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Facts
The assessee, engaged in jute products trading, had an assessment framed under Section 143(3). A subsequent survey under Section 133A indicated receipt of bogus unsecured loans of Rs. 8.48 Crores through entry operators, based on directors' statements recorded under Section 131, which were later retracted due to alleged pressure. The AO treated this as unexplained cash credit under Section 68 and made an addition, but the Ld. CIT(A) deleted the addition.
Held
The Tribunal upheld the Ld. CIT(A)'s deletion of the addition of unexplained cash credit under Section 68, noting the assessee provided all necessary documentation (identity, creditworthiness, genuineness) for the loan creditors, and that the loans were repaid. It emphasized that retracted statements made under Section 133A, especially without corroborating evidence, have no evidentiary value, citing various judicial precedents and a CBDT circular. Consequently, the related disallowances for interest and commission expenses under Section 69C were also deleted.
Key Issues
Whether additions for unexplained cash credit under Section 68 and unexplained expenditure under Section 69C can be sustained based solely on retracted statements recorded during a survey under Section 133A, when the assessee has provided documentation to establish the identity, creditworthiness, and genuineness of loan creditors, and the loans have been repaid.
Sections Cited
143(3), 133A, 131, 68, 69C, 133(6), 132(4), 132, 134
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-27(hereinafter referred to as the “Ld. CIT(A)”] dated 22.03.2025 for the AY 2014-15.
The appeal of the Revenue is time barred by 2 days. Considering the facts and circumstances of the case, we find that there is plausible reason to condone the delay and the delay of filing the appeal is hereby condoned.
The issue in Ground No. 1 by the Revenue is against the deletion of addition of Rs. 8,48,75,000/- by the Ld. CIT(A) as made by the AO on account of unexplained cash credit in respect of unsecured loans u/s 68 of the Act.
In the appellate proceedings, the Ld. CIT(A) deleted the addition as made by the AO after taking into account the submissions and contentions of the assessee. In the appellate order the ld. CIT(A)
We also note that the Ld. CIT(A) has also recorded a detailed finding of fact that these loans were repaid in the subsequent years and therefore, no addition can be made u/s 68 of the Act. In this case we find that the assessee has filed all the evidences before the AO qua these loans and AO has not pointed out any defect in the said evidences except that the lenders were having very less operational income, no fixed assets, not paying any rent etc by ignoring the fact that lenders have sufficient funds in the form of share capital/reserves and surplus. In our opinion the addition made on the basis of this belief by the AO is wrong and cannot be sustained as has been held by Hon’ble Delhi High Court in the case of CIT Vs. Ms. Mayawati (supra) wherein the exactly same ratio was laid. 08. In the present case the assessee has filed all the evidences before the AO and ld. CIT(A) and established that the repayment of loans made in the subsequent financial year. Therefore, no addition can be made u/s.68 of the Act on the ground that the assessee has failed to meet the ingredients of Section 68 of the Act. The case of assessee is squarely covered by the decisions of the Hon’ble Calcutta High court in number of cases namely PCIT-2, Kolkata Vs. Rahul Premier India
"3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act.
3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions.
3.2 The appellate authority observed that, "In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information."
“7. We have heard the rival contentions and gone through the record. The facts and issue involved are identical to that have been discussed above in Revenue’s appeal against the order of the CIT(A) deleting the additions made by the AO on account of unsecured loans in the assessment order passed u/s 143(3) of the Act. The ld. CIT(A) noted that the assessee had illustrated the entire facts along with all the relevant documentary evidence before him. That the assessee had furnished not only before the AO but also before him all the relevant details of loan creditor companies which included the address and PAN of the loan creditors, the identity and address proof of the directors of the loan creditor companies, loan confirmation, bank statements highlighting the transactions, financial statements with ITR acknowledgements for AY 2017-18, along with details of sources of funds and source of source, with supporting documentary evidences. The Ld. CIT(A) himself carried on the exercise to examine the details and evidences relating to each of the creditor and held that the assessee had furnished all the material necessary for establishing the identities, creditworthiness of the creditors and genuineness of the transactions. He observed that each of the loan creditors maintained bank accounts and copies of their respective bank accounts from which they had made payments to the assessee were filed by each of them before the AO as well before him. Further each of the loan creditors accepted the fact that they have advanced loan to the assessee and that such transactions were duly reflected in their respective books of accounts, as well as in their audited Balance Sheets. The assessee through the paper book submitted source of funds of all the loan creditors and no discrepancy was ever reported by the AO. He observed that the AO has not brought any material on record to prove that the transaction was unnatural. Further, that all the loans were repaid during the year in which the said loans were taken. He, therefore held that the assessee had duly proved that the loans were taken for a short period for the business needs of the assessee, due interest was paid on the said loans, which was duly accounted for in the books of accounts of the creditors. The creditors had filed their Income Tax Returns. The source of source was duly explained, which was not doubted by the AO. The creditors had good financial worth and the loan amount was a very small percentage of their net creditworthiness. He observed that the only adverse comment noted by the AO was based on statements recorded during the survey operation of Shri Vishwanath Gupta and Shri Vivek Gupta, the key persons of the company who later retracted their statements as the same contended to be recorded in duress. The ld. CIT(A) in this respect has noted that the alleged statement was retracted by way of affidavits dated 29.11.2019 & 24.12.2019 respectively, as the same was recorded in duress and was not voluntary. It was also explained that at the time of survey, the family was going through tough phase, as wife of Shri Vishwanath Gupta & mother of Shri Vivek Gupta was detected with cancer and was in Mumbai for treatment. Thus, the statement was given purely to avoid the immediate pressure from survey party. Thus the statement were retracted. The Ld. CIT(A) in this respect has also placed reliance upon the CBDT letter no 286/2/2003-IT (Inv) dated 03.10.2023,
The issue is Ground No. 2 is against the deletion of disallowance of Rs. 32,24,742/- as made by the AO in respect of interest paid on alleged loans. Since we have upheld the order of the Ld. CIT(A) deleting the addition in respect of unsecured loans by dismissing the ground no.1 of Revenue’s appeal, therefore, this being of consequential issue to the said issue, accordingly the ground No. 2 is dismissed by upholding the order of Ld. CIT(A) on this issue.
The issue is Ground No. 3 by the Revenue is against the deletion of disallowance of Rs. 4,24,375/- by the CIT(A) as made by AO u/s 69C of the Act towards commission expenses for obtaining accommodation entries. Since we have dismissed the ground nos. 1 of the revenue appeal supra by upholding the order of the Ld. CIT(A), whereby the Ld. CIT(A) deleted the addition made by the ld. AO u/s 68 of the Act in respect of unexplained cash credit. Therefore, this ground being consequential and consequently we uphold the order of Ld. CIT(A) on the issue by dismissing ground no. 3.
In result, the appeal of Revenue is dismissed.
Order pronounced in the open court on 11.11.2025.