SESCON BUILDERS PRIVATE LIMITED,DELHI vs. DCIT, CIRCLE- 23(2), DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI Before Sh. S. Rifaur Rahman, Accountant Member & Sh. Raj Kumar Chauhan, Judicial Member ITA No. 7072/Del/2025 : Asstt. Year: 2017-18 Sescon Builders Pvt. Ltd., Vs DCIT, 78, 306, Guru Amardas Bhawan, Circle-23(2), Nehru Place, South Delhi, New Delhi-110002 New Delhi-110019 (APPELLANT) (RESPONDENT) PAN No. AAPCS9101C Assessee by: Sh. Ved Jain, Adv. & Ms. Kanishka Garg, CA Revenue by: Sh. Sudeep Dabas, Sr. DR Date of Hearing: 07.07.2026 Date of Pronouncement: 02.09.2026 ORDER Per Raj Kumar Chauhan, Judicial Member: The appeal of the assessee is directed against the order dated 16.09.2025 of ld. CIT(A)/NFAC passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) wherein an addition of Rs.4,50,00,000/- u/s 68 of the Act on account of an unsecured loan received from M/a Arora Fincap Ltd. has been confirmed, against the assessment order dated 26.12.2019.

2 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. Rs.7,40,59,000/-. The case was selected for limited scrutiny under CASS and, during the course of assessment proceedings, the Assessing Officer called upon the assessee to explain the unsecured loan of Rs.4,50,00,000/- received from M/s Arora Fincap Ltd. In response, the assessee furnished various documentary evidences, including confirmation from the lender, audited financial statements, bank statements of the assessee and the lender, loan agreement, Income-tax Return acknowledgements, Form 16A, interest ledger and evidence of repayment of the loan through normal banking channels. Thereafter, a summon u/s 131 of the Act were issued to Mr. Rajeev Singh Kushwaha, Director of M/s Arora Fincap Ltd., who appeared before the Assessing Officer and furnished the relevant documents, including confirmation, PAN, bank statements and audited financial statements of the lender company. However, notwithstanding the documentary evidences furnished by the assessee and the personal appearance of the Director of the lender company, the Assessing Officer treated the loan of Rs.4,50,00,000/- as unexplained and made an addition u/s 68 of the Act. The assessee contended that the identity and creditworthiness of the lender and genuineness of the transaction stood duly established and that the loan transaction was routed through normal banking channels,

3 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. interest was paid thereon and the loan was subsequently repaid.

“1. On the facts and circumstances of the case, the order passed by the learned Commissioner Income Tax (Appeals), {(CIT(A),}, is bad, both in the eye of law and on the facts. 2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs. 4,50,00,000/- made by the Assessing officer (AO) on account of unsecured loans received from M/s Arora Fincap Limited under section 68 read with section 115BBE of the Act. (ii) That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee in this regard. 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition despite the fact that the unsecured loan received by the assessee was repaid along with the due interest by the assessee in the subsequent years. 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition despite the fact that the same has been made by the AO without concluding

4 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. independent enquiry conducted during the course of assessment proceedings to the logical end. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition rejecting the contention of the assessee that the transaction has been entered into with the proper banking channel and no shred of evidence has been brought on record by the AO to establish that amount of loan amount emanated from the own coffers of the assessee company. 6. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition despite the fact that the addition has been made by indulging in gross conjecture and surmises without bringing any adverse material on record. 7. Without prejudice to the above, the learned CIT(A) has erred in law in confirming the retrospective application of the amendment brought by The Taxation Laws (Second Amendment) Act, 2016 under Section 115BBE, despite the fact that the same is effective from AY 2018-19.” 5. We have heard the ld. AR and the ld. DR. The ld. AR has argued that the assessee has fully discharged the onus u/s 68 of the Act establishing the identity, creditworthiness and genuineness of the transaction. In that regard, he has referred confirmation from M/s Arora Fincap Ltd. at page 72, ledger account at page 107 and copy of bank statement of M/s Arora Fincap Ltd. evidencing the advancing of the loan to assessee placed at page 109-113 of the paper book. He also further referred balance sheet placed at page 93 of the paper book. It is further submitted that the proof of interest paid by the assessee is as at page 109-113 of the paper book. Lastly, it is argued that the AO did not conduct any inquiry with respect to

5 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. the transaction concerning the loan. In that regard, he has filed written submissions. In support of our arguments to the fact that onus upon the assessee u/s 68 of the Act has been duly discharged and the impugned addition is based merely on suspicions and the 2nd Amendment Act, 2016 u/s 115BBE of the Act cannot be applied retrospectively and the Assessing Officer has erred in that regard by proposing @ 60% plus surcharge instead of normal rates. It is also argued that the sole basis of addition is the allegation that Mr. Rajeev Singh Kushwaha, Director of M/s Arora Fincap Ltd. was allegedly arrested by Enforcement Directorate in connection with an investigation relating to money laundering and conversion of demonetized currency but the ld. Assessing Officer did not point out any defect in the documentary evidence furnished by the assessee and no material has been brought on record to establish any nexus between the alleged investigation and the loan advance to the assessee. The written submissions in that regard from paras 15 to 25 are extracted below as under:

“15. The assessee respectfully submits that it has discharged the entire burden cast upon it under section 68 of the Act. 16. The identity of the lender stands established through its:-  Copy of confirmation from Arora Fincap Ltd. (PB Pg 72)  Copy of Audited Financial Statement of M/s Arora Fincap Limited AY 2017-18 (PB Pg 93-103)

6 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd.  Copy of ITR Acknowledgement of M/s Arora Fincap Ltd. for AY 2016-17 to 2018-19 (PB Pg 153-155) 17. The creditworthiness of the lender stands established through its:- • Copy of Bank statement of the assessee reflecting the loan received and the subsequent repayment of loan. (PB Pg 74-92). • Copy of Bank Statement of M/s Arora Fincap Ltd. evidencing the advancing of loan to assessee (PB Pg 109-113) • Copy of Audited Financial Statement of M/s Arora Fincap Limited AY 2017-18 (PB Pg 93-103) 18. The genuineness of the transaction stands established through:  Loan Agreement entered with Ms Arora Fincap Limited. (PB Pg 123-125)  Form 16A for AY 2017-18 in respect of interest paid to M/s Arora Fincap Ltd.(PB Pg 143-150)  Ledger A/c of interest paid to M/s Arora Fincap Ltd. in the books of the assessee. (PB Pg 151-152)  Copy of Bank statement of the assessee reflecting the loan received and the subsequent repayment of loan. (PB Pg 74-92).  Copy of Bank Statement of M/s Arora Fincap Ltd. evidencing the advancing of loan to assessee. (PB Pg 109-113) 19. Furthermore, the Mr. Rajeev Singh Kushwaha (Director of the M/s Arora Fincap Limited) personally appeared before the Ld. AO in response to summons issued under section 131 and confirmed the transaction. 20. Thus, all the three essential ingredients required under section 68, namely identity, creditworthiness and genuineness, stood fully established. iii. The impugned addition is based merely on suspicion 21. It is pertinent to note that the impugned addition is not supported by any evidence whatsoever. Notwithstanding, the extensive documentary evidence and the personal appearance of the Director of the lender company, the Ld. AO proceeded to treat the unsecured loan as unexplained cash credit under section 68 of the Act. 22. In the assessment order, the Ld. AO does not point out any defect in the documentary evidence furnished by

7 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. the assessee. The sole basis of the addition is the allegation that Mr. Rajeev Singh Kushwaha, Director of M/s Arora Fincap Ltd., was allegedly arrested by the Enforcement Directorate in connection with an investigation relating to money laundering and conversion of demonetised currency. - No search or survey has ever been conducted in the case of M/s Arora Fincap Ltd. - No competent authority has declared the lender company to be a bogus concern or an accommodation entry provider. - No statement has been brought on record wherein the lender admitted that the loan advanced to the assessee was an accommodation entry. - No evidence has been produced to establish that any cash moved from the assessee to the lender company. - No investigation report, statement or adverse material allegedly relied upon was confronted to the assessee. 23. No material has been brought on record to establish any nexus between the alleged investigation and the loan advanced to the assessee. The addition has thus been made merely on suspicion and without any evidence to demonstrate that the impugned loan represented the assessee's own unexplained money. 24. The Revenue has thus failed to establish any live nexus between the alleged investigation against the Director and the loan transaction with the assessee. 25. It is well settled that suspicion, however strong, cannot substitute legal evidence. An addition under section 68 cannot be sustained merely on the basis of third-party allegations unconnected with the assessee.” 6. The ld. AR further submitted that the present case is covered by the case of Delhi Tribunal where the similar loan transaction subject matter of ITA No. 2157/Del/2025 order dated 28.01.2026 has been dealt with where also the similar addition were made on the sole ground of involvement of Mr. Rajeev Singh Khushwaha, Director of M/s Arora Fincap Limited. in an alleged money laundering case registered by ED.

8 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. 7. The ld. DR on the other hand argued that the assessee has miserably failed to fulfill the three conditions to show the genuineness of the transaction involved in this case. It is further argued that the facts of the covered case in ITA No. 2157/Del/2025 are distinguishable from the present case as there is less income allegedly shown for these years subject matter of the present appeal and further in the present case, the AO has filed his remand report whereas in the case relied as covered by the assessee as there was no remand report submitted by the AO. Hence, the observation in para 5.2 recorded in the covered case are not applicable to the case of the assessee.

9 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. CIT(A) has considered the said application or whether he has decided or dismissed the same. In that regard, we have noticed that the submission of the remand report and its consideration and disposal of the application under Rule 46A has been considered and adjudicated upon in paras 9.5, 9.6 and 9.7 of the impugned order extracted below as under: “9.5 Subsequently, the matter was remanded for examination of the additional evidences submitted by the appellant under Rule 46A of the Income Tax Rules. The remand report submitted by the AO affirms that the appellant was granted ample opportunities during the assessment proceedings to produce evidence to discharge its onus. However, despite such opportunities, the appellant failed to produce sufficient and satisfactory’ evidence in support of the genuineness and creditworthiness of M/s Arora Fincap Ltd. The AO further noted that summons u/s 131 of the Act were issued to M/s Arora Fincap Ltd. and its director, Shri Rajeev Singh Kushwaha, but the director failed to appear and file any submissions in these proceedings. The remand report concluded that the additional documents submitted did not establish the genuineness or creditworthiness of the lender company, particularly considering the very’ low total income shown by M/s Arora Fincap Ltd. for A.Y. 2016-17, A.Y. 2017-18, and A.Y. 2020-21, raising serious doubts on its ability’ to advance such a significant loan. The ED's description of Shri Kushwaha as the mastermind behind alleged money laundering operations through shell companies further supports the AO’s reasoning in confirming the addition. 9.6 It is also noteworthy that no rejoinder or response to the remand report was filed by the appellant within the compliance date despite being afforded the opportunity. This inaction further supports the correctness of the AO’s findings as no fresh material or substantive explanation was provided by the appellant in rebuttal. 9.7 To conclude, in view of the above facts, findings of the AO as affirmed in the remand report, and the absence of any rejoinder from the appellant, the creditworthiness of lender remained unsubstantiated. Therefore, the addition of Rs.4,50,00,000/- treating the unsecured loan from M/s Arora Fincap Ltd. as

10 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. unexplained credit u/s 68 read with section 115BBE of the Act is justified and liable to be confirmed. Accordingly, this ground of appeal is dismissed.” 9. On perusal of this finding, it is clear that the ld. CIT(A) has tried to escape from giving any finding on the admission of the additional evidence sought to be relied by the assessee/appellant to prove the creditworthiness, identity of the party and genuineness of the transaction, and he has simply concluded that in view of the facts, finding of the AO as affirmed in the remand report, and in the absence of any rejoinder from the appellant, the creditworthiness of the lender remained unsubstantiated and accordingly, proceeded to confirm the addition of Rs.4,50,000/- treating the unsecured loan from M/s Arora Fincap Ltd. as unexplained credit u/s 68 r.w.s. 115BBE of the Act. From the above finding, we have noticed that the ld. CIT(A) has neither admitted nor rejected the admission of additional evidence and has not disposed of the application under Rule 46A of the Act. The additional evidence which is sought to be filed is the crucial material relied by the assessee/appellant for proving the creditworthiness of the parties and genuineness of the transaction in question. To that extent, the case relied by ld. AR is distinguishable on facts. Further, the ld. CIT(A) because of the above factual matrix, has not decided the issue before

11 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. him as per requirement of section 250(6) of the Act, which lays down as under: Procedure in appeal. 250........ ............. (6) The order of the Joint Commissioner (Appeals) or the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.” 10. In view of these facts, since the sole issue involved in the case is addition of Rs.4,50,00,000/- u/s 68 r.w.s. 115BBE of the Act, the additional evidence which was sought to be produced by the assessee/appellant before the ld. CIT(A) remained to be considered or rejected in the absence of any finding having not been returned on the application under Rule 46A of the Act by the ld. CIT(A). The ends of justice requires that the ld. CIT(A) needs to decide the said application after considering the submissions and the rejoinder, if any, to be filed by the assessee/appellant, which he has failed to file during the appellate proceedings before the ld. CIT(A). Accordingly, the impugned order is set aside by remitting the case to the file of the ld. CIT(A) for deciding the same as per requirement of section 250(6) of the Act. The appellant shall be afforded an opportunity to file evidence/material or rejoinder to the Remand Report of the AO.

12 ITA No. 7072/Del/2025 Sescon Builders Pvt. Ltd. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order Pronounced in the Open Court on 02/09/2026. Sd/- Sd/- (S. Rifaur Rahman) (Raj Kumar Chauhan) Accountant Member Judicial Member Dated: 02/09/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR