DEPUTY COMMISSIONER OF INCOME TAX, DELHI vs. HIGH END INFRATECH PVT LTD, DELHI

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ITA 6557/DEL/2026Status: DisposedITAT Delhi07 October 2026AY 2017-1812 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A)'s order is set aside and the additions made by the AO are reversed and cancelled. The Tribunal noted that for AY 2017-18, an assessee is not obligated to prove the 'source of the source' for unsecured loans under Section 68. It was also an admitted fact that the loans were repaid well before the notice of reassessment was issued. The Tribunal found that the repayment of loans, along with interest, and the fact that the lenders were engaged in giving loans and earned interest income, demonstrated the assessee's good faith in transacting with these companies. The Tribunal agreed with the Ld. CIT(A) that the assessee had discharged the onus under Section 68 by establishing the identity, creditworthiness, and genuineness of the transaction, supported by documentary evidence and repayment through banking channels. The AO failed to bring on record cogent material to suggest the transaction was a mere accommodation entry. The Tribunal found no substance in the Revenue's grounds of appeal, rendering the assessee's grounds under Rule 27 academic. The appeal of the department was dismissed.

What were the facts?

The Revenue is in appeal against the order of the Ld. Commissioner of Income Tax (Appeals) for Assessment Year 2017-18. The assessee, High End Infratech Pvt Ltd, claimed to have received unsecured loans totaling Rs. 75,00,000/- from three entities: M/s Aptitude Tradex Pvt. Ltd. (Rs. 30,00,000/-), M/s Capacious Tradex Pvt. Ltd. (Rs. 30,00,000/-), and M/s Alight Tradex Pvt. Ltd. (Rs. 15,00,000/-). The Assessing Officer (AO) made an addition under Section 68 of the Income Tax Act, 1961, finding the lender entities to be non-descript/shell concerns, not operating from disclosed addresses, having common directors/infrastructure, not complying with summons, and their bank accounts showing fund layering. The AO also noted the assessee's failure to furnish contemporaneous loan documents. The Ld. CIT(A) deleted the addition, relying on the loans being received and repaid through banking channels and interest payment.

What were the issues?

1. Whether the addition made under Section 68 of the Income Tax Act, 1961, for unsecured loans aggregating to Rs. 75,00,000/- is sustainable when the assessee has repaid the loans through banking channels and paid interest, despite the Assessing Officer's findings regarding the alleged lender entities being non-descript/shell concerns. Assessee's Contention (as per CIT(A)'s reasoning): The assessee argued that the loans were received and subsequently repaid through banking channels, and interest was paid. The funds were utilized for business purposes. The assessee relied on the principle that it is not required to explain the 'source of source' and cited cases like CIT v. Kamdhenu Steel & Alloys Ltd., DCIT vs. M/s. Sarena Pvt. Ltd., and Real Innerspring Technologies (P.) Ltd. vs. ACIT, emphasizing that repayment of loans through banking channels, along with interest payment and creditor's compliance, negates the addition under Section 68. Revenue's Contention: The Revenue contended that the Ld. CIT(A) overlooked the AO's substantive findings about the lender entities being non-descript/shell concerns, lacking identity, creditworthiness, and genuineness of the transaction. The Revenue argued that mere repayment through banking channels does not make a non-genuine transaction genuine and relied on PCIT v. NRA Iron & Steel Pvt. Ltd., CIT v. Precision Finance (P.) Ltd., CIT v. Nova Promoters & Finlease (P.) Ltd., and CIT v. Nipun Builders & Developers (P.) Ltd. to assert the assessee's onus to establish identity, creditworthiness, and genuineness, especially when adverse material exists.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C,Section 147,Section 151,Section 153C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL

Pronounced: 07.10.2026

PER SHRI ANUBHAV SHARMA, JUDICIAL MEMBER: This appeal is preferred by the revenue against the order dated 05.03.2026 of the Ld. Commissioner of Income Tax, (Appeals)-23, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Order No : ITBA/APL/S/250/2025-26/1086881313(1) arising out of the assessment order dated 29.03.2025 u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ACIT, CC-4, New Delhi for AY: 2017-18.

2.

Heard and perused the records. Ld. DR has submitted that the assessee claimed to have received unsecured loans from the three entities, M/s Aptitude Tradex Pvt. Ltd. of Rs.30,00,000/-, M/s Capacious Tradex Pvt. Ltd. of Rs.30,00,000/- and from M/s Alight Tradex Pvt. Ltd. of Rs.15,00,000/-, aggregating to Rs.75,00,000/-. The Assessing Officer, after detailed examination and investigation, found serious adverse facts concerning the alleged lender entities. The AO recorded that the entities were non-descript/shell concerns, were not operating from their disclosed addresses, had common directors/common infrastructure, did not comply with summons, and their bank accounts revealed layering of funds through other non-descript entities. The assessment record further records that the assessee failed to furnish basic contemporaneous documents such as loan agreements, correspondence, sanction letters, repayment schedules and documentary evidence regarding the purpose/application of the loans. The AO specifically recorded:

"SMC group companies could not provide any loan agreement, communication details, details of key persons, etc. to establish that the loan is genuine."

2.1 It was submitted that the Ld. CIT(A), however, deleted the addition principally relying upon the fact that the loans had been received and subsequently repaid through banking channels and that interest had also been paid. The Ld. CIT(A) further proceeded on the premise that the assessee had taken the funds for acute working-capital requirements and had utilised them for business purposes. It was submitted that the approach of the Ld. CIT(A) overlooks the substantive findings of the AO and the settled principles governing section 68 of the Act. She submitted that the present case is not a case of "source of source" and the Revenue is not contending that the assessee was required to establish the ultimate source of every rupee in the hands of the alleged lenders. The issue is much more fundamental. The assessee was required to establish, in respect of the credits appearing in its books by establishing identity of the creditor; creditworthiness/capacity of the creditor; and genuineness of the transaction. She relied the Hon'ble Supreme Court decision in PCIT v. NRA Iron & Steel Pvt. Ltd., 412 ITR 161/103 taxmann.com 48 (SC) to submit that the assessee has the initial onus of establishing identity, creditworthiness and genuineness by cogent evidence. Likewise, she relied decision in CIT v. Precision Finance (P.) Ltd., 208 ITR 465 (Cal.), where the Hon'ble Calcutta High Court held that mere furnishing of particulars is not sufficient and that the assessee has to establish the identity of creditors, their creditworthiness and genuineness of the transactions. Mere payment through an account-payee cheque does not, by itself, make a non-genuine transaction genuine. Thus, as per ld. DR the Ld. CIT(A)'s reliance upon the proposition that the assessee need not prove the "source of source" does not answer the Revenue's case. The Revenue is questioning the genuineness and creditworthiness of the direct lenders themselves. The AO had brought substantial adverse material on record and the addition was not made merely because the AO had some doubt regarding the lenders. According to ld. DR, this distinction is important in the light of decision in CIT v. Nova Promoters &Finlease (P.) Ltd., 342 ITR 169 (Delhi), wherein the Hon’ble Delhi High Court dealt with accommodation-entry transactions and emphasised that where there is material indicating accommodation entries, the documentary form of the transactions has to be examined in the light of the surrounding material. Similarly, reliance was placed on CIT v. Nipun Builders & Developers (P.) Ltd., 350 ITR 407 (Delhi), where the Hon'ble Delhi High Court held that mere furnishing of bank statements and particulars does not by itself establish creditworthiness and genuineness where surrounding circumstances and investigation raise serious doubts regarding the transaction. As per ld. DR, the present case is particularly strong on this aspect because the AO did not stop at information received from the Investigation Wing; the AO recorded field enquiries, summons proceedings, financial profiling and bank-trail analysis. The assessment record, as summarised in the Revenue's submission, specifically records that the investigation comprised field verification, summons, financial profiling, bank-trail analysis and statements recorded during search.

3.

We have considered the rival contentions and the relevant conclusion of ld. CIT(A) are of vital significance and we reproduce para 5.11.to 5.19 here in below; “5.11 I have carefully considered the facts of the case, the contentions of the appellant, the findings recorded by the AO, and the judicial precedents relied upon. The central issue is whether the loan of 75,00,000/- received by the appellant from M/s Aptitude Tradex Pvt. Ltd, M/s Capacious Tradex Pvt. Ltd. and M/s Alight Tradex Pvt. Ltd can be treated as unexplained under section 68 of the Act, despite the fact that the loan was subsequently repaid through banking channels and was supported by confirmations, ITRs, financials, and other documentary evidences.

5.12 The Delhi High Court, in the case of CIT v. Kamdhenu Steel & Alloys Ltd. [2012] 361 ITR 220 (Del), observed that the department cannot merely reject the explanation of the assessee without conducting proper investigation. The court emphasized that where identity and transaction are supported by documentary evidence and repayment is made, no addition can be made u/s 68.

5.13 There are various judicial pronouncements which favour the appellant that if the borrowed money had repaid back in the subsequent years to the lender, then it can be said that the appellant is not the beneficiary. Reliance is placed on judicial pronouncement in the case of DCIT vs. M/s. Sarena Pvt. Ltd. ITA No. 1753 and 1754/DEL/2022 dated 22.10.2024, wherein it was held that where creditors responded to notices and provided confirmation and financial statements, and the assessee has paid interest and deducted TDS appropriately the addition u/s. 68 is not warranted.

5.14 Reliance is also placed on decision of ITAT, Delhi in the case of Real Innerspring Technologies (P.) Ltd. vs. ACIT [2025] 174 taxmann.com 1130 (Delhi - Trib.)[27-03-2025], relevant para(s) are reproduced as under:

“11. In our considered view, the additions were made only on the basis of alleging that the loan taken by the assessee from the above said two companies are only accommodation entries and assessee's own money was routed through these companies with the help of accommodation entry providers. On careful note, the accommodation entries are taken which will remain in the books of account and they will ultimately written off over the period of time. These loans were normally not repaid. In the given case, it is brought to our notice that the assessee has received the unsecured loan through the banking channel and repaid thru the banking channel as under :-

Name of the Lender Amount of the Date on which Date of Date of loan loan taken interest repayment of payment loan M/s 50,00,000 09.07.2015 30.12.2017 06.12.2017 , CitzyInfraheightsPvt. (Pg. 38 of the (Pg 40 of the 30.12.2017 Ltd. PB) PB) (Pg 39 & 40 of the PB) M/s CEA 50,00,000 18.03.2016 27.04.2016 17.03.2017 Consultants Pvt. Ltd. (Pg 81 of the 28.03.2027 18.03.2017 PB) (Pg 81 of the 21.03.2017 PB) (Pg 83 & 84 of the PB)

12.

From the above, it is clear that the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan and repaid along with the interest clearly shows that the transactions are genuine. By returning the loan, the assessee has only utilised the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs and all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee.”

5.15 In the case of Dazzling Construction (P.) Ltd. vs. Income Tax Officer [2025] 172 taxmann.com 860 (Delhi - Trib.)[26-03-2025] held as under:

“9.1. It is evident from the record that the assessee, on its part, has filed clinching documentary evidences to support the source of loan received. No legal obligation is prescribed upon the assessee in law to prove the creditworthiness of 'source of source' of receipts obtained by the assessee in view of firstly, the prospective insertion to proviso to section 68 of the Act from AY 2013-14 foisting such obligation and secondly, such proviso is limited in its scope and attributable to receipt of share application money, share capital, share premium etc. and does not extend to loan transactions. The legal propositions are derived from the judgement rendered in the case of Mod. Creations Pvt.Ltd. (supra); Shiv Dhooti Pearls & Investments Ltd. (supra) and CIT v. Gagandeep Infrastructure (P.)Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bombay).

9.2. It is trite that additions under s. 68 cannot be made merely on the basis of some perception of culpability towards receipt of loan. The money in the instant case has been received from a company whose financial standing has been demonstrated to be fairly good. The defining feature in the instant case is repayment of such loan in the subsequent years which distinguishes the facts of this case vis- a-vis the facts involved in NRI Steel and other judgements quoted by the Revenue authorities.

9.3. The factum of repayment quells the apprehension entertained by the Revenue. The over-riding factum of repayment of loan itself repels any form of disguise on the part of the assessee and dispels the perception of any sordid or extraneous affairs. The clinching evidences towards loan procurement discharge the primary onus which lay upon the assessee under s. 68 of the Act. Besides, the loan itself having been repaid, the assessee does not ultimately stand to gain any spurious benefit from such alleged unexplained cash credit. Such fact justifies the plea of the assessee towards existence of bonafides in the transactions. 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.

9.4. In the wake of peculiar facts subsisting in the present case, the additions towards unexplained credit under s. 68 and estimated addition under s. 69C is wholly unjustified.

9.5. The Hon'ble Gujarat High Court in the cases of CIT v. Ayachi Chandrashekha rNarsangji [2014] 42 taxmann.com 251/221 Taxman 146 (Gujarat) and CIT v. Shri Mahavir Crimpers [2018] 95 taxmann.com 323 (Gujarat) have held that when the Department has accepted the factum of repayment, the additions under Section 68 is not sustainable in law. Similar view has been expressed in CIT v. Karaj Singh [2011] 15 taxmann.com 70/203 Taxman 218 (Punjab & Haryana) & Smt. Panna Devi Chowdhary v. CIT [1994] 75 Taxman 507/208 ITR 849 (Bombay).

10.

In the light of the view expressed on merits in favour of the assessee, we are not inclined to examine the nuances of challenge to the jurisdiction assumed under s. 147 of the Act, approval granted under s. 151 of the Act, invocation of s. 147 instead of s. 153C and absence of DIN on the body of the assessment order.

11.

In conclusion, the order of the CIT(A) is set aside and the additions made by the AO are reversed and cancelled.” 5.16 In the present case, not only has the identity and creditworthiness of the lender been substantiated through financials, tax returns and confirmations, but also the transaction has been conclusively proved by way of repayment of loan with interest through banking channels. This fact has not been denied or disputed by the AO in the assessment order.

5.17 Further, in the case of Sheela Overseas Private Limited Vs PCIT (Delhi High Court) Hon’ble Delhi High Court held that that Section 68 of the Act as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds in case of unsecured loans.

5.18 Courts have repeatedly held that partial acceptance without cogent differentiation is arbitrary (CIT v. Samir Bio-Tech Pvt. Ltd., 325 ITR 294). The appellant has discharged the onus under Section 68, and no contrary evidence has been brought by the AO. Hence, the balance addition is also liable to be deleted.

5.19 In conclusion, I find that the assessee has satisfactorily discharged the burden under Section 68 by establishing the identity and creditworthiness of the lender, as well as the genuineness of the transaction. The lender’s tax status is not in dispute, and the loan was both received and repaid through verifiable banking channels. The Assessing Officer has failed to bring on record any cogent material or adverse evidence to suggest that thetransaction was a mere accommodation entry. The addition appears to be based on assumptions and general suspicion rather than concrete findings specific to the assessee's case. In view of the facts and judgments outlined in paras above, it is hereby held that appellant has been able to discharge the onus cast on it in proving the identity, capacity, creditworthiness and genuineness of transaction in respect of loan transactions with lender and interest paid to him on the borrowed funds. Accordingly, the addition made u/s. 68 of the Act for Rs. 75,00,000/- is unsustainable and is hereby deleted. Thus, Ground of appeal No. 9,10 and 11 are allowed.”

4.

The undisputed fact is that for Assessment Year (AY) 2017-18, an assessee is not under an obligation to prove the "source of the source" for unsecured loans or cash credits under Section 68 of the Act. It is also admitted state of affairs that assessee had repaid the loans well before the notice of reassessment was even issued. That seems to have had a major bearing on the relief given by ld. CIT(A). We find no reasons to interfere in the same.

5.

The contentions of ld. DR that though assessee was not required to prove the source yet the circumscribing aspects of the lender companies being shell companies should in itself become basis to make addition u/s 68 of the Act, is only a facet of the principle that assessee is required to prove the genuineness of transaction, and to our mind payment of interest and repayment well before the reopening are factors which show assessee may be transacting in good faith with these companies. The AO himself has recorded that these companies were engaged in giving loans and earned only interest income. The doubt was on the basis that they had shown high premiums as source of their funds used for giving loan. So the sum and substance of suspicious circumstances cited by AO, is that these companies lacked genuine funds of their own to lend to assessee. That brings us back to issue about onus of assessee to prove source of source.

Thus we find no substance is grounds of appeal. The grounds raised by assessee under Rule 27, are rendered academic. The appeal of department is dismissed.

Order pronounced in the open court on 07.10.2026

Sd/- Sd/- MANISH AGARWAL ANUBHAV SHARMA ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi Dated: 07.10.2026 Rohit, Sr.PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) SHASHI Digitally signed by KANT SHASHI KANT PANDEY 5. DR: ITAT Date: 2026.10.09 PANDEY 13:04:51 +05'30' ASSISTANT REGISTRAR

ITAT DELHI

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