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Facts
The assessee received a loan of Rs. 3.75 crores from M/s Videocon Reality and Infrastructure Ltd. in FY 2016-17. The Assessing Officer (AO) made an addition under Section 69 of the Income-tax Act for this amount. The CIT(A) upheld the addition, reclassifying it under Section 68. The assessee repaid the loan to BGCL after an assignment agreement.
Held
The Tribunal held that the addition made under Section 69/68 of the Act was unsustainable. Relying on the Bombay High Court judgment in Ivan Singh, it was noted that a credit appearing in an earlier financial year cannot be brought to tax in a subsequent year. Since the loan was received in FY 2016-17, the addition in the relevant assessment year was unjustified.
Key Issues
Whether the addition of a loan received in a prior financial year, supported by documentary evidence, can be made in a subsequent assessment year under Sections 68 or 69 of the Income-tax Act.
Sections Cited
69, 68, 143(3), 144B, 250, 139(1), 143(2), 142(1), 36, 36(1)(iii), 234A, 234B, 270A, 271AAC, 133(6)
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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRI PRABHASH SHANKAR
Date of hearing : 04/08/2025 Date of pronouncement : 06/08/2025 O R D E R Per Anikesh Banerjee (JM):
The instant appeal of the assesse was filed against the order of the National Faceless appeal Centre (NFAC), Delhi [(in short, ‘the Ld.CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2018-19, date of order 26/03/2025. The impugned order emanated from the order of the National Faceless Assessment Centre, Delhi (hereinafter called ‘Ld.AO’) passed under section 143(3) read with section 144B of the Act, date of order 14/09/2021.
2 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd 2. The assessee has taken the following grounds: - “
GROUND NO. I: ADDITION U/S 69/68 OF THE ACT:
1. On the facts and in the circumstances of the case and in law, L.d. CIT (A) erred in confirming the action of Ld. AO and in making the addition u/s 69/68 of the Act towards the loan of Rs. 375,00,000/- received by the Appellant from M/s Videocon reality and infrastructure Limited without appreciating that the same has been fully explained by the Appellant.
2. Therefore, the Appellant prays that the addition u/s 69/68 of the Act be deleted.
WITHOUT PREJUDICE TO GROUND I ABOVE, GROUND NO. II: ADDITION U/S 69 /68 CANNOT BE MADE IN THE YEAR SUBSEQUENT TO RECEIPT/TRANSACTION:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in making the addition u/s 69/68 of the Act in the year under consideration without appreciating the fact that there is no investment made, or credit received during the year and the money in fact was received in the preceding previous year.
2. Therefore, the Appellant prays that the addition u/s 69/68 of the Act is ab-initio void and bad in law and deserves to be deleted.
GROUND NO. III: LEVY OF INTEREST U/S 234A AND 234B OF THE ACT:
1. On the facts and in the circumstances of the case and in law, Ld. CIT (A) erred in upholding the levy of interest u/s 234A and 234B of the Act.
Therefore, the Appellant prays that the interest u/s 234A and 234B of the Act be deleted.
GROUND NO. IV: INITIATION OF PENALTY U/S 270A AND 271AAC OF THE ACT:
On the facts and in the circumstances of the case and in law, the Ld. CTT(A) erred in confirming the action of the Ld. AO in initiating penalty proceedings u/s 270A and 271AAC of the Act.
3 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd 2. The Appellant prays that the penalty proceedings be dropped or appropriately be kept in abeyance till the disposal of the present appeal.
GENERAL The Appellant craves leave to add, alter, amend, modify and/or withdraw any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary.”
3. The brief facts of the case are that the assesse is engaged in the business of Allied Optical Fiber working and filed the return under section 139(1) of the Act. The assessee’s case was selected under CASS under the e-Assessment Scheme, 2009. Notices under section 143(2) And 142(1) were issued and the addition was made under section 36 and under section 69 of the Act related to assessee’s failure to explain amount of Rs.3.75 crores out of total asset of R.54,25,42,412/- as on 31/03/2018. So Rs.3.75 crores is taken as deemed income under section 69 of the Act. Aggrieved assesse filed an appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition of Rs.24,91,617/- made under section 36(1)(iii) of the Act; however, he upheld the addition made under section 69 of the Act. Furthermore, the Ld. CIT(A) applied the provisions of section 68 of the Act in place of section 69 with respect to the alleged addition of Rs.3.75 crores. Being aggrieved by the said order, the assessee has preferred the present appeal before us.
The Ld.AR argued and filed a paper book containing pages 1 to 401 which is kept in record. The Ld.AR argued that the assessee received loan amount to Rs. 3,75,00,000 from Videocon Reality and Infrastructure Ltd. (in short, ‘VRIL’) in FY 2016-17. Ledger account for FY 2016-17 and FY 2017-18 of VRIL is enclosed at APB pages 127 to 128 and bank statement for FY 2016-17 for receipt of loan from VRIL
4 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd is enclosed at APB pages 129 to 131. Ld. AO asked a confirmation letter from the assessee on the amount due to VRIL, confirmation letter enclosed at APB pages 389 to 391. The confirmation letter submitted by the assessee was not accepted by the Ld. AO since PAN of VRIL on the confirmation letter was quoted wrong erroneously which was later realized by the assessee, despite the fact that legal name of the entity and all other details were correctly mentioned. Thereafter, Ld. AO had sent a notice u/s 133(6) to the VRIL, which was not responded by the VRIL. The subsequent correction in PAN which is annexed in APB page 401 was not accepted by the Ld. AO. Thereafter, an assignment agreement was executed between the assessee, VRIL and BGCL on 4th March 2022, whereby VRIL assigned the loan of INR 3.75 Crores to BGCL, copy of agreement enclosed at APB pages 282 to 285. Pursuant to this agreement, the assessee became liable to repay the said loan directly to BGCL. Relying on the assignment agreement, the assessee repaid the loan amount of Rs.3.75 Crore entirely to BGCL, enclosed the bank statement for loan repayment at APB page 279. From the bank statement, it may be seen that the total payment of Rs.42,73,00,000/- was made to BGCL on 12/05/2023. This payment includes amount of Rs. 3,75,00,000/- payable towards the loan. In this regard, copy of ledger of BGCL is enclosed at APB pages 280 to 281 as proof of payment of loan.
The Ld. AR, during the course of arguments, submitted that the assessee has duly complied with all three essential requirements under section 68 of the Act, namely, the identity of the creditors, their creditworthiness, and the genuineness of the transactions. In support of his contention, he filed a synopsis, and the relevant paragraphs are reproduced hereinbelow:
5 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd “3.9 Further, NFAC has questioned the source and genuineness of the loan transaction and has made addition of the loan amount as income of the Appellant u/s 68 of the Act. In regard to this, the Appellant would like to furnish the below: (1) The Appellant respectfully submits that the addition made by the NFAC u/s 68 of the Act on the grounds of alleged lack of genuineness and source of the loan transaction, is unjustified (ii) The Appellant has duly discharged its onus of proving the genuineness of the loan obtained from VRII. by furnishing comprehensive documentation and details, including: • Name and registered address of the lender (VRIL) • PAN of the lender • Active Status of the VRIL as per the records of MCA (Page345-346 of paper book) • Ledger account of the lender in the books of the Appellant (Page 127-128 of paper book) • Copy of the loan application submitted to VRIL; and (Page 136 of paper book) • Bank statement evidencing the receipt of loan funds from VRIL (Pages 129-131 of paper book) (iii) Additionally, the Appellant has also demonstrated that the loan has been irretrievably repaid to the loan assignee, BGCL, and has provided the following supporting documents • Bank statement showing repayment of the loan to BGCL(Page 279 of paper book) • Ledger account of BGCL in the books of the Appellant; and (Page 280-281 of paper book) • Assignment agreement (Page 282-285 of paper book) • Board Resolution by VRIL (Page 286 of paper book) • Share-holding pattern from Company Secretary (Page 377 of paper book) (iv) In view of the above, the Appellant has clearly established the identity of the lender, the genuineness of the loan transaction. The burden of proof, as required under law, has been adequately discharged by the Appellant. (v) Further, the Appellant submits that the loan transaction did not involve any interest payment, as the Appellant had obtained a waiver of interest from VRIL on a year-on-year basis due to its financial constraints. As a result, there was no tax benefit derived by either party from this transaction. The loan was purely a balance sheet item for the Appellant, with no impact on the P&L account or taxable income. (vi) In view of the above, it is evident that the transaction was genuine and carried out in the ordinary course of business, without any motive of tax avoidance. The absence of any tax benefit to either party further reinforces the bona fide nature of the transaction. (vii) Accordingly, the addition made u/s 68 of the Act is unwarranted and deserves to be deleted.”
The Ld.AR in argument respectfully relied on the order of Hon’ble Bombay High Court in the case of Ivan Singh v. ACIT [2020] 422 ITR 128 wherein the 6 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd assessing officer had sought to make addition u/s 68 on outstanding sundry credit balances. Since those credits related to the prior year, the Hon'ble Bombay held that section 68 cannot be made in the subsequent assessment year. The relevant extracts of the decision of Hon'ble Bombay High Court are reproduced hereunder: “3. Insofar as the first substantial question of law is concerned. Dr. Daniel has pointed out that section 68 of the Income-tax Act, 1961 (IT Act), is very clear in providing that where any sum is found to be credited in the books of the assessee for the previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to the income tax as the income of the assessee of that previous year. Relying upon several decisions. Dr Daniel submits that since, it is the case of Revenue that some amounts were found credited in the book of account for the financial year 2006- 07, there was no question of taking cognizance of such amounts for the assessment year 2009-10 and the corresponding previous year 2008-09. He submits that on this short ground, the first substantial question of law, is liable to be answered in favour of the appellant-assessee and against the respondent-Revenue.”
The Ld.DR argued and stands in favour of the orders of the revenue authorities.
We have heard the rival submissions, perused the material available on record, and considered the documents placed before us. The principal issue in this appeal pertains to the addition of Rs.3.75 crores made under section 69 of the Act and subsequently confirmed by the Ld. CIT(A) under section 68 of the Act. The assessee contends that the said amount represents a loan received from VRIL in the preceding financial year 2016–17, and not during the year under consideration. The assessee has placed on record comprehensive evidence including the lender’s PAN, bank statements evidencing the receipt of the loan, the ledger accounts of VRIL, confirmation letter, assignment agreement with BGCL,
7 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd repayment proof, and other supporting documents. It is also submitted that the Ld. AO rejected the confirmation solely on the ground of an erroneous PAN mentioned in the initial confirmation letter, despite the fact that all other details were correctly stated. Further, the subsequent correction was not accepted. It is also not in dispute that VRIL assigned the said loan to BGCL, and the assessee repaid the loan to BGCL, as evidenced by the bank statement and ledger accounts. The assessee has discharged the onus cast upon it under section 68 of the Act by establishing the identity of the lender, its creditworthiness, and the genuineness of the transaction. The documentation placed on record substantiates the loan transaction and its repayment. Further, we find merit in the assessee’s contention, supported by the judgment of the Hon’ble Bombay High Court in the case of Ivan Singh (supra), that a credit appearing in the books in an earlier financial year cannot be brought to tax under section 68 or 69 in a subsequent year. Since the impugned loan was received in FY 2016–17, the addition in the relevant assessment year is unjustified on this ground as well. In view of the above factual and legal position, we are of the considered opinion that the addition of Rs.3.75 crore made under section 69/68 of the Act is unsustainable and deserves to be deleted. Consequently, the grounds relating to the levy of interest and initiation of penalty also become infructuous.
8 ITA 3572/Mum /2025 Excel Telesonic India Pvt Ltd 9. In the result, the appeal of the assessee bearing