In Rajnandani Projects Pvt. Ltd., vs. Principal Commissioner of Income Tax-1, Patna & Ors. (2025), Division Bench of Justices Bibek Chaudhuri and Dr. Anshuman of Patna High Court delivered a 24-page long judgement dated December 18, 2025, wherein, it allowed the Miscellaneous Appeal. It concluded: "50. The order, dated 03.11.2022, passed by the Income Tax Appellate Tribunal, Patna Bench, Patna in I.T.A. No. 250(Pat)/2019 for the Assessment Year 2015-16, is set aside. 51. The order, dated 20.09.2019, passed by the Commissioner of Income Tax (Appeals), Patna, deleting the addition of Rs. 1,91,00,000 made under Section 68 of the Income Tax Act, is restored. 52. However, there shall be no order as to costs."
The appellant was a private limited company, engaged in the business of civil construction. For the Assessment Year 2015-16, the appellant filed its return of income on March 28, 2016, declaring total income of Rs. 1,96,95,520/-. The case was selected for scrutiny and notices under Section 142(1) of the Act, along with a questionnaire were issued by the Assessing Officer. During the assessment proceedings, the Assessing Officer noticed that the appellant had received a sum of Rs. 1,91,00,000/- through banking
channels from M/s Champion Group of Companies during the relevant previous year.
In order to verify the nature of the said receipts, the Assessing Officer issued notices under Section 133(6) and summons under Section 131 of the Act. The appellant initially described the receipts as loan and thereafter submitted that the amount was received as advance against sale of sand to be supplied to M/s Champion Group of Companies, whose proprietor is Amit Kumar Singh. The appellant furnished before the Assessing Officer a copy of the ledger account of the said party, confirmation, address and PAN details, copies of income tax returns of Amit Kumar Singh for Assessment Years 2015-16 and 2016-17, and bank statements showing the transfer of funds through banking channels. The Assessing Officer was not satisfied with the explanation furnished by the appellant. He observed that the appellant had changed its stand regarding the nature of the transaction and that the creditworthiness of the creditor and genuineness of the transaction were not established. The Assessing Officer, by order dated December 31, 2017 passed under Section 143(3), treated the entire amount of Rs. 1,91,00,000/-as unexplained cash credit within the meaning of Section 68 of the Act and made an addition to the total income of the appellant.
The appellant preferred an appeal before the Commissioner of Income Tax (Appeals), Patna. In the course
of appellate proceedings, the Commissioner of Income Tax (Appeals) called for a remand report from the Assessing Officer. The Assessing Officer submitted his remand report on September 13, 2019. The Commissioner of Income Tax (Appeals), upon consideration of the assessment order, submissions of the appellant, documents brought on record, including bank statements, confirmations, copies of returns of the creditor, and the remand report, held that the identity of the creditor stood proved, the source of funds was traceable in the banking channels, and the explanation furnished by the appellant was acceptable. The Commissioner of Income Tax (Appeals), by order, dated September 20, 2019, deleted the addition of Rs.1,91,00,000/- made under Section 68 of the Act. The Revenue preferred an appeal before the Income Tax Appellate Tribunal, Patna Bench. The Tribunal, upon consideration of the record, held that the appellant had proved only the identity of the creditor. The Tribunal observed that the genuineness of the transaction and the creditworthiness of the creditor were not established, inter alia, noting that the creditor had not filed return of income for the relevant year when the transaction occurred. The Tribunal set aside the decision of the Commissioner of Income Tax (Appeals) and restored the addition of Rs. 1,91,00,000/- made by the Assessing Officer by order, dated November 3, 2022.
Being aggrieved by the order of the Tribunal, the appellant preferred the Miscellaneous Appeal under Section 260A of the Income Tax Act before the High Court.
The High Court framed six substantial questions of law which arose for consideration in the appeal:
(i) Whether the Income Tax Appellate Tribunal erred in reversing the order dated 20.09.2019 passed by the Commissioner of Income Tax (Appeals) deleting the addition of Rs. 1,91,00,000/- made under Section 68 of the Income Tax Act.
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the appellant genuineness of the transaction and the creditworthiness of the creditor, when the identity of the creditor, the bank statements, the ledger account, and the confirmations were placed on record.
(iii) Whether the Tribunal committed an error in law in drawing an adverse inference on the ground that the creditor had not filed the return of income for the relevant assessment year, when the appellant had furnished copies of the returns of the creditor for other assessment years along with PAN, address and bank details.
(iv) Whether the Tribunal erred in applying an incorrect legal standard by requiring the appellant to establish the source of the source of the funds received from the creditor.
(v) Whether the findings of the Tribunal, in reversing the well-reasoned order of the Commissioner of Income Tax (Appeals), are perverse and contrary to the material available on record.
(vi) Whether, in the facts of the case, the Tribunal failed to consider settled judicial precedents relating to the scope and application of Section 68 of the Income Tax Act.
Justice Chaudhary who authored the judgement wrote:"....the substantial questions of law framed in this appeal are answered in favour of the appellant."
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