JOINT COMMISIONER OF INCOME TAX (OSD) CIRCLE 3(1)(1) AHMEDABAD, AHMEBABAD vs. KHUSHAL CLOTHING LLP, AHMEDABAD

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ITA 148/AHD/2026Status: DisposedITAT Ahmedabad12 June 2026AY 2020-214 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the disallowances of interest and commission. It reasoned that the entire loan amount was repaid, and the assessee had deducted TDS on interest, negating the basis for treating the transactions as accommodation entries.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case based on information about accommodation entries of Rs. 1.27 crores in the form of unsecured loans. The AO disallowed interest of Rs. 9,93,812/- and commission of Rs. 2,80,932/- related to these loans.

What were the issues?

Whether interest and commission expenses related to unsecured loans treated as accommodation entries are disallowable when the principal loan amount has been repaid and TDS has been deducted.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI TR SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri M K Patel, Advocate
For Respondent: Shri Ashesh R Rewar, CIT-DR
Hearing: 10.06.2026Pronounced: 12.06.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 13.11.2025 for the Assessment Year (A.Y.) 2020-21 in the proceeding u/s. 147 of the Income Tax Act [hereinafter referred as “The Act”].

2.

The brief facts of the case are that the assessee had filed its return of income for A.Y. 2020-21 on 13.11.2021 declaring total income of Rs. 37,74,390/-. The case of the assessee was reopened on the basis of information received by the AO that the assessee has taken

ITA No.148/Ahd/2026 JCIT Vs Khushal Clothing LLP, AY- 2020-21 2 accommodation entries of Rs.1.27 crores during the year under consideration in the form of unsecured loan. In the course of assessment, the AO had examined the matter and it transpired that the entire unsecured loan of Rs.1.27 crores taken by the assessee was repaid along with interest expense of Rs. 9,93,812/-. The AO had disallowed the interest of Rs. 9,93,812/- on the unsecured loans pertaining to this year as the same pertained to accommodation entries and was not genuine expenditure. Further, commission payment of Rs. 2,80,932/- in respect of accommodation entries was also disallowed. The assessment was completed u/s. 147 r.w.s. 143(3) of the Act on 28.03.2025 at total income of Rs. 50,49,134/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was allowed. Th

4.

Now the Revenue is in appeal before us. The following grounds have been taken in this appeal:

1.

The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 9,93,812/- made by the Assessing Officer for disallowance of interest expenditure paid on unsecured loans borrowed from the dummy entity Providing accommodation entries. 2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,80,932/ made by the Assessing Officer of unaccounted commission payment u/s 69C of the Act on account of charges/expenses of Rs. 2,80,932/- mentioned against unsecured loan of Rs. 1,27,00,000/- taken from the dummy entity Providing accommodation entries.

ITA No.148/Ahd/2026 JCIT Vs Khushal Clothing LLP, AY- 2020-21 3 3. The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal. . 5. Shri Ashesh R Rewar, the Ld. CIT-DR submitted that the Ld. CIT(A) was not correct in deleting the addition of Rs. 9,93,812/- on account of interest and Rs. 2,80,932/- on account of commission, which all pertained to accommodation entries taken by the assessee. He submitted that the accommodation entries were taken from dummy entities and the interest as well as commission expense was bogus. He, therefore, strongly supported the order of the AO.

6.

Per Contra Shri M K Patel, Ld. AR submitted that the fact that the assessee had repaid the entire loan amount was not disputed by the AO. He submitted that the identity, credit-worthiness and genuineness of the loan transactions was duly established and there was no basis to treat the loans as bogus or accommodation entry. Further, that the assessee had duly deducted TDS on the interest payments. Therefore, the Ld. CIT(A) had rightly deleted the additions made by the Assessing Officer. The Ld. AR submitted that the deletion for commission expense was also rightly made by the Ld. CIT(A).

7.

We have considered the rival submissions. It is found that the case of the assessee was reopened to examine the accommodation entries of Rs. 1.27 crores in the form of bogus loan. In the assessment, no addition was made by the AO in respect of unsecured loans. The AO had disallowed only the interest expense of Rs. 9,93,812/- and the commission payment of Rs. 2,80,932/-. The fact that the entire loan amount of Rs. 1.27 crores was repaid by the assessee, is also not under dispute. Thus, when the entire loan amount was repaid along with the interest, there was no

ITA No.148/Ahd/2026 JCIT Vs Khushal Clothing LLP, AY- 2020-21 4

rational for the AO to treat the loans taken by the assessee as accommodation entries. In fact, no disallowance for the unsecured loans was made by the AO. On the payment of interest, the assessee had duly deducted the TDS, and this fact was acknowledged by the Ld. CIT(A) as well. We, therefore, do not find any infirmity with the order of the Ld. CIT(A) deleting the addition in respect of interest payment. Similarly, there was no basis to treat the commission expense of Rs.2,80,932/- as bogus. As admitted by the AO, no loan was obtained during the current year and, therefore, the disallowance for the commission expense on the ground that the same pertained to loan transactions, was based on mere surmise and conjecture. The decision of the Ld. CIT(A) on this issue is also upheld. The grounds taken by the Revenue are dismissed.

8.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on 12/06/2026 at Ahmedabad.

Sd/- Sd/- (TR SENTHIL KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 12th June, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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