Section 68 inpplicable to Unsecured Loan Repaid by Cheque in next Year

DCIT Vs Asit Surendrabhai Shah (ITAT Ahmedabad)

ITAT Ahmedabad held that provisions of section 68 of the Income Tax Act doesn’t attract as unsecured loan availed was repaid in the next financial year through cheque payments to the creditor and bank statement thereof was filed.

Facts- The sole issue involved in all these appeals are unsecured loans received from Smt. Hansaben M. Patel, Shri Kamal Gohil and Shri Mukesh Jayantilal Shah by the respective assessees and the additions made by the Assessing Officer made u/s. 68 which were repaid in the next financial year by the assessees, therefore the same were deleted by the Ld. CIT(A). Being aggrieved, revenue has preferred the present appeal.

Conclusion- Held that the unsecured loan availed was repaid in the next financial year to the creditor namely Smt. Hansaben M. Patel through cheque payments and the bank statement also filed before the Lower Authorities. Therefore we are of the considered opinion, the provisions of section 68 does not attract in the above transaction and thereby we uphold the order passed by the Ld. CIT(A) deleting the addition made u/s. 68 of the unsecured loans availed from Smt. Hansaben M. Patel.

The so called unsecured loan was given by Account Payee cheques and also repaid by the assessee in the next financial year through banking channels. The recovery proceedings u/s. 226(3) initiated against Mukesh J. shah was also dropped by the A.O. Therefore the provisions of section 68 does not attract of the loan transactions between the assessee M/s. Savitaben Mangaldas Trust and Shri Mukesh J. Shah. Therefore the addition on this account is also liable to be deleted and the grounds raised by the Revenue is devoid of merits.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

These eight appeals are filed by the Revenue as against different Assessees as against the separate appellate orders passed by the Commissioner of Income Tax (Appeals), Ahmedabad arising out of the reassessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Years (A.Ys) 2009-10 & 2010-11. Since common issue is involved in all the above appeals, the same are disposed of by this consolidated order.

2. The common issue involved in all these appeals are unsecured loans received from Smt. Hansaben M. Patel, Shri Kamal Gohil and Shri Mukesh Jayantilal Shah by the respective assessees and the additions made by the Assessing Officer made u/s. 68 which were repaid in the next financial year by the assessees, therefore the same were deleted by the Ld. CIT(A) which is tabulated as follows:

3. Aggrieved against the deletions, the Revenue is in appeal before us raising the following Grounds of Appeal (in ITA No. 945/Ahd/2018 for A.Y. 2009-10) is as follows:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by AO on account of Unexplained cash credit u/s 68 of the Act of Rs. 10,00,00,000/-.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the various facts relating to the impugned loan transaction discussed by the AO in the assessment order.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.

4. We take ITA No. 945/Ahd/2018 relating to the Assessment Year 2009-10 in the case of Shri Asit Surendrabhai Shah as the lead case. The brief facts of the case is that the assessee is an individual and Proprietor of S. Mangaldas Finance Corporation engaged in Shroff Business. For the Assessment Year 2009-10, the assessee filed its Return of Income on 23-02-2010 declaring total income of Rs. 14,61,410/-. The return was processed under section 143(1) of the Act. Thereafter the assessment was reopened by issuing a notice u/s. 148 of the Act on 31-03-2016 on the ground that the unsecured loan of Rs. 10,00,00,000/- received by the assessee from Smt. Hansaben Manilal Patel as not genuine. The assessee vide its letter dated 17-11-2016 to treat the original return in compliance to the above under 148 notices.

4.1. The assessee during the course of reassessment proceedings, submitted Ledger account of Smt. Hansaben M. Patel, Copy of the bank statement reflecting the transaction with Smt. Hansaben M. Patel, Copy of Return of Income for A.Y. 2009-10 filed by Smt. Hansaben M. Patel and her bank statement reflecting the above transaction with the assessee. Further the assessee also filed copy of confirmation received from Smt. Hansaben M. Patel and repayment of loan in the next financial year through Account Payee Cheques with bank statements.

4.2. The assessee also clarified that he has not paid any interest on the above loan taken from Smt. Hansaben M. Patel. Thus the assessee claimed that he has proved the identity of Smt. Hansaben M. Patel, genuineness of the transaction and creditworthiness of the creditor, who sold her lands at Sanand District, Ahmedabad for Rs. 149,52,20,000/-. Thus the assessee pleaded the provisions of section 68 does not attract and relied upon various case laws in support of his claim.

5. The above submission was not accepted by the A.O. since Smt. Hansaben M. Patel has never filed her Return of Income, except only for the AY 2009-10. Even for the AY 2009-10, she has filed Return of Income of Rs. 8,65,250/-. The assessee has not provided computation of income, but submitted only copy of acknowledgement of the Return of Income. Further, on verification of bank statement of Smt. Hansaben M. Patel maintained with Indian Bank, it is seen that there is continues in and out credit and debit entry throughout the year. The sale considerations received of various lands have been immediately or within a day or two was debited from her account. Thus, it can be seen that Smt. Hansaben M. Patel has transferred money to the various concerns of the Asit Shah, JP Infrastructure Pvt. Ltd. and dummy companies of JP Iscon Group like Rachana Finelease Pvt. Ltd., which again proves that Smt. Hansaben M. Patel has worked as an accommodation entry provider and she was used by the assessee for providing accommodation entries to JP Iscon Group.

5.1. In view of these facts, the submission of the assessee that Smt. Hansaben M. Patel owned lands in her own name is proved wrong. Even it is accepted that Smt. Hansaben M. Patel has in reality had her own lands and sold it to M/s. Applewoods Estate Pvt. Ltd. then also no capital gain on such transaction had been offered in the Return of Income filed by her in the AY 2009-10. In view of the fact that the lands which was claimed to be sold by Smt. Hansaben M. Patel were in fact not her own lands, it has become necessary to verify when and from whom this lands were purchased by her. On verification, it is revealed that lands situated at Block nos. 111, 112, 114, 115, 116, 117 and 121/A, was purchased by Smt. Hansaben M. Patel from the original land owners during the FY 2008-09 itself on a single day i.e. on 20.06.2008 and out of these total seven blocks 6 blocks except 117 was sold to M/s. Applewoods Estate Pvt. Ltd. on a single day i.e. on 03.07.2008, it means that Smt. Hansaben M. Patel has sold the lands to M/s. Applewoods Estate Pvt. Ltd. just within 13 days after purchased from original land owners.

5.2. In view of the above facts, the assessee failed to prove the identity, genuineness and creditworthiness of the unsecured loan of Rs. 10,00,00,000/- and also it is proved that Smt. Hansaben M. Patel has given accommodation entry to the Assessee in guise of unsecured loan, the unsecured loan of Rs. 10,00,00,000/- is added to the total income of the assessee under Section 68 of the IT Act, as unexplained cash credits and demanded taxes thereon.

6. Aggrieved against the addition, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) after considering the submissions of the assessee, deleted the entire addition made u/s. 68 of the Act observing as follows:

“….6.2 Facts of the case as mentioned in assessment order, submissions of the appellant and case laws cited upon by the appellant have been carefully considered. There is no dispute that the loan of Rs.10 crore was obtained by the appellant through account payee cheques. It is established, accepted & settled legal principle that to prove the genuineness of credits, three parameters ie. identity, genuineness of the transaction & creditworthiness of the creditor should be proved. The AO did not find explanation about the identity of creditor Smt. Hansaben M. Patel satisfactory as she was not found at the address given and the appellant could not produce her. But the appellant had submitted PAN detail of Smt. Hansaben M. Patel, copy of her I.T. return for AY 2009-10, confirmation from her to prove her identity. The AO called details of bank accounts from various banks as mentioned in the assessment order, through which transactions worth hundreds of crores took place. These facts proved the identity of Smt. Hansaben M. Patel beyond doubt. Moreover, on the sale deeds of plots of land sold worth more than rs. 149 crore during the year, she signed all these sale deeds and her photo is affixed on all these sale deeds. Sale deeds are registered in the office of the Sub-Registrar and seller & buyer has to remain present personally for registration of documents.

Apart from this, the ITO. Ward.3(3)(2), Ahmedabad made assessment u/s. 144 r.w.s. 147 of the Act in the name of Smt. Hansaben M. Patel vide order dated 23.12.2016 and determined income of Rs.103.02 crore for A.Y. 2009-10 i.e, year under consideration. All these facts proved that the appellant had proved identity of the creditor Smt. Hansaben M Patel beyond doubt. Regarding genuineness of the transaction, there is no doubt that the transaction took place through account payee cheques. There is not a single rupee found deposited in cash even in the bank account of Smt. Hansaben M. Patel, which has been utilized to give loan to the appellant. There is no finding in the assessment order that the appellant given cash for obtaining cheques worth Rs. 10 crore. Even the loan taken was repaid in same financial year to the extent of Rs 1.35 crore through account payee cheques and remaining amount was also paid through regular banking channel in next financial year. There was NIL balance as on 31.3.2010. Thus, the transaction is found genuine one. Regarding creditworthiness of the creditor, there is no doubt about the fact that Smt. Hansaben M. Patel sold plots of land worth Rs.149 crores during the year and she has been assessed at Rs.103.02 crores by her Assessing Officer. These facts prove her creditworthiness Further, the loan amount was received through bank accounts, hence creditworthiness cannot be doubted in absence of adverse finding like immediate deposits of cash etc. These facts prove that the appellant satisfactorily established the identity of the creditor, genuineness of the transactions and creditworthiness of the creditor with documentary evidences. Hence, the additions made by the AO are not found justified. Regarding the financial relations of the appellant with JP Iscon group, the appellant did not deny and admitted that he had financial relations with Kotak family since his father’s days but all these transactions have been found entered into regular books of accounts. Therefore, any adverse inference without any substantial documentary evidence is not legally sustainable. The appellant’s case has been further found covered by the following judgments :-

i) In the case of Meenaben Lakhani TA No.104 of 2011, the Hon’ble Gujarat High Court held as under:

“In our opinion, when the loan has been received by the assesse by way of account payee cheques from depositor under the Income Tax Act and the PAN as well as confirmation by such creditor has been furnished to the Assessing Officer, before deciding to proceed further it is the first duty of Assessing Officer to verify from the co­ordinate Assessing Officer of the said lender whether the transactions in question has found place in the account of said lender. If it appear that such transactions has been accepted to be genuine by the Assessing Officer of the said depositor, the Assessing Officer in question cannot dispute any further the transaction which has been accepted to be genuine by co- ordinate Assessing officer having jurisdiction to decide such question.

In the case before us the Assessing Officer did not place any material indicating that the loan has been either disbelieved by the Assessing Officer of the lender or it is not reflected in the lenders account. Such being the position, there was no scope of branding the truncation as “not worthy of credence”

ii) In the case of Ranchhod Jivabhai Nakhava in TA No.50 of 2011, the Hon’ble Gujarat High Court held as under :-

“In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees. whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing Officer did not follow the principle laid down under Section 68 of the Income Tax Act. If on verification, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same.

However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, we find that those lenders have made inconsistent statement as pointed out by the Commissioner of Income Tax (Appeals) and in such circumstances, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing Officer is satisfied with the transaction.”

iii) In the case of DCIT v/s Rohini Builders 256 ITR 360 (Guj), Hon’ble High Court held as under :-

“substantial Question of law – Cash Credit Assessee furnished complete addresses of – all the creditors along with GIR numbers /PAN as well as confirmations along with copies of assessment orders passed in the cases of individual creditors, wherever available, and copies of returns filed by’ the creditors bin the remaining cases- All loans were received and repaid by the assessee by account payee cheques along with interest Tribunal deleted the addition substantial question of law arises appeal of the department dismissed.”

Apart from the above mentioned judgments of Hon’ble Jurisdictional High Court of Gujarat, Ahmedabad, the appellant’s case has been found covered by the following judgments:-

i) CIT v/s. Meta Chem Industries 245 ITR 160 (MP)

ii) Nemichand Kolhani v/s CIT 264 ITR 254 (Gauhati)

iii) Sona Electric Co. v/s. CIT 152 ITR 507 (Delhi)

iv) Tam Tam Pedda Guruna Reddy v/s. JCIT 291 ITR 44 (Kar.)

Keeping in view the factual discussion and binding judgments of various High Courts, the additions made by the AO are not found factually and legally sustainable, hence, these are deleted. This ground of appeal is allowed.”

7. The Ld. D.Rs. appearing for the Revenue supported the orders passed by the Assessing Officer and pleaded that the loan creditor namely Smt. Hansaben M. Patel who has filed her Return of Income showing an income of Rs. 8,65,250 for the Assessment Year 2009­10 and not paid Short Term Capital Gain on sale of land worth Rs. 149 crores. Notices issues u/s. 133(6) was returned unserved with postal remark “Not Known”. Therefore the Assessing Officer determined Rs. 102.93 crores as Short Term Capital Gain earned by the assessee Smt. Hansaben M. Patel. However Smt. Hansben M. Patel neither paid the taxes thereon nor filed any appeal/Revision against that assessment order, which has become final. The whereabouts of Smt. Hansaben M. Patel is not also known and she is treated as an absconded assessee. Therefore the Ld. A.O. was correct in treating the above loan from Smt. Hansaben M. Patel as not genuine and the addition made by the A.O. u/s. 68 of the Act is to be sustained and the Revenue appeal is liable to be allowed.

8. Per contra, Ld. Counsel Ms. Urvashi Shodhan appearing for the assessee submitted before us a Paper Book running into 130 pages containing the Ledger Account, Confirmation from Smt. Hansaben M Patel, Bank account of the assessee reflecting the loan transacation, Return of Income filed by the assessee and that of Smt. Hansaben M Patel, details of land sold by Smt. Hansaben M. Patel and Bank statements of Smt. Hansaben M. Patel reflecting the loan transactions. Ld. Counsel brought to our notice that similar unsecured loans given by Smt. Hansaben M. Patel to M/s. Rachana Finlease Pvt. Ltd., Capaxo Logistics Pvt. Ltd. and Ambe Tradecorp Pvt. Ltd. were considered by the Co-ordinate Benches of this Tribunal and deleted the addition made u/s. 68 of the Act. Thus the present addition made by the Assessing Officer is liable to be deleted and relied upon Co-ordinate Bench decision in the case of ACIT Vs. M/s. Rachana Finlease Pvt. Ltd. in ITA No. 63/Ahd/2020 dated 05-07-2023 wherein it was held as follows:

“…6.1. In the case of M/s. Capaxo Logistics Pvt. Ltd. and Ambe Tradecorp Pvt. Ltd. wherein funds were received from the above two  parties namely Shri Rameshji Thakor and Smt. Hansaben Manilal Patel. When the additions made by the Assessing Officer were deleted by Ld. CIT(A) which are now confirmed by the Co-ordinate Bench of this Tribunal in ITA No. 1264/Ahd/2019 and ITA No. 1235/Ahd/2019 observing as follows:

In the case of M/s. Capaxo Logistics Pvt. Ltd (in ITA No. 1264/Ahd/2019)

“…14. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the assessee has received amount of loan and advances for Rs. 5 crore each from Shri Rameshbhai Thakor and Shri Vinod Sharma which was treated as unexplained cash credit under section 68 of the Act by the AO which was deleted by the learned CIT(A).

14.1 At the outset we note that assessee also received share application money for Rs. 3.5 core and 4 crores from each of the party namely, Shri Rameshbhai Thakore and Shri Vinod Sharma which was also treated as unexplained cash credit under section 68 of the Act by the AO on account of lack of proof of identity of party, genuineness of transaction and creditworthiness of the parties. However while dealing with the issue of share application money in the preceding paragraph of this order, we have held that identity of parties, genuineness of transaction and creditworthiness have been established by the assessee. Therefore, the only issue remains whether assessee has given advances to these parties on earlier occasion which has been received back in the year under consideration. In this regard we note that the assessee has submitted ledger copies of both parties for the F.Y. 2008- 09 and 2009-10 which is available on pages 249 to 254 of paper book. On perusal of the same, we find that the assessee as on 28-02-2009 has provided advances to both the parties through cheque which has been received back in the year under consideration through banking channel. The assessee has also submitted bank book and bank statement showing the transaction which is available on paged 245 to 248 and 251 to 252 of paper book.

14.2 In view of the above, there remains no ambiguity that amount of Rs. 5 crore each received from Shri Ramesh Thakor and Shri Vinod Sharma represent repayment of advances given by the assessee in the month of February 2009. Therefore the provision of section 68 will not be applicable on this transaction. Hence the ground of appeal of the Revenue is hereby dismissed.

14.3 In the result appeal of the Revenue is dismissed.”

In the case of Ambe Tradecorp Pvt. Ltd (in ITA No. 1235/Ahd/2019)

“….9.2 Furthermore, once the source of fund in the hand of above company was held as explained by learned CIT (A) then amount received by the assessee from that company cannot be held as unexplained under section 68 of the Act in the absence of contrary information. Likewise, there cannot be addition of one item in the hands of two different persons.

9.3 Nevertheless, the assessee has submitted PAN, address, ledger confirmation, own bank statement and bank statement of M/s Rachna Finelease Pvt. showing amount received through banking channel. The assessee also claimed before the learned CIT (A) that M/s Rachna Finelease Pvt. has received money from Smt.  Hansaben Patel and Shri Ramesh Thakor which can be verified from the bank statement of M/s Rachna Finelease Pvt. and also from the finding of the AO in paragraph 6.1.3 which reads as under:

On verification of the bank book of Rachna Finelease Pvt. Ltd. it is found that the fund have travelled within minutes of being credited from the bank account of Hansaben H. Patel and Rameshbhai Thakor and immediately the funds have landed in the bank account of JP Fincorp Services Pvt. Ltd.(Renamed as Ambe Tradecorp Pvt. Ltd.).

9.4 Smt. Hansaben Patel sold immovable property for Rs. 102.93 crores and paid due taxes in the assessment framed under section 147 r.w.s. 144 of the Act. Going through all these document it is established that identity, genuineness of transaction and credit worthiness/sources of fund has been established. Further the AO has not pointed out any deficiency in these documentary evidences neither any contrary evidences brought by the learned DR before us at the time of hearing against the finding of the ld. CIT-A. Thus, the finding of the AO that the creditworthiness of the party was not proved was not based on the cogent reasons. Thus the finding of the AO appears to be arbitrary and non-speaking.

9.5 It is also not out of the place to mention that the shares application money received by the assessee in the year under consideration was refunded in the subsequent year. The repayment of the share application amount by the assessee was duly accepted by the Revenue. In this regard, we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of the CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under:

“The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques.”

9.6 Thus, the entire basis of allegation by the AO that the credit worthiness of the party i.e. share application money was not proved does not hold well in view of above discussion. As the assessee was able to establish the identity of the share applicant by furnishing PAN and company master data and proving the genuineness of transaction by adducing bank statements and also explained the sources of fund in the hands of the party, which are placed on pages of the paper book as discussed above, no addition is warranted.

9.7 In view of the above facts and after considering the details in totality, we do not find any reason to interfere in the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed. 9.8 In the result, the appeal filed by the Revenue is dismissed.”

7. Thus the Ld. A.R. pleaded that the deletion made by the Ld. CIT(A) does not require any interference and the Revenue appeal is liable to be dismissed.

8. We have given our thoughtful consideration and perused the materials available on record. It is settled principle of law the Income Tax Act nowhere provides that parallel assessments can be made in respect of the same income on two different persons. The assessee right from the beginning of the reassessment proceedings submitted that the source of the funds from the creditors and their source (i.e. source on source) is also proved by the assessee. Therefore the Assessing Officer made a protective addition of Rs. 28.68 crores as unexplained money in the hand of the assessee. The Co-ordinate Bench of this Tribunal in the case of M/s. Capaxo Logistics Pvt. Ltd. and M/s. Ambe Tradecorp Pvt. Ltd. are on identical additions deleted the same observing identity, creditworthiness and genuineness of the transactions are clearly established by the assessee. The Assessing Officer has not pointed out any deficiency in these documentary evidences submitted by the assessee and also not brought on record any contrary evidences in the reassessment proceedings.

8.1. It is seen from the appellate record, the assessment made in the case of Smt. Hansaben Manilal Patel wherein the sale of land has been duly taxed on substantive basis. Though the said order remained unchallenged by her (Smt. Hansaben Manilal Patel allegedly a missing person) by way of appeal or revision. Whereas in the case of Shri Rameshji Thakor that the alleged substantive additions made in his hands were also deleted by Ld. CIT(A) as the source was been clearly proved by the assessee. Thus we do not find any infirmity in the order passed by the Ld. CIT(A) who has deleted the protective addition made in the hands of the assessee herein. More particularly, the provisions of Section 68 as it stood prior to the amendment of the Financial Act, 2013. Thus in our considered view, the grounds raised by the Revenue is devoid of merits and the same is liable to be dismissed.

9. We have given our thoughtful consideration and perused the materials available on record including the Paper Books and compilation of case laws filed by the assessee. In all the above appeals, the unsecured loan given by Smt. Hansaben M. Patel was doubted by the Assessing Officer on the ground that on sale of lands at Sanand District, Ahmedabad for Rs. 149 crores, but she failed to file the computation of Short Term Capital Gain. On completion of the exparte assessment order dated 23-12-2016 in the case of Smt. Hansaben M. Patel, wherein the A.O. determined the Short Term Capital Gain of Rs. 103.02 crores for the Assessment Year 2009-10 the same was also neither paid by Smt. Hansaben M. Patel nor filed any appeal against the assessment order. Thus the sale of the lands and execution of sale deeds by Smt. Hansaben M. Patel was not doubted by the Revenue, but as her whereabouts are not known, thereby the loan transactions to various parties is doubted by the Revenue. Since the respondent-assessees herein provided Copies of the Ledger account, confirmation, Bank Details, PAN and Income Tax Return of Smt. Hansaben M. Patel and contra entry and Bank Statements of Smt. Hansaben M. Patel, etc. After considering the above details we are of the considered view the assessee has discharged its initial onus cast upon him u/s. 68 of the Act and the Revenue failed to disprove the above transaction as bogus. Therefore both the Ld. CIT(A) and the Co-ordinate Benches of this Tribunal deleted the additions made u/s. 68 of the Act.

9.1. Further it is the case of the assessee that the unsecured loan availed was repaid in the next financial year to the creditor namely Smt. Hansaben M. Patel through cheque payments and the bank statement also filed before the Lower Authorities. Therefore we are of the considered opinion, the provisions of section 68 does not attract in the above transaction and thereby we uphold the order passed by the Ld. CIT(A) deleting the addition made u/s. 68 of the unsecured loans availed from Smt. Hansaben M. Patel. Thus the grounds raised by the Revenue are devoid of merits and the same are liable to be rejected and ITA No. 945/Ahd/2018 filed by the Revenue is hereby dismissed.

10. Following the above decision of ours, we hereby delete the addition made on account of unsecured loans from Smt. Hansaben M. Patel by the respective assessee in ITA Nos.1249/Ahd/2018, 1252/Ahd/2018, 1253/Ahd/2018, 1254/Ahd/2018, 457/Ahd/ 2020, 477/Ahd/2020 & IT(SS)A No. 54/Ahd/2021 are hereby deleted and the respective grounds raised by the Revenue are held to be devoid of merits. Thus the appeals filed by the Revenue are dismissed.

11. In IT(SS)A No. 54/Ahd/2021 (for A.Y. 2010-11), apart from the unsecured loan from Smt. Hansaben M. Patel of Rs. 2.92 crores another unsecured loan of Rs. 75,55,000/- was availed by the assessee from one Mr. Kamal Gohil which was also deleted by the Ld. CIT(A) after calling from the Remand Report from the Assessing Officer observing as follows:

“….13.2 During the remand report proceedings the A.O. has reported that Shri Kamal Gohil has not filed his return of income, not appeared before him and also appellant failed to produce Kamal Gohil before him. Also Kamal Gohil is not traceable.

13.3 In the rejoinder to remand report filed by the appellant on 28-12-2020 the appellant has made counter argument to rebut the observations made by the A.O. in the remand report. The appellant has submitted

(i) Copy of PAN Card

((ii) Copies of Sale deed and

(iii) Affidavit of Kamal Gohil.

In this regards appellant has contended that neither it is proved that these details are bogus nor the AO has not made any adverse comments/observations on details filed by the appellant.

13.4 Appellant has also received loan of Rs. 75,55,000/- from Kamal Gohil. Alike in case of Hansaben Manilal Patel. He has also executed sale deed of land. He has personally appeared before Sub Registrar for execution of sale deed. His copy of PAN Card is also filed by appellant which was available to the AO. Therefore his identity is proved from the above records.

13.5 As contended by appellant that he was in a receipt of Rs. 8,44,69,500/- as confirming party on sale of land is found to be correct and genuine. Therefore there is no question of doubting his credit worthiness. Also transaction done with him by appellant through banking channel and nothing proved adverse by AO in his remand report. Thus, the genuineness of the loan is fully established. Therefore the loan of Rs. 75,55,000/- could not be considered as unexplained in view of evidences coupled with the judicial decision of Hon’ble Courts as discussed in the preceding paras of this order.

In this regard, the decision of Hon’ble Gujarat High Court in the case of Ranchodbhai Jivabhai Lakhava 208 Taxmann 35 is relevant whereby it has been held that by submission of the PAN of the depositor and establishing that the loan taken through account payee cheque, the initial burden cast upon the appellant u/s.68 is discharged. This decision is squarely applicable on the facts of the case.

Therefore addition of Rs. 75,55,000/- made by the AO is deleted.”

12. The Ld. D.R. appearing for the Revenue supported the order passed by the A.O. and could not file any contra evidences as against the findings of the Ld. CIT(A). Further Mr. Kamal Gohil is also one of the party who sold the land at Sanand District, Ahmedabad and the loan transaction is done through banking channels. Therefore we have no hesitation in deleting the above addition made by the Ld. CIT(A). Thus the Grounds raised by the Revenue is devoid of merits and the same is liable to deleted.

13. ITA No. 477/Ahd/2020 (for A.Y. 2010-11). In this case, apart from the unsecured loan of Rs. 1.31 crores from Smt. Hansaben M. Patel another unsecured loan of Rs. 1.55 crores received from Shri Mukesh J. Shah by the assessee which was added as unexplained income u/s. 68 of the Act by the Assessing Officer. The Ld. CIT(A) deleted the same observing as follows:

“….It is contended by the appellant that they have submitted ample evidences, such as bank statement of appellant and Shri Mukesh Jayantilal Shah, conformation and copies of sale deeds of land of Rs.51,90,90,000/-. Each bank transaction is tallied with other. AO has not verified details submitted to him. Shri Mukesh Jayantilal Shah has denied having a bank account with any other bank except Vijya Bank and but AO has not collected KYC documents and his bank statement directly from Indian Bank, Navrangpura Branch Ahmedabad from which transactions have been made. AO has asked questions to Shri Mukesh Jayantilal Shah regarding transactions with assessee Trust and having a bank account with Indian Bank or not but have not asked any question regarding having a transactions of sale of land for a worth of Rs. 51.91 Crores. It is also contended that when appellant has submitted vital evidences of land transactions AO has not cross verified Shri Mukesh Jayantilal Shah for his land transactions. It is contended by the appellant that AO has not brought anything adverse on record which proves that documents of land transactions are false or not genuine or are not executed by Shri Mukesh Jayantilal Shah. The registration of land sale is through a robust system which can’t be doubted, therefore, in my opinion, no question can be raised for credit worthiness of Shri Mukesh Jayantilal Shah.

It is further contended by the appellant that AO of Shri Mukesh Jayantilal Shah has passed his assessment order for the year under consideration and assessed his income at Rs. 6,80,50,635/-. Therefore, his creditworthiness proved on record. AO of assessee Trust has alleged that assessee itself sold all properties and introduced the same in books of accounts of the assessee in the name of Shri Mukesh J. Shah. Before concluding, AO has no material on record to say so and alleged without having any logical basis. In this regards appellant submitted that AO of Shri Mukesh Jayantilal Shah has specifically mentioned in his assessment order that he (AO)s in a receipt of information from DDIT Investigation Unit 1(3), Ahmedabad, that assessee (Shri Mukesh Jayantilal Shah) through his bank account was dealing in real estate business and huge amount was rotated through his bank account No. 757306721 held with Indian Bank, Navrangpura Branch, Ahmedabad and these amounts were finally repaid in the account of J.P. Fincorp Services, which is a flagship company of J.P. Iscon group (Para 5.1 Page 3 of assessment order of Shri Mukesh Jayantilal Shah Page 311 of PB). AO of Shri Mukesh Jayantilal Shah himself stating on the basis of information from DDIT Unit 1(3), Ahmedabad, after detailed investigation by DDIT Unit 1(3), Ahmedabad. On such basis appellant contended that allegation made by AO is without any basis. It is further contended by the appellant that ITO Ward 5(3)(4), Ahmedabad who is a AO of Shri Mukesh Jayantilal Shah, has initiated proceedings u/s. 226(3) of The Act for recovery of demand of Shri Mukesh Jayantilal Shah from the appellant. Appellant has submitted all the details to AO of Shri Mukesh Jayantilal Shah and submitted that they have repaid entire amount to Shri Mukesh Jayantilal Shah and there is a NIL balance as on 31.03.2011. AO of Mukesh Jayantilal Shah has verified these details and after his due satisfaction, has dropped recovery proceedings against the appellant. In these circumstances, the appellant submitted that all the receipt and payment have been made through banking channel therefore it is proved that appellant has not sold plot and has not introduced these amount in its books of accounts by using name of Shri Mukesh Jayantilal Shah. Further it is also contended that in the case of Shri Ramesh Gobarji Thakor (Who is known to the appellant) for the Assessment Year 2010-11 addition of Rs.1,50,00,000/- u/s. 68 of the Act was made by ITO ward -3, Gandhinagar on account of loan received by him from said Shri Mukesh Jayantilal Shah. CIT (A), Gandhinagar has allowed appeal of the assessee and deleted additions made by ITO ward 3, Gandhinagar.

Facts of the case as mentioned in assessment order, submission of the appellant during appellate and assessment proceedings, assessment order of Shri Mukesh Jayantilal Shah, action of recovery proceedings by the AO of Shri Mukesh Jayantilal Shah, and case laws cited upon by the appellant have been carefully considered. There is no dispute that the loan of Rs. 1,55,00,000/- was obtained by the appellant through account payee cheques. It is established that to prove the genuineness of credit, three ingredients i.e. identity, genuineness of the transactions and creditworthiness of the creditor should be proved. In instant loan transaction from Shri Mukesh Jayantilal Shah identity and genuineness of the transactions are not at all in question. The AO did not find creditworthiness of Shri Mukesh Jayantilal Shah and have made additions. Appellant has submitted total 4(four) documents of land which were sold during A.Y. 2009-10 totaling for Rs. 51,90,90,000/. AO not brought anything adverse on record that these sale deeds are not genuine nor has called upon Shri Mukesh Jayantilal Shah to verify correctness of land transactions. Also he has not offered any opportunity for cross examination of Shri Mukesh Jayantilal Shah. Therefore as far as correctness of the sale transactions is concerned these are found to be correct. Assessment order of Shri Mukesh Jayantilal Shah passed by ITO Ward 5(2)(4), Ahmedabad and has assessed his income to Rs. 6,80,50,640/- proves creditworthiness of Shri Mukesh Jayantilal Shah. Regarding genuineness of the transactions, there is no doubt that the transactions took place through account payee cheques. There is not a single case in which deposit and/or withdrawal of cash found in bank account of appellant as well as in account of Shri Mukesh Jayantilal Shah. There is no finding in assessment order that appellant has given cash out of transactions made by appellant with Shri Mukesh Jayantilal Shah. Even loan taken is repaid in next year. Also repayment of loan made during the year under consideration is not doubted by AO nor does anything adverse brought on record out of such repayment. Also actions of recovery proceedings u/s. 226(3) of The Act are dropped by A.O. of Shri Mukesh Jayantilal Shah. Therefore an addition made by A.O. is not justified.”

14. We have considered the facts in the present case Shri Mukesh J. Shah sold his land during A.Y. 2009-10 for Rs. 51.09 crores and assessed to tax by ITO, Ward-5(2)(4) and assessed total income at Rs. 6,80,50,640/-. The so called unsecured loan was given by Account Payee cheques and also repaid by the assessee in the next financial year through banking channels. The recovery proceedings u/s. 226(3) initiated against Mukesh J. shah was also dropped by the A.O. Therefore the provisions of section 68 does not attract of the loan transactions between the assessee M/s. Savitaben Mangaldas Trust and Shri Mukesh J. Shah. Therefore the addition on this account is also liable to be deleted and the grounds raised by the Revenue is devoid of merits.

15. In the combined result, the appeals filed by the Revenue in ITA Nos. 945/Ahd/2018, 1249/Ahd/2018, 1252/Ahd/2018, 1253/Ahd /2018 1254/Ahd/2018 (for A.Y. 2009-10), ITA No. 457/Ahd/2020, 477/Ahd/2020 and IT(SS)A No. 54/Ahd/2021 (for A.Y.2010-11) are hereby dismissed.

Order pronounced in the open court on 02-08-2023.