Machhabhai Raghavbhai Thunga Bharwadpa Vs ITO (ITAT Rajkot)
The Rajkot Bench of the Income Tax Appellate Tribunal (ITAT) heard the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals) dated 24.03.2026 for Assessment Year 2017-18, arising from an assessment made under Section 143(3) of the Income-tax Act, 1961.
The assessee had filed a return declaring total income of Rs.3,01,570. The return was processed under Section 143(1) and the case was subsequently selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) on the issue of cash deposits during the demonetisation period. During assessment proceedings, the Assessing Officer noticed that the assessee had received an unsecured loan of Rs.9,00,000 from Mrs. Ritu Sharma. Holding that the assessee had failed to establish the genuineness and creditworthiness of the transaction, the Assessing Officer treated the amount as unexplained cash credit under Section 68 and added Rs.9,00,000 to the assessee’s income, assessing the total income at Rs.12,01,570.
The assessee’s appeal before the CIT(A) was dismissed, with the addition being sustained.
Before the Tribunal, the assessee contended that the unsecured loan was genuine and that all necessary documentary evidence had been furnished before the lower authorities. The documents included the lender’s confirmation, PAN, address, bank statements, ledger account in the assessee’s books, the assessee’s bank statement reflecting receipt of the loan, and proof that the loan was repaid through RTGS. The assessee also produced the HDFC Bank sanction letter showing that the lender had obtained a loan of Rs.20,00,000, which was stated to be the immediate source of the funds advanced to the assessee. It was submitted that the identity of the creditor, the genuineness of the transaction and the creditworthiness of the lender stood fully established, thereby satisfying the requirements of Section 68.
The Departmental Representative relied on the orders of the Assessing Officer and the CIT(A) but was unable to controvert the documentary evidence produced by the assessee.
After examining the record, the Tribunal found that the assessee had furnished comprehensive documentary evidence supporting the unsecured loan. The Tribunal noted that the confirmation of the lender, PAN, address, bank statements, ledger account, bank statement evidencing receipt of the loan, HDFC Bank sanction letter, and proof of repayment through RTGS had all been placed on record.
The Tribunal observed that the immediate source of the funds advanced by the lender had been satisfactorily explained through the bank loan sanctioned in her favour. It further held that the identity of the creditor stood established, the genuineness of the transaction was evidenced through banking channels, and the creditworthiness of the lender was supported by the sanctioned bank loan. The Tribunal also noted that the Revenue had not produced any material to discredit the documentary evidence and that the Departmental Representative could not rebut the factual submissions made on behalf of the assessee.
Holding that the conditions prescribed under Section 68 of the Income-tax Act had been duly satisfied, the Tribunal concluded that the addition of Rs.9,00,000 made by the Assessing Officer and sustained by the CIT(A) was unsustainable. It directed the Assessing Officer to delete the addition made under Section 68 and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2017-18, is directed against the order u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the Commissioner of Income Tax Appeal [in short `Ld.CIT(A)’], dated 24.03.2026, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Act, dated 19.12.2019.
2. Brief facts of the case are that the assessee filed the original return of income for the Assessment Year 2017-18 declaring a total income of Rs.3,01,570. The return was processed under Section 143(1) of the Income-tax Act, 1961. Subsequently, the case was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) on the issue of cash deposits made during the demonetisation period. Accordingly, notices under Sections 143(2) and 142(1) of the Act were issued. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had received an unsecured loan of Rs.9,00,000 from Mrs. Ritu Sharma. According to the Assessing Officer, the assessee failed to satisfactorily establish the genuineness and creditworthiness of the transaction. Consequently, the amount of Rs.9,00,000 was treated as unexplained cash credit under Section 68 of the Act and added to the total income of the assessee, which was assessed at Rs.12,01,570.
3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The CIT(A) upheld the addition and dismissed the appeal.
4. Dissatisfied with the order of the Ld. CIT (A) assessee is in appeal before this tribunal. At the time of hearing the Ld. AR submitted that the unsecured loan of Rs.9,00,000 was genuinely received from Mrs. Ritu Sharma, and all the requisite evidences establishing the identity, genuineness and creditworthiness of the lender were duly furnished before the Authority below. It was submitted that the paper book contains the confirmation of the lender, her PAN, address, bank statements, ledger account in the books of the assessee, and the assessee’s bank statement reflecting receipt of the loan. The assessee has also produced evidence showing repayment of the loan through banking channels by RTGS. The Ld. AR further pointed out that the immediate source of the loan advanced by Mrs. Ritu Sharma was a loan of Rs.20,00,000 sanctioned by HDFC Bank, and the sanction letter issued by the bank has also been placed on record. It was contended that once the immediate source of funds stands explained through a loan obtained from a scheduled bank, the requirements of Section 68 of the Act stand fully satisfied. Therefore, the identity of the creditor, the genuineness of the transaction and the creditworthiness of the creditor have all been established.
5. On the other hand, the Ld. DR relied upon the orders of the authorities below but could not controvert the documentary evidence placed on record by the assessee.
6. We have heard the rival submissions and carefully perused the material available on record. We find that the assessee has furnished comprehensive documentary evidence in support of the unsecured loan received from Mrs. Ritu Sharma. The documents placed on record include the confirmation of the lender, her PAN and address, bank statements, ledger account in the books of the assessee, bank statement evidencing receipt of the loan, the sanction letter issued by HDFC Bank showing grant of a loan of Rs.20,00,000 to the lender, and proof of repayment of the loan by the assessee through RTGS. The immediate source of the funds advanced by the lender has thus been satisfactorily explained. The identity of the creditor is established, the genuineness of the transaction is evidenced through banking channels, and the creditworthiness of the lender is supported by the bank loan sanctioned in her favour. The Revenue has not brought any material on record to discredit these documentary evidences. The Ld. DR was also unable to controvert the factual submissions made on behalf of the assessee. In these circumstances, we are of the considered view that the conditions prescribed under Section 68 of the Act stand duly satisfied. The addition of Rs.9,00,000 made by the Assessing Officer and sustained by the CIT(A) is, therefore, unsustainable in law. Accordingly, we direct the Assessing Officer to delete the addition of Rs.9,00,000 made under Section 68 of the Act.
7. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open Court on 09/07/2026.
