INCOME TAX OFFICER-19(1)(5), MUMBAI vs. LEELADEVI GANPATRAJ SANGHVI, MUMBAI

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred deleting the addition of Rs. 7,00,000/- made by the AO, u/s 68 of the Act, on account of bogus unsecured loan/cash credits, without appreciating the fact that post search & seizure operations on Shri Gautam Jain & his Groups, it was established that these groups were managed and controlled all paper companies/firms/proprietorship without real business activities and were engaged with various parties solely for the purpose of facilitation of fraudulent financial transaction in the form of providing accommodation entries of bogus purchases and unsecured loans?"

Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred deleting the addition made by the AO, u/s 68 of the Act, without appreciating the fact that the assessee has failed to discharged his onus by not providing satisfactory explanation with supporting evidences to the question as why such unsecured loan/cash credits should not be treated as non genuine transaction and added back to the total income, when it was availed from the bogus and paper entity?

Whether on the facts and circumstances of the case and in law, the Ld. CITTA) has erred deleting the addition of Rs. 7,00,000/- made by the AO, u/s 68 of the 3 ITA No. 2018 & CO No. 119/Mum /2025 Leeladevi Ganpatraj Sanghvi Act, by ignoring the observations of the Hon'ble Supreme Court, in the case of CIT Vs Orissa Corpn (P) Ltd (1986) 159 ITR 78, that... the doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been dully taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank/cheques and paid through the process of banking transaction but that itself is of no consequence?

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred deleting the addition of Rs. 7,00,000/-made by the AO, u/s 68 of the Act, without appreciating the decision of Hon'ble Supreme Court, in the case of Sumati Dayal Vs CIT (1995) 214 ITR 80, where the test of human probabilities were applied and further Hon'ble Court held that section. 68 of the Act, provided that where any sum is fond credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof of the explanation offered by him in not, is the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year?

The tax effect involved in this case is Rs. 2,16,300/-, which is below the prescribed limit mentioned in the CBDT's Circular F.No.279/Misc. 142/2007- ITJ(Pt) amended vide No. 09/2024 dated 17.09.2021 and this case also falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT's Circular No 05/2024 Dated 15.03.2024, wherein it is stated that in cases involving "Organised Tax Evasion" including cases of accommodation entry of bogus purchases, the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.”

1 The grounds no. 1 raised by the appellant is related to the claim of the appellant that the id AO had erred in rejecting explanation of the appellant in respect of loan of Rs. 700000/- and invoking provisions of section 68 of the Act.

2 & 6.3. ****

4 In this case, it is clear as admitted in para 5.3 of assessment order by the learned Assessing Officer, the appellant had submitted following documents like the details of advances received chart, Loan Confirmation of the party, Copy of affidavit, Bank statements, Confirmation of repayment of loan etc to substantiate the loan taken from Maniratnam Exim P Ltd, thereby discharging his initial onus as envisaged u/s 68 of the Act. The Id AO had not found any specific defect in the documents produced by the appellant and had failed to give any cogent reason or evidence in the assessment order as to why the amount of Rs 7,00,000/- loan taken by the appellant comes under the purview of the provisions of s.68 of the Act. Hence the addition of Rs 700000/- u/s 68 of the Act cannot be sustained and accordingly deleted. Accordingly, the ground no.1 of appeal raised by the appellant is hereby allowed.”

The ld. AR on the other hand submitted that the assessee has repaid the impugned loan within a period of two to three months and the said fact is substantiated by the bank statement. The ld. AR further submitted that the assessee has filed the confirmation from the loan party and also the income tax return of the loan creditor. The ld. AR submitted a detailed written submission which taken on record.

We heard the parties and perused the material on record. The main contention of the revenue for making the addition under section 68 towards the loan transaction is that the party from whom the assessee has obtained the loan is allegedly a bogus company. We notice in this regard that the AO has relied on the report from investigation wing in this regard. We further notice that the AO while making the addition has not recorded any adverse findings with regard to the documentary evidences filed by the assessee such as the confirmation, bank statement, ITRs etc. We also notice that the AO has not considered the fact that the impugned loan is repaid by the assessee within the same AY through banking channel and that the AO has questioned the same. It is a settled legal position that when the loan is repaid and 6 ITA No. 2018 & CO No. 119/Mum /2025 Leeladevi Ganpatraj Sanghvi the repayment is accepted then there can be no addition made under section 68. In view of this discussion we are of the considered view that the addition made by the AO under section 68 towards loan which is repaid within the same AY is not sustainable. Accordingly we see no reason to interfere with the decision of the CIT(A). The grounds raised by the revenue in this regard are thus dismissed

Since we have dismissed the appeal of the revenue, the C.O. filed by the assessee has become infructuous.

In result, the appeal of the revenue and the C.O of the assessee are dismissed.