Arnavjeet Baruah Vs ITO (ITAT Panaji)
Panaji ITAT Deletes ₹32.25 Lakh Section 68 Addition: Once Assessee Explains Nature, Source and Even “Source of Source”, AO Cannot Tax Loan Merely Doubting Creditor’s Creditworthiness
The assessee was assessed with two major additions—₹32.25 lakh as unexplained cash credit under Section 68 and ₹27.61 lakh towards unexplained cash deposits, with Section 115BBE also invoked. The CIT(A) sustained the Section 68 addition while restricting the cash-deposit addition to ₹9.45 lakh.
Regarding the ₹32.25 lakh loan from Mr. Pulak Kalita, the assessee produced the creditor’s bank statement, PAN/details, confirmation and evidence of his agricultural land and agricultural income. Significantly, the bank account was a joint account of the creditor and assessee, there were no preceding cash deposits, and the funds credited before issuance of the cheque had come through banking channels.
The ITAT held that the assessee had discharged the primary onus under Section 68 and had even explained the “source of source.” If the AO continued to doubt the creditworthiness of Mr. Kalita, the AO could have taken appropriate action in the creditor’s case; there was no justification for invoking Section 68 in the assessee’s hands when the nature and source stood supported by complete evidence. The entire ₹32.25 lakh addition was deleted.
On the remaining ₹9.45 lakh cash-deposit addition, the Tribunal made an important observation that ITR-3 did not provide a mechanism for furnishing the financials of business concerns whose income was offered under Section 44AD or of agricultural activities. Therefore, merely considering the personal cash balance disclosed in the return did not reflect the assessee’s complete cash position.
The assessee demonstrated availability of cash from Banjarik Farm (agricultural activity), Kundil Dairy and personal sources through separate and consolidated cash statements. The Tribunal also noted evidence of substantial agricultural land and cultivation of areca nut, cashew, mango, black pepper, banana, pineapple, fodder and seasonal vegetables. It therefore held that sufficient cash was available to explain the demonetisation-period deposits and deleted the balance ₹9.45 lakh addition as well.
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 08.07.2025 framed by National Faceless Appeal Centre, Delhi arising out of Assessment Order dated 27.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
