. 2016 (12) TMI 617 has held that where as per the audited financial statement, the loan creditors were having sufficient sources, addition u/s 68 cannot be made. Thus, there can be no dispute about the creditworthiness of the loan creditors. As regards the genuineness of the transaction the loans were received by banking channel. The loan creditor has confirmed their transaction with the appellant. With regard to the remarks of the AO that the appellant did not pay any interest, there is substance and justification in the submission of appellant that the loan creditor companies are not outside parties. The appellant himself is director in the company i.e. M/s Sincerely Finance and Investment Pvt Ltd while the other company M/s M.G. Metalloy Pvt Ltd is owned by close friend of the appellant. Thus, there can be no dispute about the genuineness of the transactions.

25. In view of the above, in my considered opinion, the appellant has sufficiently discharged his onus by proving the identity of the creditors, creditworthiness and genuineness of the loan creditors/transactions. The appellant has explained the source of credit in its books of accounts by way of confirmation of the creditors and their bank statement. The AO is raising doubt about source of source. It is a settled law that for the year under consideration, the appellant was not required to explain the ‘source’ of ‘source”. ‘Requirement of explaining ‘source’ of ‘source’ in respect of loans is applicable from A.Y. 2023-24 and subsequent years The AO has not brought on record any adverse information or material in respect of the loan creditors. The loan creditors are not alleged to be accommodation entry providers. In view of the above, the addition of Rs. 90,00,000/- made by the AO cannot be held to be justified and, therefore the same is hereby deleted.”

28. It is observed that ld. CIT(A) has appreciated that the assessee has filed all the relevant details and thus discharged the burden casted upon it u/s 68 of the Act to prove the genuineness of the transactions and creditworthiness of both the lenders. It is further observed that the loans were given out of the regular bank accounts where sufficient balances were available when the loans were given to the assessee.

29. The Hon’ble Supreme Court in the case of Orissa Corporation Ltd. reported in [1986] 159 ITR 78 (SC) has held that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burdenshifts to the Department to establish the Revenue’s case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee.

30. The Hon’ble Jurisdictional Allahabad High Court in the case of Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd. reported in [2024] 162 com 792 (Allahabad) has held as under

“Income tax : where assessee had received unsecured interest bearing loans from three corporate entities and had furnished necessary acknowledgement of return,
balance sheet, profit and loss account, etc., to prove identity, creditworthiness and genuineness of transaction of unsecured loan taken by it, addition under section 68 was not warranted.”

31. In the case of Deputy Commissioner of Income-tax v. Paswara Papers Ltd. reported in [2024] 159 com 604 (Allahabad), the Hon’ble Allahabad High Court has held as under:

“INCOME TAX : Where assessee received loan from various creditors who sold their old jewellery and gave loan to assessee out of sale consideration, since assessee had disclosed name of jewellers to whom jewellery was sold and also established mode of payment through banking channel, and moreover existence of deposits made to assessee by creditors was not in dispute, impugned addition under section 68 with respect to loan could not be sustained.”

32. In view of the above facts and circumstances of the case and by respectfully following the order of the hon’ble high courts as stated supra, we find no error in the order of ld. CIT(A) deleting the additions made which is hereby upheld. Thus, Ground of appeal No.4 raised by the Revenue is dismissed.

33.Ground of appeal Nos. 5 & 6 raised by the Revenue are general in nature hence, not adjudicated.

34.In the result, appeal of the Revenue is dismissed.

35. Now we take appeal of the assessee in ITA No.9054/Del/2025 for Assessment Year 2019-20.

ITA 9054/DEL/2025 [Assessment Year: 2019-20]
[Assessee’s appeal]

36. We have already considered the facts and decided the assessee’s Ground of appeal No.5 alongwith the Revenue’s Ground of appeal No.3. With respect to the remaining Grounds of appeal, before us, no submissions were made in respect to these Grounds of appeal therefore, the same are dismissed as not pressed.

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

38. Now we take appeal of the Revenue in ITA No.1140/Del/2026 for assessment Year 2020-21.

ITA No.1140/Del/2026 [Assessment Year 2020-21]
[Revenue’s appeal]

39. Ground of appeal No.1 raised by the Revenue is with respect to the deletion of addition of INR 2,59,64,342/- made u/s 68 on account of advance received from the customers held as unexplained.

40. Before us, both the parties have fairly admitted that this issue is identical to the issue raised in revenues appeal for AY 2019-20 in ITA No.1139/Del/2026 wherein the revenue has challenged the deletion of addition of INR 2,45,11,712/- made. While deciding the appeal of the revenue herein above, we uphold the order of the ld. CIT(A) and dismissed the Ground of appeal No. 1 raised by the Revenue in ITA No.1139/Del/2026 for Assessment Year 2019-20.

41. Facts being identical as admitted by both the parties therefore, by respectfully following the observations made in ITA No.1139/Del/2026 for AY 2019-20 while dismissing the appeal of the Revenue which are Mutatis Mutandis applied to the present case also. Thus, Ground of appeal No.1 raised by the Revenue is dismissed.

42. Ground of appeal No.2 of the Revenue is with respect to the deletion of disallowance of INR 2.00 Lakhs made on account of interest on housing loan claimed u/s 24B of the Act.

43. Heard the contentions of both the parties at length and perused the material on record. It is observed that the assessee has taken housing loan from Union Bank of India and during the year under appeal, has paid interest on such loan. The necessary certificate regarding payment of interest issued by the bank was filed before the AO which is placed at page 70 of the Paper Book. The assessee has claimed deduction u/s 24B of the Act which was allowed in subsequent Assessment Year by the AO based on the same certificate. IN the instant year, claim was disallowed without appreciating the evidence filed by the assessee. Ld. CIT(A) after considering the submissions made and evidences filed in the shape of bank certificate issued, has deleted the disallowance. We find no error in the order of ld. CIT(A) as the interest was paid on the housing loan was claimed upto the maximum ceiling of INR 2,00 Lakhs u/s 24(b) of the Act. Accordingly, the order of ld. CIT(A) deleting the disallowance so made is hereby confirmed. Ground of appeal No.2 raised by the Revenue is accordingly, dismissed.

44. Ground of appeal No.3 raised by the Revenue is with respect to the deletion of addition of INR 11,17,000/- made u/s 40(a)(ia) of the Act.

45. The AO observed that assessee has paid rent on which TDS was not deducted and in the Tax Audit Report, a sum of INR 3,25,000/- was shown as the amount on which no TDS was deducted and thus the AO had made the disallowance. Ld. CIT(A) after appreciating the fact that assessee has declared loss under the head “Business or profession” which was carried forward to next year therefore, held that no separate addition is required to be made and accordingly, has deleted the addition made, however, has confirmed the disallowance u/s 40(a)(ia) of the Act.

46. Heard the contentions of both the parties at length and perused the material on record. It is observed that assessee has paid rent of INR 11,17,000/-and claimed the same in Profit & Loss Account and declared total loss of INR 20,49,596/- under the head “income from business or profession”. Besides this, the assessee has declared income from salary, housing property and other sources and from the perusal of the computation of income placed before us, it is observed that the assessee has not claimed set off the loss declared under the head “income from business or profession” with the income declared under other heads of income and was carry forward to next year. It is further observed that ld. CIT(A) has already upheld the disallowance of INR 3.35 Lakhs u/s 40(a)(ia) of the Act which is to be reduced from the loss carry forward to next year. Since no separate expenditure was claimed therefore, there is no occasion for the AO for making separate disallowance of the same. Under these facts and circumstances of the case, we find that no error in the order of Ld. CIT(A) who has rightly deleted the disallowance which was claimed as deduction out of the total income for the year under appeal. However, we are in agreement with the observations of ld. CIT(A) who has rightly upheld the disallowance @ 30% of the total rent paid u/s 40(a)(ia) of the Act without making TDS which is to be reduced from the business loss carried forward to next year. Accordingly, we uphold the order of ld. CIT(A) and dismissed Ground of appeal No.3 raised by the Revenue.

47. Ground of appeal Nos. 4 & 5 raised by the Revenue are general in nature hence, not adjudicated.

48. In the result, appeal of the Revenue is dismissed.

49. Now we take appeal of the assessee in ITA No.9055/Del/2025 for Assessment Year 2020-21.

ITA 9055/DEL/2025 [Assessment Year: 2020-21]
[Assessee’s appeal]

50. Ground of appeal Nos. 1 to 3 raised by the assessee are with respect to the initiation of the proceedings u/s 148 of the Act. However, no separate submissions was made therefore, the same is hereby, dismissed.

51. Ground of appeal No.4 raised by the assessee is with respect to the confirmation of addition of INR 16.20 Lakhs made on account of cash deposited in the bank account.

52. Heard the contentions of both the parties at length and perused the material on record. The addition was made by holding that the assessee has deposited cash of INR 16.20 Lakhs in his bank account. Regarding the source, assessee has filed copy of cash books as per which there was opening balance of INR 5,04,028/- and further, assessee has declared income from trading of agricultural produce. It is observed that the AO has disbelieved the income declared by the assessee from such activity and made the addition which was upheld by ld. CIT(A). The copy of cash book is placed at page 72 of the Paper Book. It is observed that the assessee has declared sales from trading of agricultural products which were duly incorporated in the total turnover. Once the assessee has explained the source and filed all the necessary evidences and the trading in agriculture produce has never been doubted on which the profit declared has been accepted as such. In view of these facts, we find no reason to hold that the source of the cash deposited into bank remained unexplained and thus the addition so made is hereby deleted. The Ground of appeal No. 4 raised by the assessee is thus, allowed.

53. Ground of appeal No.5 of the assessee is with respect to the approval granted u/s 148B for which no separate submission was made thus same is dismissed.

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

55. Now we take appeal of the Revenue in ITA No.1141/Del/206 for Assessment Year 2021-22.

ITA 1141/DEL/2026[Revenue’s appeal]
[Assessment Year: 2021-22]

56. Ground of appeal No.1 raised by the Revenue is with respect to the deletion of addition of INR 9,43,16,450/- made u/s 68 of the Act in respect of sundry creditor M/s. Richfield Industries Pvt. Ltd.

57. Heard the contention of both the parties at length and perused the material available on record. The addition was made by the AO on the allegation that no details were filed by the assessee with respect to the transactions with M/s. Richfield Industries Pvt. Ltd. and neither any reply was filed by the said party in response to the notice issued u/s 133(6) of the Act by the AO. Thus, the AO had concluded that assessee has failed to establish the identity as well as creditworthiness of the suppliers and made the addition u/s 68 of the Act. It was the claim of the assessee that out of the addition made of INR 9,43,16,450/-, a sum of INR 8,42,46,710/- was the opening balance and there was increase of INR 1,00,69,740/- during the year under appeal. It was further claimed by the assessee that in immediately preceding year, verification of the purchases made from the said party of more than INR 19.60 crores was done by the AO and after considering the facts and the replies filed had accepted the transactions as well as the closing balance of INR 8.42 crores. The assessee further claimed that online reply was filed on 23.12.2022 which skipped the attention of the AO who had wrongly observed that assessee has not made any compliance.

58. It is observed that ld. CIT(A) had appreciated these facts and further placed reliance on the judgments of Hon’ble Jurisdictional High Court in the case of PCIT-07, Delhi vs. M/s Wel Intertrade Pvt. Ltd. in ITA No.135/2023 wherein it is held that merely because notice issued u/s 133(6) of the Act was not complied with, the same cannot be reason for making addition. Ld. CIT(A) had deleted the addition by making following observations:-

11. “Upon careful consideration of the remarks of the AO made in the assessment order and also the submission of the appellant, it is seen that in response to questionnaire issued by the AO the appellant, by online reply dated 23.12.2022, submitted before the AO confirmation of account of M/s Richfield Industries Pvt Ltd along with copy of their ITR Acknowledgment. The appellant also furnished before the AO detail of date wise purchases made from all parties including M/s Richfield Industries Pvt Ltd along with GST returns. From the confirmation of account of M/s Richfield Industries Pvt Ltd, it is seen that opening credit balance as on 01.04.2020 of M/s Richfield Industries Pvt Ltd. was Rs. 8,42,46,710/- (Rs. 4,76,72,735 + Rs. 3,65,73,975) and closing balance was Rs. 9,43,16,450/-. Thus, during the year there is net increase of Rs. 1,00,69,740/ only. In the immediately preceding year i.e. A.Y. 2020-21, there were purchases of Rs. 19,60,35,966/ made by the appellant from M/s Richfield Industries Pvt Ltd and the AO raised specific queries relating to the same in A.Y. 2020-21. The AO after duly examination, accepted the transactions and balance of M/s Richfield Industries Pvt Ltd for A.Y. 2020-21. The opening outstanding balance of Rs. 8,42,46,710/-relates to earlier year (F.Y. 2019-20) which has been duly accepted by the AO himself in the assessment order passed for A.Y. 2020-21 which has been passed on 28.03.2024 i.e. subsequent to the date of assessment order in question.”

59. Before us, the Revenue has failed to controvert the findings given by ld. CIT(A) who not only appreciated the facts that the majority of balance of INR 8,42,46,710/- was the opening balance brought forward from previous year where assessment was completed u/s 143(3) of the Act and no doubts were raised about the transaction made. Moreover, the purchases during the year have been accepted. Looking to the entirety of facts, we find no error in the order of ld. CIT(A) in deleting the addition made which order is hereby, upheld. Accordingly, Ground of appeal No.1 raised by the Revenue is dismissed.

60. Next Ground of appeal No.2 raised by the Revenue is with respect to the deletion of addition of INR 1,76,67,419/- made u/s 68 of the Act on account of advance received from the customers.

61. Under identical circumstances by making similar observations, AO has made the addition of outstanding balances of advances received during the year which were deleted by ld. CIT(A) and such order of ld. CIT(A) was upheld by us while deciding the appeal of the assessee for AY 2019-20 in ITA No. 1139/Del/2026. Facts being identical in this year also and which fact is fairly admitted by both the parties, thus, by following the aforesaid observations in ITA No. 1139/Del/2026 for AY 2019-20 which are Mutatis Mutandisapplicable to this Ground of appeal, thus the Ground of appeal No. 2 raised by the Revenue is dismissed.

62. Ground of appeal No.3 raised by the Revenue is with respect to the deletion of addition of INR 18.20 Lakhs made u/s 69C of the Act on account of unexplained credit card payments.

63. Heard the contention of both the parties at length and perused the material available on record. The AO had made the addition by observing that the information was available on Insight Portal that assessee has made payment of INR 18.20 Lakhs towards payment of American Express Credit Card in cash and had not explained the source thereof. However, it was the claim of the assessee that the entire payment was made through bank account maintained in the regular books of business and copy of the same was filed. Ld. CIT(A) after appreciating this fact, has deleted the additions made. The relevant observations of ld. CIT(A) as contained in para 20 of the order are as under:-

20. “Upon careful consideration of the remarks of the AO made in the assessment order and also the submission of the appellant, I find that as per the AO, the payments for credit cards were made in cash, source of which could not be explained by the appellant. However, the fact of the matter is that the credit card payments have been made from bank account of the appellant. Once, the payments are verifiable from the bank account of the appellant, the addition made by the AO, being factually erroneous cannot be sustained. Therefore, the addition of Rs. 18,20,000/- made by the AO is liable to be deleted. I hold accordingly. Hence, the said addition made by the AO is hereby deleted.”

64. Before us, Revenue has failed to controvert the findings of ld. CIT(A) that the payments were made though banking channel and not in cash. Further, the ld. CIT(A) had verified all the payments made from the bank account of the assessee which is forming part of the regular books of accounts and therefore, addition was made based on incorrect information available which was not verified by the AO. Accordingly, we find no error in the order of ld. CIT(A) in deleting the addition so made. The Ground of appeal No.3 raised by the Revenue is thus dismissed.

65. Ground of appeal No.4 raised by the Revenue is with respect to the deletion of addition of INR 15.00 Lakhs unsecured loans.

66. Heard the contention of both the parties at length and perused the material available on record. While deciding the appeal of the assessee in AY 2019-20 in ITA No.1139/Del/2026, it was observed that this amount of INR 15.00 Lakhs was the opening balance but the AO has made the addition u/s 69 holding the same as fresh cash credit. In this year also, AO had made the addition of the same amount ignoring the fact that addition of the same amount was already made in AY 2018-19. Ld. CIT(A) after appreciating these facts has deleted the addition which order is hereby, upheld. The Ground of appeal No.3 raised by the Revenue is dismissed.

67. Ground of appeal No.5 raised by the Revenue is with respect to the deletion of addition of INR 12,23,686/- made on account of difference between the purchases reflected in GST/Insight Portal.

68. Heard the contention of both the parties at length and perused the material available on record. The AO has made the addition by observing that the assessee has shown purchase of INR 63,47,921/- as against which as per Insight Portal, GST purchases were shown at INR 75,71,607/- and since the difference was not explained by the assessee therefore, he made the addition of INR 12,23,686/- as unexplained expenditure u/s 69C of the Act.

69.Before us, it was explained by the assessee that the amount reported in GST Portal is inclusive of all the purchases made by the assessee on which GSTis paid whether it is of the goods traded or purchases of fixed assets or payment of expenses. The assessee also filed a re-conciliation statements which is placed at pages 66 to 68 of the Paper Book though which has been able to demonstrate that difference in purchases declared was on account of purchases of fixed assets and payment of various expenses on which GST was paid and reported in the GST portal. It is observed that ld. CIT(A) after verifying the re-conciliation statement, has deleted the addition. Before us, said findings have not been controverted by Revenue by placing any contrary material on record.

70.Under these circumstances, once the assessee had been able to successfully demonstrated that the difference is on account of purchase of fixed asset i.e Tempoo of INR 11,63,002/-, on account of expenses etc., no adverse inference could be taken for the said differential amount. Thus, Ground of appeal No.5 raised by the Revenue is dismissed.

71. Ground of appeal No.6 raised by the Revenue is general in nature, hence not adjudicated.

72. In the result, appeal of the Revenue is dismissed.

73. Now we take cross-appeals filed by the Revenue and the assessee for Assessment Year 2022-23.

ITA 1142/DEL/2026[Revenue’s appeal]

ITA 9056/DEL/2025 [Assessee’s appeal]
[Assessment Year: 2022-23]

74. Before us, the assessee has not pressed Ground of appeal Nos. 5, 6 & 7 in his appeal, therefore, they are dismissed as not pressed.

75. In Ground of appeal No.1, the Revenue has challenged the deletion of addition of INR 1,36,64,436/- made u/s 68 of the Act on account of advance received from customers held as unexplained.

76. This issue has come for consideration for the first time in AY 2019-20 where under identical circumstances by making similar allegations, AO has made the addition which was deleted by ld. CIT(A). Facts are identical in this year also and before us, both the parties fairly admitted that this fact, thus, by following the observations in ITA No. 1139/Del/2026 for AY 2019-20 which are Mutatis Mutandis applied to the facts of this year also. Accordingly, Ground of appeal No. 1 raised by the Revenue is dismissed.

77. Ground of appeal No.2 raised by the Revenue is with respect to the deletion of addition of INR 6.00 Lakhs made u/s 69A of the Act on account of cash found during the course of search.

78. Heard the contention of both the parties at length and perused the material available on record. The brief facts are that during the course of search carried out u/s 132 of the Act, total cash of INR 14,79,500/- was found from the possession of the assessee for which it was explained by the assessee that it was recorded in the regular book and also out of the saving of the assessee and his family members. Out of the total cash found, a sum of INR 6.00 Lakhs being found recorded in the books of accounts was released and balance of INR 8,79,500/- was seized. The AO in absence of any satisfactory explanation had made the addition of the entire amount.

79. In first appeal, ld. CIT(A) has deleted the addition of INR 6.00 Lakhs against which the revenue is in appeal and the assessee is in appeal against the confirmation of addition of INR 8,79,500/-.

80. Since assessee has not pressed this Ground of appeal therefore, Ground of appeal No.2 raised by the assessee is dismissed. With respect to the ground raised by the Revenue of deletion of addition of INR 6.00 Lakhs, ld. CIT DR submits that the assessee has failed to give any satisfactory explanation therefore the AO has rightly made the addition of the total cash found. Whereas it was the claim of the assessee that since the cash of Rs. 6.00 lacs was duly recorded in the books of accounts as on the date of search which fact was also appreciated by the search party therefore, ld. CIT(A) has rightly deleted the same.

81. On careful consideration of the facts, it is observed that cash of INR 6.00 Lakhs was released at the time of search solely for the reason that said amount was found recorded in the books of accounts maintained in the regular course of business which fact has been appreciated by ld. CIT(A) while deleting the addition. We find that order of ld. CIT(A) being reasonable and based on the factual appreciation of the cash book filed by the assessee and therefore, the order to that extent is hereby, confirmed. Accordingly, Ground of appeal No. 2 of the Revenue as well as Ground of appeal No.5 of the assessee are dismissed.

82. Ground of appeal Nos.3 & 4 of the Revenue are general in nature hence, not adjudicated.

83.Ground of appeal No.1 of the assessee is general in nature hence, not adjudicated.

84. Ground of appeal No.2 of the assessee is with respect to the confirmation of addition of INR 1,77,290/- made on account of unexplained investment u/s 69B of the Act.

85. During the course of search, one (01) gold coin & two (02) Ginnis worth of INR 1,77,290/- were found for which addition was made. The claim of the assessee was that these Ginnies were found from the Locker No.2 owned by Smt. Deepa Bhardwaj, sister of the assessee and Shri Ankush Bhardwaj, brother of the assessee. For this, he drew our attention to pages 77 & 78 of the Paper Book which are the copy of inventory prepared during the course of search and Valuation Report of the approved valuer wherein it is clearly stated that they were found from the Locker No.2 belonged to Smt. Deepa Bhardwaj and Shri Ankush Bhardwaj. This being so, no addition could be made in the hands of the assessee for the contents found in the said locker. After considering the facts and circumstances of the case and looking to the ownership of the lockers of the assessee’s sister and brother, we find no reason for making any addition in the hands of the assessee for the items found in the said locker as they neither were found from the possession of assessee nor the assessee ever admitted the ownership of these items. Therefore, the addition made is hereby, deleted. Ground of appeal No.2 of the assessee is allowed.

86. Ground of appeal No.3 raised by the assessee is with respect to the addition of INR 13,15,942/- made on account of unexplained investment in jewellery u/s 69B of the Act.

87. Brief facts of the case are that total jewellery worth of INR 1,78,75,757/-having gross weight of 2491.940 Grams was found during the course of search out of our jewellery of INR 13,15,942/- was seized. As per AO, the benefit of CBDT Instruction No.1916 was allowed according to which total 2200 Grams jewellery was held as explained and addition was made for the remaining jewellery which was confirmed by ld. CIT(A).

88. It was the claim of the assessee that in the total 2200 Grams of jewellery held as explained in terms of CBDT instruction No. 1916, 500 Grams jewellery of Smt. Deepa Bhardwaj was also taken. Ld.AR submits that Smt. Deepa Bhardwaj owned 2500 Grams jewellery in support of the same, our attention is invited to the copy of her Wealth Tax assessment placed at pages 79 to 81 according to which total wealth of Smt. Deepa Bhardwaj was assessed at INR 60,00,000/- comprising of 2500 Grams gold. Ld.AR submits that once the AO himself has accepted that Smt. Deepa Bhardwaj has having 2500 Grams gold jewellery, credit of only 500 Grams was given. Under these circumstances, he prayed that if the credit of total jewellery owned by Smt. Deepa Bhardwaj is given, no addition is required to be made on account of total 2494.940 Grams of jewellery found.

89. On the other hand, ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and requested for the confirmation of same by stating that benefit of CBDT Circular has already been given therefore further benefit of the jewellery owned by Smt. Deepa Bhardwaj should be allowed. He prayed accordingly.

90. Heard the contention of both the parties at length and perused the material available on record. It is a matter of fact that Smt. Deepa Bhardwaj had owned gold jewellery of 2500 Grams which fact is verifiable from her Wealth tax assessment order and the AO has given the benefit of 2200 Grams of jewellery as explained in terms of CBDT Instruction No. 1916 including 500 Grams gold owned by Smt Deepa Bhardwaj. Once the AO has himself accepted that Smt. Deepa Bhardwaj was living jointly with the assessee therefore, credit of total jewellery owned by her should be given. Accordingly, the balance jewellery of 291.940 Grams could safely be presumed as belonged to Smt. Deepa Bhardwaj and addition made by the AO for the same is hereby, deleted. The Ground of appeal No.3 raised by the assessee is allowed.

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

92. In the final result, all four [04] appeals of the Revenue in ITA No.1139, 1140, 1141 & 1142/Del/2026 for Assessment Years 2019-20, 2020-21, 2021-22 & 2022-23 respectively, are dismissed and all three [03] appeals of the assessee in ITA Nos. 9054, 9055 & 9056/Del/2025 for Assessment Years 2019-20 & 2020-21 & 2022-23 respectively, are partly allowed.

Order pronounced in the open court on 29.07.2026.