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TMI Blog2025 (5) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as no books of accounts are maintained by the appellant. Such illegality in invoking wrong section for making addition to income is a jurisdictional error which is incurable u/s 292BB of IT Act. 2. On the facts and circumstances of the case, the Ld CIT(A) has erred both on facts and in law in upholding the addition of Rs. 5,90,73,007/- u/s 68 rws 115BBE of IT Act as unexplained credits ignoring the fact that the appellant has duly proved discharged its onus u/s 68 of IT Act by submitting all relevant evidences. The AO has neither asked any further clarification nor has made any enquiry before making addition. The additions made by the AO are therefore contrary to facts on record and the same is based on mere suspicion, surmises and conjectures which are unsustainable, arbitrary and unjustified. 3. On the facts and circumstances of the case, the Ld CIT(A) has erred both on facts and in law in upholding the disallowance of claim of exempt income of Rs. 1,11,56,703/- ignoring the fact that the above is receipt of gift from the donor son which is exempt from income tax and the appellant has submitted all relevant evidences. The additions made by the Ld AO are therefore contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that it is an admitted position that the assessee has not derived any business income and therefore was neither under obligation to maintain books of accounts nor did she maintain any books of accounts. In the absence of books of accounts, s. 68 could not have been invoked by the AO at the first place. The additions made under s. 68 of the Act and all other additions are thus required to be quashed at the threshold and the returned income requires to be restored. 6.1. On merits, it is the contention on behalf of the assessee that the additions of INR 5,90,73,007/- comprised of; (i) credits by way of unsecured loans of INR 1,09,30,007/- in aggregate from very close family members for which relevant documentary evidences were duly placed in the course of assessment. Besides, the loans have been fully or substantially repaid during the FY itself and therefore the addition s made under s. 68 of the Act is wholly unjustified; (ii) credits/receipt of INR 4,81,43,000/- represents repayment of preexisting loan advanced by assessee from (a) Ommur Medica Health P Ltd. of INR 33,27,000/-; (b) M/s. Ravee Pro-Build P.ltd. of INR 15,000/-; and (c) M/s. Mukesh Mrinal and Deepak of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute books of account. The "books or books of account" have been defined in section 2(12A) of the Act. The same reads as under: "2(12A) books or books of account" includes ledgers, daybooks, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;" The definition of books, under the Act, is inclusive. A perusal of the definition shows that the same does not include bank passbook or bank statement maintained by another person i.e. bank. A conjoint reading of above provisions would thus lead to the conclusion that the addition u/s 68 can be made only where any amount is found credit in the books as defined u/s 2(12A) of the Act maintained by the assessee. The jurisdictional Delhi High Court in CIT Vs. Ms. Mayawati 338 ITR 563 [Del] held that Section 68 has no applicability when the assessee is not maintaining any books of accounts. The ITAT was of the opinion that balance sheet/statement of the affairs cannot be equated to books of account and also a pass book of the bank cannot be treated as a book of account of the assessee because this is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- These loan transactions are of Rs. 50,000/- dt: 30.04.2020 and Rs. 26,00,000/- dt: 20.11.2020 which are fresh addition to old brought forward loan of Rs. 16,50,000/-. The amount is fully repaid during the year. Copy of the confirmation along with ITRV for AY 2021-22, computation of income, bank statement, PAN Card, her statement of affairs as on 31.03.2020 and 31.03.2021 are placed in paper book at pages 54-66. The entire loan of Rs. 44,27,000/- (including opening balance of Rs. 16,50,000/-) was repaid during the year through banking channels which can be verified from confirmation, statement of affairs and bank statement where repayment transactions are duly highlighted. The Ld AO was not satisfied about the creditworthiness of loan creditor as her current year income as per the ITR for AY 2021-22 was Rs. 4,08,710/- but Ld AO missed the very important aspect of the matter that the above loan creditor had opening capital balance of Rs. 3,26,52,121/- as per statement of affairs as on 31.03.2020 (PB 65) and she had benefit of outstanding loan of Rs. 2,00,90,000/- as on 31.03.2020 and therefore, the above loan creditor had adequate resources to advance loan of Rs. 26,50,000/- dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was not satisfied about the creditworthiness of loan creditor as his current year for AY 2021-22 was just Rs. 4,04,290/- but Ld AO missed the very important feature in the case which is that the above loan creditor had opening capital balance of Rs. 3,88,34,094/- as per statement of affairs as on 31.03.2020 (PB 78) and she had benefit of third credits as loans Rs. 29,70,000/- on the opening day and therefore, the above loan creditor could not be held to be lacking creditworthiness to advance loan of Rs. 19,21,007/- to the appellant mother which has been repaid back. Besides above, the current year income of Rs. 4,04,290/- is further supplemented by the sale realization of shares of Rs. 25,17,596/- as shown in the computation of income on which LTCG loss of Rs. 35,23,161/- has been claimed but there was inflow of funds of Rs. 25,17,596/- during the year under consideration (PB 71). On the issue of current year being the criteria for judging creditworthiness and the fact that the loans are repaid during the year, the judgements cited in the case of Smt Akanksha Mittal are relied in the above case too. c. Neha Vikas Goyal (Married Daughter) Rs. 48,69,000/- This is also a loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epayments/fresh loans given during 20.06.2020 to 18.02.2021 aggregating Rs. 13,80,304/-. The assessee seeks to explain the source of above loan of Rs. 1,90,000/- on the basis of copy of the confirmation, e-filed ITRV, Computation of income, PAN Card and bank statement placed in paper book at pages 98-108. Out of above loans Rs. 25,15,304/- including opening balance of Rs. 50,000/- was repaid and the above loan creditor turned into a debtor of Rs. 14,75,304/- during the year. All the transactions were done through banking channels which can be verified from confirmation and bank statement where repayment transactions are duly highlighted. The Ld. AO was not satisfied about the creditworthiness of loan creditor as his current year for AY 2021-22 was Rs. 5300/- but from the copy of computation of income (PB 99-101), it can be seen that the above loan creditor had received funds of Rs. 1,00,51,220/- from sale of shares of three unlisted entities which was the source of loan given by him to the appellant. On the issue of current year's income being the sole criteria for judging creditworthiness and repayment of the loans during the year, the judgements cited in the case of Smt A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of s. 68 are recoupment of the earlier advances. The nature of the credit is thus obvious case of repayment of existing loans. It was held that on facts, the AO has obviously misunderstood the true purport of nature of credits. The Assessing Officer has thus misdirected himself in law in proceeding against the assessee on a wholly wrong footing. The onus which lays upon the assessee to explain that the entries made are real and not fictitious, has been duly discharged. Ordinarily, it is difficult to fathom an onus tagged upon the assessee to explain the circumstances as to why third party had needed such funds so long as the transactions are embedded with commercial considerations. Furthermore, the onus towards source in the hands of borrower in relation to repayment entries qua pre-existing loans is indeed onerous and can seldom be visualized. Reliance is also placed in the decision of JCIT vs Radhe Developers P Ltd ITA No.1226/AHD/2018 dated 22.02.2021 (relevant para 11), ACIT vs Sunderdeep Construction P Ltd ITA No.380/IND/2017 and M/s Flourish Pure Foods P Ltd vs DCIT ITA No.30/AHD/2022 dated 16.02.2024. a. Repayment of loan by M/s Ravee Pro-Build P Ltd Rs. 15000/- Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book at pages 169-173 and gift deeds are enclosed with present submission. These diamonds were acquired by the donors out of the withdrawal from their respective saving accounts. The bank statements of these donors are placed in paper book at pages 174-175 & 176-204. From perusal of the bank statement, it can be seen that there have been no cash deposits in the bank accounts. The statement of affairs signed by the CA for 31.03.2020 and 31.03.2021 placed in paper book at pages 205-208 and theirs e-filed ITRV and computation of income at pages 163-168. to show the creditworthiness of above donors. The gifts were made 30.09.2020 which was the birthday of the husband of the assessee as per Hindi calendars. The fact that donors were sons of the assessee gets proved from the ration card, copy of which is placed in paper book at pages 158- 162. The fact of relationship of mother with the sons is ample proof of natural love and affection. This fact need not be proved beyond establishment of above relationship which stands established from copy of ration card. When an assessment order lacks clear references to the specific sections under which the addition is made, it raises doubts about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores. The loan received during the year as well as brought forward loans have been largely repaid by the assessee during the year with a meager outstanding of INR 7,85,007/-. The copy of confirmation, Income tax return, computation of income of the lender, bank statement, balance sheet etc. adequately establishes the nature and source of loan contemplated under s. 68 of the Act. The AO has cast doubt on the creditworthiness based on current year income of INR 4,04,290/- without taking into account receipt by way of sale proceeds of shares by lender and large opening capital balances held at the disposal of the lender. Be that as it may, the loan stands repaid and propriety of credit cannot be regarded to be suspect. (c) Unsecured loan from Mrs. Neha Vikas Goyal (Married daughter) of INR 48,69,000/-: The assessee contends that the fresh credit received is only INR 13,69,000/- and remaining amount received is out of loan earlier advanced by the assessee to the daughter. The relevant documentary evidence such as confirmation, income tax return, bank statement are placed on record. Noticeably, the loans stands repaid and therefore, there is no justification to doubt the nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the totality of facts, where the trail for obtaining of loan and repayment thereof is proved and the lender has duly filed its return of income encompassing the transaction carried with the assessee, the action of the Revenue cannot be countenanced in law. 11. The Hon'ble Gujarat High Court in the cases of CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj) and CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj) have held that when the Department has accepted the factum of repayment, the additions under s. 68 is not sustainable in law. Similar view has been expressed in CIT Vs. Karaj Singh (2011) 15 Taxmann.com 70 (P&H); Panna Devi Chowdhary Vs. CIT, 208 ITR 849 (Bom); and PCIT v. Skylark Build (2019) 180 DTR 266 (Bom.) (HC). 12. At this juncture, it will also be relevant to note the pertinent observations of the Hon'ble Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) in the context of the expression 'may' with reference to s. 69 of the Act. The Hon'ble Supreme Court in that case observed that the word 'may' should not be read as 'shall'. The Hon'ble Supreme Court held that the expression 'may' indicates that the intention of Parlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 2,50,000/-; (iii) Audited financial statement of the LLP and Note No.3 showing comparative long term borrowings particulars. With the help of these documents, the assessee submits that she was the partner in LLP and an amount of INR 4,30,51,000/- and capital contribution lying with the LLP has been recovered during the year which explains nature of receipt of repayment /recovery entries from M/s. SMN Reality where the assessee was a partner. The source of receipt of INR 4,33,01,000/- is thus cogently explained. The additions made under s. 68 of the Act is therefore, clearly devoid of any merit; and (iv) Repayment of loan by M/s. Mukesh Mrinal and Deepak of INR 15,00,000/- The amount was outstanding as on 01.04.2020. The confirmation from the borrower clearly vouches for the fact that the credit represents recovery of loans. The additions made are thus not justified. 15. It may be pertinent to note here that the burden of verification on documents submitted is upon the AO. The assessee has filed the relevant documentary evidences and either the loans earlier received have been repaid or the loans advanced by the assessee have been recovered. It may be borne in mind that whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of accounts mandated in law, there is no legal scope to invoke the provision of s. 68 at the first place. 17.2. Guided by the judicial precedents quoted above, we find merit in the legal plea too. 18. In the light of delineations made, the additions made to the tune of INR 5,90,73,007/- under s. 68 of the Act is unsustainable both on fact and law and therefore, reversed and cancelled. 19. Ground No.1 & 2 raised by the assessee are allowed. 20. Ground No.3 concerns disallowance of claim of exempt income of INR 1,11,56,703/- on account of receipt of unexplained gifts. 20.1. In respect of such claim, the assessee seeks to submit that she has received gifts in the form of loose diamonds of INR 63,77,752/- from son Shri Arun Mittal and loose diamonds of INR 47,78,952/- from other son Shri Kushal Mittal. The assessee with reference to the Paper Book, seeks to submit that the evidences of purchase of diamonds by the both sons and Gift Deed of such loose diamonds showing voluntarily transfer of diamonds to mother assessee is placed on record. The source of purchase of diamonds is out of bank balances without any cash deposits. The AO has dis-credited the receipts of diamonds by w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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