DCIT, CENTRAL CIRCLE-4(3), KOLKATA, KOLKATA vs. AVIMA EXPORTS PRIVATE LIMITED , KOLKATA

Per Pradip Kumar Choubey, Judicial Member:

This appeal filed by the revenue is directed against the order dated
24.03.2025 of the Commissioner of Income Tax (Appeals)-27, Kolkata
[‘CIT(A)’] passed under Section 250 of the Income-tax Act, 1961
(hereinafter referred to as “the Act”).
2. Brief facts of the case are that the assessee company being the flagship concern of ‘Avima Group’ was engaged mainly in trading of jute products. The assessee filed original Return of income u/s 139 of the Act on 27.09.2015 declaring total income at Rs.33,10,000/-. The assessment was completed u/s 143(3) of the Act at a total income of Rs.47,53,370/- vide an order dated 29.12.2017. Later, a Survey operation u/s 133A of Avima Exports Pvt. Ltd

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the Act was conducted in the Avima Group of cases on 04.11.2019 at Kolkata and several documents including soft data in mobiles and computers were found, examined, inventoried and impounded bearing identification mark AEPL/01 to AEPL/04 (documents) and AEPL/HD/01
to AEPL/HD/04 (computer hard discs). In the light of evidences gathered during the course of survey operation and post-survey enquiry, the Investigating Officer (hereinafter referred as DDIT) reported that Avima
Group amassed unaccounted cash and brought back the same in their regular books of accounts of Group concerns in the garb of unsecured loans with the help of the accommodation entry operators, brokers etc.
routed through various web of paper/shell/jama-kharchi companies and by resorting to above methods the assessee also brought its unaccounted income in the books in form of bogus unsecured loans. It is also noticed by the DDIT that such unsecured loans were admitted by Shri
Vishwanath Gupta, key person of the group, as bogus in his sworn statement recorded u/s 131 of the Act during the said survey proceedings. Later, the case was centralized to the ACIT/DCIT, Central
Circle-4(3), Kolkata vide order u/s 127 of the Act and with prior approval u/s 151 of the Act, the reopening proceedings u/s 147 of the Act were initiated in the instant case after recording reasons for reopening by the respective Assessing Officer. The reason recorded was that the assessee had received bogus unsecured loan of Rs.5,24,50,000/- from 12 lending entities. Subsequently, notice u/s 148 of the Act was issued to the assessee on 26.03.2021. In response to the said notice, the assessee filed its ITR on 08.04.2021 declaring total income same as earlier i.e., at Rs.33,10,000/-. Further, the assessee had raised objection on the initiation of reopening proceedings in its case for the current year and the same was duly disposed of on 10.02.2022 by the Assessing Officer.
Further, the assessee had again filed another objection on 22.02.2022. Avima Exports Pvt. Ltd

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The same was again disposed of by the Assessing Officer later on.
Thereafter, statutory Notice u/s 143(2) dated 10.01.2022 followed by notice u/s 142(1) dated
11.01.2022
accompanied with detail questionnaire was issued and duly served on the assessee. In response to the same, the assessee had filed its submission and on perusal of the same, the Assessing Officer passed the assessment order u/s 147 r.w.s.
143(3) of the Act on 14.03.2022 by determining the total income of the assessee at Rs.6,10,14,650/-. On perusal of the assessment order, it is observed that the Assessing Officer has made additions in three grounds viz. a) unexplained cash credit u/s 68 of the Act in the form of bogus unsecured loan Rs.5,24,50,000/- and b) disallowance of relatable interest expenses of the aforesaid unsecured loan of Rs.35,49,027/- u/s 36(1)(iii) of the Act and c) unexplained expenditure of Rs.2,62,250/- in the form of secret & undisclosed commission expenses paid to entry operators from unaccounted cash u/s 69C of the Act.
3. Aggrieved by the said order, the assessee filed an appeal before the CIT(A) wherein the appeal of the assessee has been allowed by deleting the addition of Rs.35,49,027/-u/s 36(1)(iii) and Rs.5,24,50,000/- u/s 68
of the Act.
4. Being dissatisfied, the revenue is in appeal before us challenging the very impugned order by raising the following grounds of appeal:
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from various parties. The ld. AR further submits that the unsecured loans was taken and repaid the same in subsequent years and the assessee submitted the details of all the parties of PAN, CIN, complete address of the loan creditors, loan confirmations, ITR acknowledgement.
The submission of the ld. AR is that the assessee had duly paid interest on the loans availed after deducting applicable TDS on such interest and according to him, there is no infirmity in the impugned order of the ld.
CIT(A).
7. Upon hearing submission of the counsels of the respective parties and perused the material available on record, we find that the assessee company belongs to ‘Avima Group’ which is one of the major players in the field of trading (export as well as domestic trading) of jute products and is engaged in business of export of all type of jute products, Rice,
Refractories, import of LDPE,
Reprocessed
Granules,
Plastic
Agglomerates and Raw Cashew nuts etc. We find that the Assessing
Officer relied on the statement of a person and reopened the assessment proceeding ignoring the fact that both the persons have retracted the statement by filing affidavit. During the course of reassessment proceedings, the assessee had submitted the following details of in respect of the unsecured loans taken:
1 Copy of Audited Financial Statement of all the Four loan Creditors
2 Copy of Relevant Bank Statement reflecting transaction
3 Copy of Loan Confirmation
4 Source of Funds of the loan creditor company
5 Copy of IT Acknowledgement of the loan creditor company
6 Copy of Audited Financial Statement of the appellant company
7 Computation of Income of the appellant company
8 Copy of ITR Acknowledgement of the appellant company
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7.1
It is further pertinent to mention here that the Assessing Officer alleged that that the Assessing Officer had conducted independent enquiries by issuing summons u/s 131 which was duly served upon all the 16 entities and all of them have made independent compliance which is evident from the order of the ld. CIT(A) and submitted the following documents:

Copy of Audited Financial

Statement of all the Four loan Creditors
• Copy of Relevant Bank Statement reflecting transactions
• Copy of Loan Confirmations
• Source of Funds of the loan creditor company
• Copy of ITR Acknowledgement of the loan creditor company
• Copy of ledger Account
• Copy of PAN Card

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Consistent Suppliers Pvt
Ltd
4,10,90,242/-
90,75,000/-
5
Cosmos Tradelinks Pvt Ltd
15,90,72,789/-
30,00,000/-
Avima Exports Pvt. Ltd

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6
Express Commotrade
Pvt Ltd
10,80,51,435/-
6,00,000/-
7
Megapix Real Estate Pvt ltd
7,85,69,679/-
11,75,000/-
8
Overall Marketing Pvt
Ltd
8,07,89,000/-
39,00,000/-
9
Panther Suppliers Pvt
Ltd
6,45,23,726/-
40,00,000/-
10
Quest Heights Pvt Ltd
8,44,94,24,800/-
19,00,000/-
11
Ratnakar Dealers Pvt
Ltd
6,89,29,163/-
25,00,000/-
12
Umang Dealmark Pvt
Ltd
9,28,61,374/-
25,00,000/-
Total Loan Total

5,24,50,000/-

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entities had filed their Income Tax returns regularly and they also were assessed to income Tax. The net-worths of the said entities are more than adequate to extend huge loans to anyone. The AO had not considered the positive financial parameters of the lending entities (supra) and only relied upon the adverse strictures of financials according to his own choice. Further, on perusal of the submission of the assessee, it is noticed that the status of the said loan creditors is Active in MCA website and they are regularly filing their returns as per the provisions of Companie Act with ROC. Further, as stated earlier and as evident from the unsecured loan summary provided by the assessee, it is observed that the assessee had also paid interest on loan @ 12% per annum to the lending entities. This is also evident from the Account Confirmation provided by the lender. However, these findings did not get any place in the assessment order by the AO. It may not be out of place to mention here that the lending entities had neither provided any adverse statement nor they had formed any adverse opinion against the loan transaction of the assessee.
6.2.13. It is observed from the submissions of the assessee that the assessee during the course of reassessment proceedings, had furnished audited Tax audit report showing the receipt and payment of the said loan etc. Hence, it is palpable that the AO, by not considering the aforesaid averments presented by the assessee during the assessment proceedings, relied on the statements of one unrelated arbitrary person recorded by the investigation wing and had made addition on the said loans received by assessee from the aforesaid lending entities along with corresponding interest payments without finding any defect in documents and details filed by assessee and merely relying on some retracted statements of the key persons of the assessee. It is also observed that the AO had not made any cross verification with the alleged lending entities. It is also noticed that nowhere in the assessment order it is mentioned that the assessee had routed its unaccounted cash and also no instance of cash deposit or cash trail was found and established during the assessment proceedings.
6.2.14. Reliance is placed on the following judicial pronouncements on the basis that no addition can be made when the identity, creditworthiness and genuineness of the loan creditors have been established by the assessee and the AO has not disputed the documents:
a) In the case of “Overtop Marketing (P.) Ltd. Vs. PCIT I.T.A. No. 686/Kol/2019,
15.03.2021’, the Hon’ble ITAT, Kolkata had held the following:
“17. So, the A.O in this case, erred in relying on the statement of two persons who were not allowed to be cross-examined as held by the Hon’ble Apex Court in Andaman Timber (supra) and Odeon Builders Pvt. Ltd. (supra). So from any angle, one looks, the statement of these two persons cannot be used against the assessee. And when we remove these two statements with the legal infirmities discussed supra, there is no material at all against the assessee and the AO having failed to find any infirmity with the documents filed by the assessee/lenders to prove the loan transactions as discussed supra, no adverse view was legally twelveable. And having gone through the impugned order and the Paper Book filed before us, we fully concur with the finding of facts as rendered by Ld CIT(A) in respect of identity, creditworthiness and genuineness of the lenders/loan transaction and for the sake of brevity and to avoid repetition it is not again repeated. We agree with the judicial precedence relied upon by the Avima Exports Pvt. Ltd

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Ld CIT(A) in support of his decision. And we don’t find any legal or factual infirmity in the impugned order of the Ld CIT(A), so we decline to interfere. So the impugned action of Ld. CIT(A) to delete the section 68 addition of Rs.4.51 crores and [the interest paid by assessee to lenders] Rs.53,70,163/- is confirmed. So, the Revenue’s appeal stands dismissed.”
The decision of the ITAT was challenged before the Hon’ble High Court by the department. The court had upheld the decision of ITAT by dismissing the appeal of the department vide ‘Overtop Marketing (P.) Ltd. Vs. PCIT [2023]148
taxmann.com 94 (Calcutta)’.
b) In the case of ‘Ambe Tradecorp (P) Ltd. Vs. PCIT [2022]145 taxmann.com27
(Gujarat)’, the Hon’ble Gujarat High Court had held the following:
“6. The Tribunal rightly recorded in para 29 of the judgment, "Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A."
c) In the case of ‘ACIT Vs H.K. Pujara Builders (2019) 178 DTR 97.’, The Hon’ble
ITAT, Mumbai had held as follows:
“The assessee had been making frequent repayment of loans to said party and had also availed loans from time to time said party and entire loan account together with interest there on [duly subjected to TDS] had been completely squared up on 20.03.2015-entire transaction i.e. , received of loans, repayment of loans and repayment of interest there on had been made through regular banking channel from account payee cheques/there was no case of any cash deposit made either at the time of receipt of loan in account of M/s Grafton
Merchants Pvt Ltd, or in account of assessee while making repayment of loan or repayment of interest–Hence, there was no need to suspect entire gamut of transaction .”
d) The Hon’ble High Court of Gujarat, in the case of ‘DCIT Vs. Rohini Builders
(2002) 256 ITR 360 (Guj)’ had held as under:
“That the tribunal having deleted the addition under s. 68 accepting the genuineness of loans which were received and repaid by assessee by account payee cheques, assessee having established the identity of the creditors by giving their complete addresses, GIR numbers/PAN as well as confirmations along with the copies of their assessment orders wherever readily available, no substantial question of law arises; appeal under s. 260A dismissed.”
a) In the case of ‘Commissioner of Income-Tax vs. Shiv Dhooti Pearls &
Investment Ltd. [2016] 237 Taxman 104 (Delhi)’, the Hon’ble Delhi High Court had held the following:
“12. ……What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub- creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further
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logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and subcreditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee.
………….
15. In view of the legal position explained in the above decisions, the Court holds that as far as the present case is concerned, the Assessee has indeed discharged its onus of proving the creditworthiness and genuineness of the lender (TIL).
There was no requirement in law for the Assessee to prove the genuineness and creditworthiness of the sub-creditor, which is in this case was TCL.”
b) The Hon’ble Supreme Court in the case of ‘CIT vs Orissa Corporation Pvt Ltd
159 ITR 78 (SC)’ held as follows:
“13. In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further.”
d) The Hon’ble Guwahati High Court in the case of ‘Nemi Chand Kothari vs CIT
136 Taxmann 213’ had held the following:
“Once the assessee had established that he had received the said amounts from ‘N’ and ‘P’ by way of cheques, the assessee must be taken to have proved that the creditors had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. On failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said amounts to the assessee, these amounts as a corollary, could not have been and ought not to have been, under the law, treated as the assessee’s income from the undisclosed sources, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Therefore, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of sub-creditors, had actually been received by the sub- creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources. The Tribunal seriously fell in error in treating the said amounts as income derived by the assessee from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness.”
e) In the case of ‘CIT vs Shalimar Buildwell Pvt Ltd (2014) 2020 Taxman 138 (All)’
where the following was held by the Hon’ble juri ictional High Court:
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“No additions on account of unsecured loans can be made when identity of the party is proved and more so when the amount is received through proven banking channels.”
6.2.15. Hence, it is proved that the AO had made the addition without any corroborative evidence on record against the assessee. The AO had treated the said lenders as bogus and dummy only relying on the statement of one unrelated person of the assessee namely Mr. Banka, Pritam Beria, Mr. Nangalia, Mr. Gopal
Banka etc. Hence, the addition on the said unsecured loans were made by the AO merely on presumption and surmises which is not acceptable in law and devoid of natural justice. Reliance may be placed in the following cases:
a) In the case of ‘Prashant Pratap Ahir vs ACIT ITA No. 1954/PUN/2018’ the Hon’ble Punjab & Haryana High Court had held that “addition u/s 68 of the IT Act merely on the basis of presumption or suspicion without any corroborated evidence is unsustainable.”
b) Further, the Hon'ble High Court, Calcutta in the ‘CIT-Ill, Kolkata vs. Dataware
Private Limited ITAT No. 263 of 2011 Date: 21st September, 2011’ wherein the Court held as follows:
"In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities.”
c) The Hon’ble Supreme Court of India in ‘Sreelekha Banerjee V. CIT (1963) 49
ITR (SC) 112’ had held that “if the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject the explanation to hold that it was income. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof”.
d) In the case of ‘Khandelwal Construction Vs CIT 227 ITR 900 (Gauhati)’, the Hon’ble juri ictional High Court had held as under:
“the amount of cash credits could not be included in the total income of the assessee because the Assessing Officer had not made proper enquiry. Therefore, u/s 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account. This is not the case where assessee has not provided relevant details. In this case the assessee has discharged its onus by Avima Exports Pvt. Ltd

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filing the documents for which Ld. Assessing Officer has not pointed any discrepancy. There is no material with the Ld. Assessing Officer to prove the funds received by the assessee as non-genuine and no belief can be formed merely on the basis of assumptions, presumptions, surmises and conjectures.”
e) The Hon’ble Calcutta High Court in the case of ‘Hindustan Tea Trading Co.
Limited v. CIT 263 ITR 289 (Kol)’, had held that “But once sufficient material is produced and explanation is given, the onus is discharged and shifted on the Revenue. Having regard to the materials, it might ask for further materials from the assessee or it might come to a conclusion on the materials so produce as it might in law arrive at. Once the materials are there, it is incumbent on the Assessing Authority to inquire into the same. It cannot over look one or other materials nor can it undertake a halfhearted enquiry”.
(f) In the case of ‘Commissioner of Income Tax V. Diamond Products Limited
(2009) 177 Taxmann 331 (Delhi)’, the following has been held by Hon’ble High
Court of Delhi:
“We have heard the learned Counsel for the appellant and have examined the findings returned by the Tribunal as well as those returned by the Commissioner of Income-tax (Appeals) and find ourselves to be in agreement with the conclusions arrived at by the Tribunal. The Assessing Officer is not permitted to examine the source of the source once the assessee has been able to establish that the transaction with his creditors is genuine and that the creditors identities and creditworthiness have been established. In this case, this had been done, therefore, it was not open to the Assessing Officer to make the addition of Rs.23,00,000 after entering upon an examination of the source of the source.
Consequently, we feel that no interference is called for on this conclusion in the impugned order passed by the Tribunal. The Tribunal has correctly applied the law on the facts determined by it. No substantial question of law arises on this aspect of the matter”.
6.2.17. It is further observed from the assessee’s submission (confirmation of accounts, ledgers etc.) that the said loans were repaid in the same AY i.e., 2015-
16 with respective interest after deducting due TDS on it. Reliance was placed by the assessee in the following judicial pronouncements in respect of its contention:
a) The Hon’ble ITAT, Ahmedabad, in the case of ‘DCIT vs. A.S.Shah, ITA
No.945/Ahd/2018, 02/08/2023’, held the following:
“The unsecured loan availed was repaid in the next financial year to the creditor namely Smt. Hansaben M. Patel through cheque payments and the bank statement also filed before the Lower Authorities. Therefore, we are of the considered opinion, the provisions of section 68 do not attract in the above transaction and thereby we uphold the order passed by the Ld. CIT(A) deleting the addition made u/s. 68 of the unsecured loans availed from Smt. Hansaben
M. Patel. The so-called unsecured loan was given by Account Payee cheques andalso repaid by the assessee in the next financial year through banking channels. The recovery proceedings u/s. 226(3) initiated against Mukesh J. shah was also dropped by the A.O. Therefore, the provisions of section 68 do not attract of the loan transactions between the assessee M/s. Savitaben Mangaldas
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Trust and Shri Mukesh J. Shah. Therefore, the addition on this account is also liable to be deleted and the grounds raised by the Revenue is devoid of merits.”
b) In the case of ‘CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18 (All.)’, the Hon’ble juri ictional High Court on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:-
"4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AAC, setting aside the assessment order."
c) The Hon’ble High Court, Calcutta in the case of ‘S.K. Bothra & Sons, HUF v.
Income-tax Officer, Ward-46(3), Kolkata 347 ITR 347’ wherein the Court held as follows:
“15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.
16. In the case before us, the appellant by producing the loan-confirmation- certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements.”
d) In the case of ‘CIT vs. Y.K. Gupta [2014] 46 (HC), the Hon’ble Gujrat High
Court’ held the following:
"18. As mentioned hereinabove, we had called for the original file, which had revealed new, valid and tangible information supporting Assessing Officer's opinion received from DCIT, Kolkata, based on the material found during the search by the CBI, where Basant Marketing Pvt. Ltd. is said to be a dummy company of one Shri Arun Dalmia. What has been emphasized by the learned
Senior Counsel appearing for the petitioner is that the Assessing Officer had attempted to fill in the gap by terming the amount received from Basant
Marketing Pvt. Ltd. as "accommodation entry", which she could not have done without further inquiry/verification. Yet another contention emphasized by the learned Senior Counsel is that the post notice correspondence made after the reasons recorded could not have added anything which was lacking in the reasons themselves. He urged that in absence of any statement given by any Avima Exports Pvt. Ltd

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Director of Basant Marketing Pvt. Ltd. stating that the assessee received and obtained accommodation entry in the form of loans and advances, the reasons lack basis. The Director Mr. Dalmia of Basant Marketing Pvt. Ltd. as contended also does not reveal anywhere and, therefore, it is premature on the part of the Assessing Officer to so record the reasons. It is further urged that the affidavit of Rishabh Dalmia stating on oath that the loan transactions with the petitioner are genuine for having been carried out only through cheques, prima facie vindicates that the entire exercise is based on suspicion.”
6.2.18. In view of the various judicial pronouncements cited by assessee together with various evidential documents submitted by the assessee, it can be inferred that since the assessee had taken loan in case of normal business and repaid the said loan through banking channel in the same FY, the assessee cannot be said to be beneficial owner of the money without any cogent evidence brought by the AO on record and addition under section 68 by the AO cannot be sustained.
Additionally, as discussed above, the assessee’s burden is confined to prove identity of the creditors, creditworthiness of creditor and genuineness of the transaction with reference to transaction between assessee and creditor and the same cannot be extended to include source of such creditor for the purpose of section 68 of the Act. The burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. In the present case, the assessee had received unsecured loan of Rs.5,24,50,000/- from the said twelve lending entities (supra) through banking channel and also repaid the same during the subsequent years through banking channel and the same is well reflected in the Tax Audit Report. The acceptance of loan has been established vide the confirmation and bank statements filed during the appellate proceedings. Hence, the addition of Rs.5,24,50,000/- made by the Assessing Officer u/s 68 of the Act is liable to be deleted.
6.2.19. As the addition on the unsecured loan has been deleted by the AO, the corresponding addition on interest payments against the such loans of Rs.22,92,986/- out of total interest payment of Rs.35,49,027/- is also liable to be deleted as the same was paid by the assessee through proper banking channel and the said was reflected in the audited P&L A/c and books of the assessee.
Further for the remaining interest payment of Rs.12,56,041/- paid to two creditors viz. Avion Tradelinks Pvt. Ltd. (Rs.12,23,986/-) & Labheswari Agencies
Ltd. (Rs.32,055/-), it is imperative to mention that the same interest payment were made to them against loans taken from them in earlier years and addition on which was deleted vide appellate order dated 22.03.2025. Hence, the corresponding addition on such interest payments are also liable to be deleted.
Further, the said interest payment was reflected in the audited books of accounts of the assessee and paid through banking channel. The AO had failed to bring any corroborative evidence on record to substantiate the fact that the aforesaid interests were paid from unexplained sources of the assessee and out side books of it. Hence, the disallowance u/s 36(1)(iii) can’t be invoked in any manner.
Therefore, the addition totaling to Rs.35,49,027/- is hereby deleted.
Consequently, these grounds of appeal raised by the assessee are allowed.
7. In the appeal Ground No. 3 (original ground):- In this ground, the assessee had claimed that the AO had also erred in disallowing a sum of Rs.2,62,250/- as Avima Exports Pvt. Ltd

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commission u/s 69C read with section 115BBE of the Act paid to entry operators for unsecured loan.
………..
7.2.1. The assessee’s contention in this ground is perused. As in the discussions made in the above grounds, the afore-mentioned unsecured loan transactions are declared to be genuine, there no question arises in respect of availing entry by the assessee from any entry operator. The investigation wing as well as the AO had neither found any incriminating evince which can prove that the assessee had actually paid Rs.2,62,250/- to the said lending entities for availing any accommodation entry nor the said lending entities and their directors or key persons had admitted that they had taken such commission @0.5% against accommodation entry. Hence, the AO’s observation that there may be expenses incurred by the assessee in respect of commission paid to the entry operators is nothing but an imaginary story. Hence, in view of the above the addition of Rs.2,62,250/- as estimated by the AO @0.5% of total loan of Rs.5,24,50,000/- is liable to be deleted. Hence, this ground of the assessee is also allowed.”

[Pradip Kumar Choubey]
Accountant Member

Judicial Member

Dated: 11.11.2025. RS

Copy of the order forwarded to:
1. Appellant -
2. Respondent -
3. CIT(A)-
4. CIT- ,
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5. CIT(DR),

////
By order