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Facts
The assessee filed its ITR for AY 2019-20. A search operation was conducted, leading the Assessing Officer (AO) to make additions of Rs.1.90 crores as unexplained cash credit under Section 68 and Rs.3.33 lakhs as unexplained expenditure under Section 69C, alleging that unsecured loans were accommodation entries from shell entities. The Ld. CIT(A) subsequently allowed the assessee's appeal, deleting these additions, which the revenue then challenged before the ITAT.
Held
The Tribunal found no infirmity in the order of the Ld. CIT(A), concluding that the assessee had discharged its onus by providing sufficient evidence of the identity, creditworthiness, and genuineness of the loan transactions. The loans were received and repaid through banking channels, with interest paid and TDS deducted, and the creditors were active filers with adequate net worth. Consequently, the Tribunal dismissed the revenue's appeals, upholding the deletion of additions made under Section 68 and 69C.
Key Issues
Whether the CIT(A) erred in deleting additions made under Section 68 for bogus unsecured loans and Section 69C for interest expenses, despite the AO's view that the assessee failed to establish the creditworthiness and genuineness of the transactions, and if loan repayment affects the application of Section 68.
Sections Cited
132, 153A, 143(3), 68, 115BBE, 69C, 133(6), 131, Rule 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: Both these appeals preferred by the revenue against the order of Commissioner of Income Tax (Appeals)-26, Kolkata (hereinafter referred to as the Ld. CIT(A)] dated 31.12.2024 for AY 2019-20 & 2020-21 respectively. Since issues are common in both AY 2019-20 as a lead case.
Brief facts of the case of the assessee is that assessee being a company filed the return of income for AY 2019-2020 on 31/10/2019 by declaring an income of Rs.7,50,60,000. A search and seizure operation u/s 132 of the Income Tax Act,1961 was conducted on the assessee in case of Balaji Group on 29/01/2021. In consequence to the search the Learned Assessing Officer ACIT Central Circle 2(4), Kolkata issued notice u/s 153A of the Income Tax Act 1961 dated 29/10/2021. The assessee complied with the notices and filed a return u/s 153A of the Income Tax Act, 1961 on 28/11/2021 and submitted various documents and clarification as sought by the assessing officer during the assessment proceeding. The Learned Assessing Officer passed an assessment order assessing the income of the assessee at Rs.9,43,98,699 by an order passed u/s 153A of the Income Tax Act,1961 on 30/03/2022. In the assessment order the following additions were made: a) Addition of Rs.1,90,00,000 as unexplained cash credit u/s 68 of the Income Tax Act,1961 read with section 115BBE of the Income Tax Act,1961 being unsecured loan taken by the assessee.
(b) Addition of Rs.3,33,699 being added as unexplained expenditure u/s 69C of the Income Tax Act,1961 read with section 115BBE of the Income Tax Act,1961 on account of interest incurred and paid on loan to the lending companies.
Aggrieved by the said order the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been allowed.
Being aggrieved and dissatisfied the revenue preferred appeal before us.
4. The Ld. D.R challenges the impugned order by taking following grounds of appeal:
1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s 68 of the Act on account of bogus & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. unsecured loan amounting to Rs. 1,90,00,000/- and addition on account of interest expense amounting to Rs. 3,33,699/-?
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the additions made by the Assessing Officer, observing that the assessee company had submitted bank statement, audited accounts, copy of income tax acknowledgement, copy of PAN card of lender companies ignoring that, this is not the litmus test to discharge the burden on the assessee to establish creditworthiness of the investing companies as well as the genuineness of the transaction as held by the Jurisdictional High Court in the case of M/s BST Infratech Ltd [161 taxmann.com 668]?
3. The Ld. CIT(A) erred in not appreciating the fact that once it is established that the loan taken was nothing but accommodation entries then its repayment is nothing but return of accommodation entries and therefore, it is in no way affect the application of section 68 of the Income Tax Act in the given set of facts of the assessee.
4. That the revenue reserves its rights to substantiate, modify, delete supplement and/or alter any or all grounds of appeal at any the time of appeal proceedings.
5. Contrary to that the Ld. A.R supports the impugned order thereby submitting that in the present case the sole issue arises in the assessment pertains to loan aggregating to Rs. 1.50 crores taking from RKS Nirman Pvt. Ltd. and Rs. 40 crores from Superior Vanijya Pvt. Ltd. along with interest. The Ld. A.R submits that in course of assessment proceedings, notice u/s 133(6) were issued to the loan creditors and loan parties duly responded to the notice and such evidence was placed but in fact the AO wrongly mentioned in its order that no reply was received from the parties. The Ld. A.R further submits that loan in questions were availed for commercial business purpose of the assessee and assessee has a turnover of Rs. 169.83 crores and net profit of Rs. 8.35 crores and net worth of Rs. 44 crores. The Ld. A.R submits that the assessee completely discharged the onus cast upon and there is no infirmity in the impugned order.
& 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd.
Upon hearing the submission of the counsel of the respective parties, we have perused the impugned order and find that the assessee company has received loan through proper banking channel and he has also paid interest and deducted TDS on the same. It is further pertinent to mention herein that the assessee had during the year taken loan of Rs. 1,50,00,000/- from M/s RKS Nirman Pvt. Ltd. and he paid interest and loan was repaid in the same year. The AO had added back the loan availed in the interest paid in the assessment year by saying that lender was a shell company. It is pertinent to mention here that the loan creditor company is having a status of active compliant on MCA portal and he had net worth of Rs. 2,44,63,218/- and he is a regular filer of the return. The assessee has also filed following documents in respect of loan:
(a) MCA Master Data (b) Loan Ledger (Assessee’s Books)
(c) Bank Statement (Assessee) reflecting loan received & repayment (d) Compliance of Notice issued u/s 133(6) of the IT Act (e) ITR acknowledgement (f) Audited Accounts of the Creditor (g) Loan Ledger (Lender’s Books)
(h) Confirmations – loan availed & repayment after interest payment (i) Bank Statement (Assessee) reflecting loan received & repayment (j) Source of Loan – provided by the lender
7. The Ld. CIT(A) in its detailed order had considered the evidence with regard to creditworthiness and identity and genuineness of the loan transaction. We find it relevant to quote the order of Ld. CIT(A) which is as under:
In the context of addition u/s 68 of the IT Act, the 2nd important aspect is to establish the creditworthiness of the loan creditors. The assessee is required to establish as to whether the & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. parties from whom the money were claimed to have borrowed, really possessed the capacity to pay the loan amount. The creditworthiness or financial strength of the lender can be proved either with the support of Bank Statement of the lender or on the basis of the Balance Sheet of the lender. While Bank Statement shows that the payment for the loan was made from the fund generated from a disclosed receipt reflected in the bank statement itself, the Balance Sheet shows the position of assets & liabilities as well as the owner’s net worth. Therefore, if the net worth of a lender is much higher and the investment money is fully covered, it can be concluded that the lender has the creditworthiness / capacity to give loan to others. Extract from balance sheets of the respective lenders show that each lender possesses good creditworthiness during the relevant year and the loan amount represents only a small fraction of the net worth: Sl No. Lenders Loan to assessee Net worth as per Loan as % of Net Balance Sheet Worth 1 RKS Nirman Pvt. Ltd. 1,50,00,000 2,44,63,218 61.03% 2 Superior Vanijya Pvt. 40,00,000 10,24,74,326 3.9% Ltd.
As settled legally, in this respect, the medium of payment is also very important. If the payment is made by account payee cheque, the source of payment, the payer & the payee is easily identifiable. Further, the bank statement itself would entail the capacity of the lender and accordingly to be considered in establishing the creditworthiness. In the present case, the lenders had transferred the respective loan amounts to the assessee via banking channel and the repayment was also made via banking channel, as seen in the assessee’s bank statement:
& 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd.
The overall fact can be summarized in the following manner. The assessee had planned to strengthen its business of warehousing and accordingly had taken up an expansion project. Such venture requires a lot of money. Apart from bank finance for long term capex loan, the assessee is also required to borrow work short term loan to meet the working capital. Hence the assessee had approached to private money lenders and in this process availed unsecured loan. As per the terms, it had incurred an interest expenditure also. The whole dealing was made at arm’s length. Loans were received via banking channel. The lenders are regular return filers and possesses good creditworthiness. Loans are subjected to interest & party’s account were credited for such interest as reflected in ledger accounts. Further such interests are subjected to TDS. The sanctity of such loan / interest / TDS is reflected in the confirmation statement as enclosed at page 99 & 125. All these facts prove the genuineness of the loan leaving no room to assess the loan / interest as unexplained cash credit u/s 68 of the IT Act. We place below a summary of the ledger account of the lenders in the books of the assessee: 1. RKS Nirman (P) Ltd: Loan Received & Repaid and Interest Payment: Date Particulars Debit Credit 10.11.2018 By Bank 50,00,000 20.11.2018 By Bank 50,00,000 01.11.2018 By Bank 50,00,000 14.01.2019 To Bank 1,50,00,000 15.02.2019 By Interest less TDS 2,07,123 15.02.2019 To Bank 2,07,123 1,52,07,123 1,52,07,123 Superior Vanijya (P) Ltd: Loan Received & Repaid and Interest Payment: Date Particulars Debit Credit 12.11.2018 By Bank 40,00,000 25.02.2019 To Bank 40,00,000 15.03.2019 By Interest less TDS 93,206 15.03.2019 To Bank 93,206 40,93,206 40,93,206 Documents relating to the Lender: 1) RKS Nirman (P) Ltd No t) Brief about the Lender 079-079 u) MCA Master Data No 080-080 v) Compliance u/s 133(6) 081-081 w) ITR acknowledgement 082-082 x) Audited Accounts 083-097 y) Assessee Ledger 098-098 z) Confirmation 099-099 aa) Bank Statement 100-101 bb) Source of Fund No 102-102 2) Superior Vanijya (P) Ltd cc) Brief about the Lender 103-103 dd) MCA Master Data 104-104105-105 ee) Compliance u/s 133(6) 106-124
hh) On-line doc. Submission A remand report was called for and the report was forwarded vide letter dated 17/10/2024 which is reproduced as under: 5.1 Brief fact emanating from the record is that a search action was conducted on29.01.2021 in Balaji Group. Consequently, the instant case was centralized to this charge by an order passed by the Competent Authority. Subsequently, the assessee filed his return of income u/s. 153A electronically on 28.11.2021 declaring total income of Rs. 7,50,65,000/- and the case was assessed 143(3) rws 153A of the Income Tax Act,1961 by making an addition of Rs. 1,90,00,000/- u/68 and addition of Rs. 3,33,699/- u/s 69C of the Act. 5.2 During the year under consideration the assessee company had taken unsecured loans from various shell entities which have been indulged in providing accommodation entries in the form of unsecured loans. Party wise details of the same for the relevant AY 2019-20 is as mentioned as below: Sl.No. Name of shell PAN Loan Interest Paid Total companies Received during the year (in Rs.) 1 M/s. RKS Nirman AADCR3507K 15000000 230137 15230137 Pvt. Ltd. 2 M/s. Superior AAMCS7398L 4000000 103562 4103562 Vanijya Pvt. Ltd Total 19000000 333699 19333699
5.3 The total addition of Rs. 1,90,00,000/- was made u/s 68 and Rs. Rs. 3,33,699/- u/s 69C of the Income Tax Act, 1961 under the head unexplained cash credit as the identity of the lending entities and creditworthiness of the same were questionable. 5.4 During the course of assessment proceedings notice u/s 133(6) of the Act, was duly served upon the lending entities through the ITBA portal and as well as physically to the lending entity M/s. RKS Nirman Pvt. Ltd. on 01.02.2022 and physically to the lending entity M/s. Superior Vanijya Pvt. Ltd on 31.01.2022. The tear-off slip duly signed by the lending companies are enclosed as Annexure-A for your ready reference. In the said notice u/s 133(6) of the Act, 1961, the following details were sought (i) Details of transactions with the assessee company M/s. Vikrama Impex Pvt Ltd or a copy of ledger of the relevant financial year. (ii) Sources of fund for advancing loans to the assessee company M/s. Vikrama Impex Pvt Ltd along with relevant bank statements and documents. (iii) Copy of Balance Sheet for the relevant financial Year. 5.5 However, both the lending entities namely M/s. RKS Nirman Pvt. Ltd. and M/s. Superior Vanijya Pvt. Ltd. failed to comply with the notice. No response was received from the above & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. lending entities. Thus, the entities failed to submit any documentary evidence during the course of assessment proceedings. 5.6 Since no documentary evidence was submitted by the lending entities in support of source of fund against the unsecured loans to the assessee company M/s. Vikrama Impex Pvt Ltd. Furthermore, the assessee company was provided with an opportunity of cross examination of the Entry Operators during the course of assessment proceedings, however the directors of the companies failed to appear before this office to prove the genuineness of the transactions. This has been mentioned in the assessment order itself. Thus, the addition made by the erstwhile AO is prudent and justified.
6. Now during the course of appellate proceedings, the assessee has made additional submissions in terms of Rule 46A of Income Tax Rules’1962. In its submission, the assessee is found to have submitted additional documentary evidence wrt to the lending entities. The assessee has submitted the ledger, MCA data, the loan confirmation and the bank statements reflecting the transactions made by the assessee. The submission made by the assessee before your learned office is perused carefully. On perusal of the additional documentary, it is noticed that the relevant documents have been submitted by the assessee and not the concerned lending parties. Hence, the lending parties nor the parties who had made sales to the assessee company have neither made any submission during the course of assessment proceedings. Further it is imperative to mention here that the documents submitted by the assessee before your good office, there is no documentary evidence regarding the source of funds of the lending entities has been submitted before your good self in terms of Rule 46A of Income Tax Rules’1962. 6.1 As discussed above, the nature and source of funds of the lending entities remains unexplained and the credibility of the lending entities could not be established by the assessee, thus the nature and source of funds remains unexplained Therefore the addition made under section 68 and 69C of the Income Tax Act in the assessment order is justified. In rejoinder to remand report, the appellant has submitted as under: In the remand report the AO has justified the addition of loan of Rs.1.90 crore and interest of Rs.3,33,699. The summary of transactions are as follows: Description Loan Interest Total 1 M/s. RKS Nirman 15000000 230137 15230137 Pvt. Ltd. 2 M/s. Superior 4000000 103562 4103562 Vanijya Pvt. Ltd Total 19000000 333699 19333699
2. In the assessment proceedings and appellate proceedings, the assessee had filed the following documents in support of the loan transaction: (a) MCA Master Data (b) Loan Ledger (Assessee’s Books) (c) Bank Statement (Assessee) reflecting loan received & repayment (d) Compliance of Notice issued u/s 133(6) of the IT Act (e) ITR acknowledgement (f) Audited Accounts of the Creditor (g) Loan Ledger (Lender’s Books) (h) Confirmations – loan availed & repayment after interest payment (i) Bank Statement (Assessee) reflecting loan received & repayment & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. (j) Source of Loan – provided by the lender 3. The above documents were sent for remand under rule 46A to the Assessing Officer. On his examination of the same he could not bring out any adverse comments on these documents, hence the documents submitted by the assessee have duly substantiated and discharged their onus. The assessee has discharged its onus u/s 68 of the Act and demonstrated its creditworthiness, identity and genuineness of the loan transactions. Hence, no addition can be made against these transactions. The appellant relied upon following case laws: Hon’ble Calcutta High Court in Commissioner of Income Tax, Kolkata-III vs. M/s.Dataware Private Limited, reported in 2011 (9) TMI 175, 4. We submit that the AO has alleged that the two creditors had not replied to the notice u/s 133(6) of the Act, however this is factually incorrect. Both the creditors had replied to the notice. The copies of their replies have been obtained from them and enclosed herein marked as annexure 1 & 2. Thus, the creditors have confirmed the transaction in response to notice u/s 133(6) of the Act.
In the assessment order the Ld AO has claimed that the directors of the creditor’s companies did not come for the examination in response to notice u/s131 of the Act. The representative of the assessee company went for the cross-examination hearing; however, the director of the creditor did not turn up. Thus, there was the failure of the creditor to appear in response to notice u/s 131 of the Act. However, for such reason no adverse view can be taken against the assessee, when otherwise the assessee has discharged its onus and also refunded the loan with interest and submitted all documents and bank statements to prove the same.
6. The appellant relied upon following case laws: Hon’ble Calcutta High Court in the case of PCIT vs. M/s Naina Distributors Pvt. Ltd. in ITAT 113/2023 IA No. GA/1/2023 dated 28.06.2023 7. Supreme Court’s ruling in Andaman Timber Industries vs. Commissioner of Central Excise, Kolkata-II, 281 CTR 241.
8. The appellant also relied upon following case laws: (i)Hon’ble Gujarat High Court in the case of Commissioner of Income Tax -vs- Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat). (ii)Hon'ble Gujarat High Court in the case of CIT s. Mahavir Crimpers 95 Taxman.com 323 (Guj). (iii) CIT vs. Karaj Singh (2011) 15 txmann.com 70 (P&H) & Panna Devi Chowdhary vs. CIT, 208 ITR 849 (Bom) etc. (iv) CIT v. Sahibganj Electric Cables (P.) Ltd. [1978] 115 ITR 408 (CAL.). (v) Principal Commissioner of Income-tax v. Ojas Tarmake (P.) Ltd.Reported as 156 taxmann.com 75 (Gujarat) (vi)CIT v. Rohini Builders [2003] 127 Taxman 523/[2002] 256 ITR360 (Guj.) (vii) Hon’ble Gujarat High Court’s decision in the PrincipalCommissioner of Income Tax 1 vs. Merrygold Gems Pvt. Ltd, reported in2024 (6) TMI 1371 (viii) CIT v. Smt. P.K. Noorjahan* [1997 (1) TMI 6 - Supreme Court]. (ix) Hon’ble Calcutta High Court in the case of CIT v. Mitul Krishna Kapoor (ITA No.333 of 2009) ………… 16. The Assessee Company submits that the submissions made above shows that unsecured loan received by the Assessee Company from the loan creditors are all genuine and thus the said & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. unsecured loan and the interest expenses incurred thereon cannot be doubted. We, therefore, request you to kindly delete the additions made in the assessment order. The appellant has challenged the addition of Rs.1,90,00,000 /- made by the AO u/s.68 of the Act in relation to the total unsecured loan of Rs 1,90,00,000 /- taken from RKS Nirman (P) Ltd and Superior Vanijya (P) Ltd. It is noticed that the assessee had filed all documentary evidences which it was required to maintain in the ordinary course to substantiate the identity and creditworthiness of the lender and the genuineness of the transaction. The loans were also repaid in the same FY: 2018-19 (ie A.Y. 2019-20). The break up is as under: 1. RKS Nirman (P) Ltd: Rs.1,50,00,000/- 2. Superior Vanijya (P) Ltd: Rs.40,00,000/- 1. RKS Nirman (P) Ltd: A.Y. Loan Taken Loan Interest Paid TDS Closing Repayment balance 2019-20 20.11.2018 50,00,000 20.11.2018 50,00,000 20.11.2018 50,00,000 14.01.2019 1,50,00,000 15.02.2019 2,07,123 23,014 Nil
Superior Vanijya (P) Ltd: A.Y. Loan Taken Loan Interest Paid TDS Closing Repayment balance 2019-20 13.11.2018 40,00,000 25.02.2019 40,00,000 26.03.2019 93,206 10,356 Nil
The appellant has challenged the addition of Rs.1,90,00,000/- made by the AO u/s. 68 of the Act in relation to the unsecured loan of Rs. 1,90,00,000 /- received by the assessee from M/s RKS Nirman (P) Ltd: and Superior Vanijya (P) Ltd. It is noticed that the assessee had filed all documentary evidences which it was required to maintain in the ordinary course to substantiate the identity and creditworthiness of the lender and the genuineness of the transaction. The lender had own funds to advance a loan to the assessee. The assessee has provided the said interest in its books. The return of income filed by M/s RKS Nirman (P) Ltd and Superior Vanijya (P) Ltd. for the assessment year 2019-20 was also furnished. The loan has been confirmed by the lender and was also repaid during the same FY: 2018-19 ie A.Y. 2019-20. These documents filed by the assessee has not been faulted in the order of assessment. In this connection, reliance is placed in the decision of the Calcutta High Court in the case of PCIT, M/s. Sreeleathers[2022] 143 taxmann.com 435 (Calcutta) wherein on similar facts and circumstances, the Hon’ble court has held as under:
& 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd.
Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we need to take note of Section 68 of the Act. This provision deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any 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 income tax as the income of the assessee of that previous year. The crucial words in the said provision are "assessee offers no explanation". This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income Tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to Section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the ITAT 18 OF 2022 explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Srilekha Banerjee & Ors. Versus CIT 4, it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source [CIT Versus Mohanakala (P) 5]. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds (Lal Mohan Krishna Lal Paul Versus CIT 6 and Anil Kumar Singh Versus CIT 7).
5. Further to be noted that where the assessee furnishes full details regarding the creditors, it is up to the department to pursue the matter further to locate those creditors and examine their creditworthiness. It has been further held in Sivan Pillai (AS) Versus CIT 8 that while drawing the inference, it cannot be assumed in the absence of any material that there has been some illegalities in the assessee's transaction. Thus, more importantly, as held by the Hon'ble Supreme Court in CIT Versus Daulat Ram Rawatmull 9, the onus of proving (1963) 49 ITR 112 (2007) 291 ITR 278 (SC) (1944) 12 ITR 441 (Cal) (1972 84 ITR 307 (Cal) (1958) 34 ITR 328 (Mad) (1973) 87 ITR 349 (SC) ITAT 18 OF 2022 that the appellant was not the real was on the party who claims it to be so. Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22.12.2017.The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. In more than one place the assessing officer used the expression "money laundering." We find such usage to be uncalled for as the allegations of money laundering is a very serious allegations and the effect of a case of money laundering under the relevant Act is markedly different. Therefore, the assessing officer should have desisted from using such expression when it was never the case that there was any allegations of money laundering. Paragraph 5.4 and 5.5 of the assessment order are all personal perception and opinion of the assessing officer which needs to be ITAT 18 OF 2022 ignored. Much reliance was placed on the statement of Shri Ashish Kumar Agarwal, which statement has been extracted in full in the assessment order & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under Section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under Section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the lender companies, the CIT has recorded the factual findings that the net worth of those companies is in crores of rupees and they have declared income to the tune of Rs. 45,00,000/- and 75,00,000/-. Therefore, the assessing officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons. We find that there is no discussion on the explanation offered ITAT 18 OF 2022 by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under Section 133 (6) of the Act to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the assessing officer and there is no discussion on this aspect. Thus, we find that the tribunal rightly dismissed the appeal filed by the revenue. As stated earlier, the loan was repaid in the same assessment year and therefore it cannot be said that the assessee was a beneficiary of the loan. In this connection, the judgement of the Hon’ble Gujrat High Court in the case of PCIT Vs Ambe Tradecorp Pvt. Ltd. [2022] 145 taxmann.com 27 (Gujarat) where it has been held as follows : “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 being 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)”. It is, therefore, held that since the appellant had discharged its onus of proving the identity of the loan creditor, which in the instant case, duly registered with Ministry of Corporate Affairs having PAN and filed the return of income as well. Further, the creditworthiness of the transaction is proved with the fact that they have been carried through banking channel and sufficient funds were available with loan creditors to explain the amount of loan given. The & 317/Kol/2025 Assessment Years: 2019-20 & 2020-21 Vikrma Impex Pvt. Ltd. genuineness of the transaction is proved in the fact that the assessee company is carrying regular business activity and the loan was obtained at rate of interest which was also repaid at a later date, interest was paid of the loans and TDS has been deducted and income tax return has been filed by the loan creditor. Merely because the parties could not be traced cannot be a ground for making the addition when the AO had verified the same by issue of notice u/s 133(6) of the Act. Further the loan taken had been repaid at a subsequent date. 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 being carried out in the later years. Therefore, there is no justification of the AO for invoking the provision of section 68 of the Act and the addition of Rs. 1,90,00,000/- is deleted. Hence, the consequent addition on account of interest income of Rs. 3,33,699 /- is also deleted.”
Keeping in view, the order passed by the Ld. CIT(A) as discussed above, we are in this view that there is no infirmity in the impugned order. The Ld. CIT(A) has not only discussed the documentary evidence rather discussed the law before allowing the appeal of the assessee. We do not find any infirmity in the impugned order. Accordingly, the appeal of the revenue is dismissed.
The issue raised in the appeal is similar to one as decided by us in AY 2019-20. Therefore, our decision in for AY 2019-20 would mutatis mutandis, apply to this appeal as well. Accordingly, the appeal of the revenue is dismissed.
In the result, both the appeals of the revenue are dismissed.
Order is pronounced in the open court on 25th August, 2025