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Facts
The Revenue appealed against an NFAC order that partly allowed the assessee's appeal, deleting additions made under Section 68 for alleged accommodation entries. The Assessing Officer had treated loans totaling Rs. 2,07,96,642/- received from multiple entities as accommodation entries. The Revenue's appeal was filed 42 days late, and the delay was condoned.
Held
The Tribunal observed that the assessee had repaid the loans through banking channels, after deducting TDS, and had provided relevant documentary evidence like bank statements and ledger accounts. Following the Gujarat High Court's precedent, the Tribunal held that if repayment is established through banking channels and the identity, creditworthiness, and genuineness of the transaction are satisfied, additions under Section 68 may not be warranted. The Tribunal found no reason to interfere with the NFAC's order.
Key Issues
Whether the deletion of additions made under Section 68 for alleged accommodation entries was justified, given that the loans were repaid through banking channels with TDS deducted.
Sections Cited
68, 147, 148, 143(2), 133(6), 142(1)
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Income Tax Appellate Tribunal, DELHI BENCH ‘F, NEW DELHI
Before: SH. S. RIFAUR RAHMAN & SH. SUDHIR KUMAR
06/01/2026 Date of hearing: 14/01/2026 Date of Pronouncement: ORDER
PER SUDHIR KUMAR, JM:
This appeal by the Revenue is directed against the order of National Faceless Appeal Centre/ Commissioner of Income Tax Delhi, [hereinafter referred to as “(NFAC)”], vide order dated 20.02.2025 pertaining to A.Y. 2016-17 and arises out of the assessment order dated 28-03-2022 passed by the Assessing Officer under Section 147 r.w.s.144 B of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’].
The appeal is time barred by 42 days. Cause stated by the Revenue is sufficient to condone the delay, therefore the delay is condoned.
3. The revenue has raised the following grounds in the appeal:
1. Whether on the facts and in the circumstances of the case and in law, the decision of the Ld. CIT(A)/NFAC is ex facie perverse because the Ld. CIT(A)/NFAC has erred in deleting the addition of Rs. 20796642/- made u/s. 68 of the Act for the funds received from M/s M3M Traders Pvt. Ltd., M/s Karda Traders Pvt. Ltd, M/s Gomati Consultants, M/s Ambaranuj Finance and Investment Pvt. Ltd. without appreciating the entire gamut of facts making it evident that the transaction was in the nature of accommodation entry?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that receipt of loan and repayment of loan through banking channel is a genuine transaction whereas the four companies providing loan to the assessee company are not engaged in the any genuine business activity and has been established as paper concerns during investigation proceedings.
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in ignoring the fact that the loan of Rs. 20796642/- has been received from dummy entities duly established during search proceedings.
Whether the Ld. CIT(A) was justified in law in deleting the addition made by the AO u/s. 68 of the Income Tax Act, 1961, merely on the basis of copy of ledger accounts, copy of ITR and the receipt of loan and repayment of loan through banking mode, without ensuring the creditworthiness of M/s M3M Traders Pvt. Ltd, M/s Karda Traders Pvt. Ltd, M/s Gomti Consultants, M/s ambaranuj Finance and Investment Pvt. Ltd. to provide huge amount of loan of Rs. 20796642/- to the assessee company, thereby ignoring the settled principle of creditworthiness of lenders and genuineness of transacstions as held in the case of CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal.), CIT vs. Korlay Trading Co. Ltd. (1998) 238 ITR 920 (Cal) and CIT vs. United Commercial and Industrial Co Pvt. Ltd. (1991) 187 ITR 596 (Cal)” 3. The brief facts of the case are that the assessee company filed its original return of income at Rs.9,84,49,950/- on 14-10-2016. As per the information received from JDIT (Inv.) Unit-1 Delhi during the course of search operation on Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain , it was observed the they were involved in providing accommodation entries to various beneficiaries through banking channels in lieu of cash. As per the information the assessee is one of such beneficiaries who has taken accommodation entries totaling to Rs.2,07,96,642/- from Gomati Consultants Karda traders, M3M traders and CVH sea during the A.Y. 2016-17. The case of the assessee was re-opened u/s 147 of the Act after taking the approval and notice under section 148 of the Act was issued on 26-03-2021 to file the return of income. In the compliance of the notice the assessee filed the return of income declaring at Rs. 9,84,49,950/-. Again notice under section 143(2) of the Act was issued along with questionnaire. After considering the submission submitted by the assessee company the Assessing Officer completed the assessment after making the additions of Rs.2,07,96,642/- on the following accommodation entries from the M3M Rs.13,59,780/-, Karda Traders Rs.75,59,875/- and Gomti Rs.41,39,364/-.
4. Aggrieved by the order of the AO the assessee filed the appeal before the Ld. NFAC, who vide his order dated 20-02-2025 relying the decision of the Hon’ble Gujarat High Court partly allowed the appeal. The Ld. NFAC held in in the order as under:
“5.2.3 I have considered the appellant submissions against the addition made by the AO. In this regard, the party wise details of loan receipts and repayments as extracted from the statements of the HDFC Bank account number : 01582000006120 and Andhra Bank account numbers : 104231100000229, 104211011000841 submitted by the appellant during the assessment proceedings in response to notices issued u/s. 142(1) of the Act, are tabulated as below:- Sl No. Party Loan receipt Loan repayment 1. Karda 20,00,000/- to 58,77,577/- from Andhra Bank HDFC bank account Traders account on on 21.11.2014 during 21.05.2014. the AY 2015-16
25,00,000/- to Andhra Bank account on 23.05.2014.
11,50,000/- to Andhra Bank account on 24.05.2014.
9,00,000 to 75,59,875/- from HDFC bank Andhra bank account account on on 11.9.2015 during 18.3.2015. the AY 2016-17.
4,00,000/- to HDFC bank account on 19.03.2015
60,00,000/- to HDFC bank account on 6.4.2015. 2 M3M Traders 13,00,000 to 13,59,780/- from HDFC bank HDFC bank account account on on 12.10.2015 during 18.3.2015 the AY 2016-17 during the AY 2015-16 3 Gomati 40,00,000 to 41,39,364/- from Consultants HDFC bank Andhra Bank account account on on 11.9.2015 during 6.4.2015 durign the AY 2016-17. the AY 2016-17 4 Ambarnuj 50,00,000/- to 77,37,623/- from Finance & HDFC bank HDFC bank account Investment account on on 12.10.2015 during Ltd. 18.3.2015 the AY 2016-17. during the AY 2015-16
24,00,000/- to HDFC bank account on 19.3.2015 during the AY 2015-16.
Total 74,00,000
5.2.4 From the above table, it is evident that the appellant repaid all the loans obtained from the alleged bogus parties along with interest after deducting TDS applicable. In the case of PCIT vs. Ambe Tradecorp (P) Ltd.
[2022] 145 taxmann.com 27, the Hon’ble Gujarat High Court held as under:- 2.1 Section 68 of the Act deals with the cash credits, it provides 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 assessee officer satisfactory, the sum so credited may be charged to the Income tax.
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. JA 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, n 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 1.T. Act and in compliance thereto both the companies have submitted the requisite information." 3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt. The accounts were finally settled with the repayment of the loan to the lender companies. 3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of CITV. Durga Prasad More [1971] 82 ITR 540 (SC) and also in Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC), to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. 3.5 While the revenue has tried to put up a case that the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities the transactions were found to be genuine.
4. Learned advocate for the appellant attempted to emphasize that for the purpose of application of section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied.
As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the repaid in the subsequent year, even the ingredients of loan creditworthiness and genuineness of transaction were well satisfied.
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, "
7. For the reasons recorded above, no question of law much less substantial questions arises in this appeal. It stands meritless and accordingly dismissed." 5.2.5 In the instant case also the appellant is not a beneficiary of the loan received by it in as much as the loan was subsequently repaid. Therefore, respectfully following the decision of Hon’ble Gujarat High court as cited above, the addition made by the AO of Rs. 2,07,96,642/- u/s. 68 of the Act is deleted and Ground No. 1 is allowed.” 5. Being aggrieved the order of the Ld. NFAC the Revenue is in appeal before the Tribunal.
Ld. CIT(DR) relied upon the order of the AO. She submitted that the assessee company received the accommodation entries from the three companies. The assessee has failed to discharge his burden that the transaction was genuine. She also submitted that on the basis that the loan was repaid by banking channel the transaction could not prove that the transaction was genuine. She further submitted that the companies who provided the loan to the assessee are not engaged in any genuine business activity and the paper companies. It was also argued that creditworthiness of the lenders were not established.
The Ld. AR for the assessee has submitted that the loan was repaid along with interest after deducting the TDS. The assessee has discharged the onus to prove the creditworthiness and genuineness of transactions.
We have heard the parties and gone through the material available on record. Perusal of the order of the Ld. NFAC reveals that the assessee has proved that the loan was repaid through banking channel after deducting the TDS. Ld. CIT(A) has examined the issue in the correct perspective and rightly deleted the addition under section 68 of the Act. The reasoning and findings of the Ld.NFAC, while granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any reasons to interfere with the findings of the Ld. NFAC.
The appeal of the Revenue is liable to be dismissed and dismissed accordingly.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 14.01.2026.