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Income Tax Appellate Tribunal, DELHI “E” BENCH: NEW DELHI
Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL
ORDER
PER MANISH AGARWAL, AM:
The captioned appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-3, Gurgaon [“Ld. CIT(A)”] dated 28.01.2025 in Appeal No. CIT(A), Gurgaon 3, passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of the assessment order passed u/s 143(3) of the Act dated 27.12.2019 for Assessment Year 2017-18.
Brief facts of the case are that assessee is a private limited company engaged in the real estate business. Return of income for the year under appeal was filed on 18.10.2017 declaring total loss at Rs.4,780/- and the case of the assessee was selected under CASS for Passion Realtech Pvt. Ltd. Vs ACIT limited scrutiny for two reasons; (a) Expenses incurred for earning exempt income and (b) Investments/ Advances/ Loans. Notice u/s 143(2) of the Act was issued on 28.09.2018 followed by notices u/s 142(1) alongwith questionnaires from time to time. In response assessee filed submissions and after considering submissions made by the assessee, order was passed u/s 143(3) of the Act wherein an addition of Rs. 4,87,00,000/- was made u/s 68 of the Act being loan received from M/s. Height Propcon (P) Ltd held as unexplained credit.
Against the said order, assessee preferred an appeal before Ld. CIT(A), who dismissed the appeal of the assessee.
Aggrieved by the said order, assessee is in appeal before the Tribunal by taking following grounds of appeal:-
1.0 That, on the facts and in the circumstances of the case, the disallowance, imposition of tax, and interest with reference thereto, as well as the quantification of taxable income and tax liability, are unjustified, erroneous, and unsustainable, and it is prayed that necessary directions be issued to the Learned Assessing Officer (Ld. AO) to grant appropriate relief in accordance with the law. 2.0 That, on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in upholding the order of Ld. AO without considering the fact that the assessment completed u/s 143(3) was bad in law on various technical and jurisdictional grounds. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in upholding the order of Ld. AO without appreciating the fact that recourse to section 143(3) of the Act would be unavailable in cases where the AO is empowered to proceed u/s 153C of the Act. 4.0 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without considering the fact that conversion of limited scrutiny into complete scrutiny is against the spirit of CBDT mandate which is binding on the Ld.AO.
Passion Realtech Pvt. Ltd. Vs ACIT 5.0 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that the appellant has discharged onus laid down u/s 68 of the Act and hence addition made was baseless and invalid. 5.1 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 on account on unexplained cash credits amounting to Rs. 4.87 crores without considering the facts and reply filed by the appellant. 5.2 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 since bank statement cannot be construed to be books maintained by the assessee for the purpose of section 68 of the Act. 5.3 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 on account of treating M/s. Height Propcon Pvt. Ltd. as a dummy entity i.e. accommodation entry provider and placed reliance on the statement of alleged person who was not even the director of the impugned company. 6.0 That on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in upholding the order passed by Ld. AO who is actually failed to send the summon u/s 131 or notice u/s 133(6) of the Act to the alleged persons whose vague statements or non- attendance before the investigation wing made whole assessment proceedings bad in law and invalid. 6.1 That on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in upholding the order passed by La. A who has not been provided impugned statements of persons recorded on oath during the survey conducted u/s 133A of the Act at the premises of M/s. Height Propcon Pvt. Ltd. and disproved the identity of said company and adjudged legitimate business transaction as a non- genuine transaction and treated as an accommodation entry. 7.0 That on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in treating the appellant company as an accommodation entry recipient by relying on statement recorded at back of the appellant without providing an opportunity by the Ld. AO to cross examine the same.
8. That on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in upholding the order of Ld. AO without considering the fact that assessment proceedings was done merely on the basis Passion Realtech Pvt. Ltd. Vs ACIT of suspicion and assumptions/ presumptions derived from search conducted in case of M3M Group. 9.0 That on the facts and in the circumstances of the case, the Ld. CIT- (A) has erred in upholding the order of Ld. AO without considering the fact that no adverse inference has been drawn in the assessment order of impugned party i.e. M/s. Height Propcon Pvt. Ltd. during the year under consideration with respect to transaction undertaken by the appellant company. 10.0 That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the Grounds stated here-in-above, either before or at the time of hearing of this appeal.
Grounds of appeal No. 1 & 2 are general and need no adjudication.
Regarding Ground of appeal No. 3, no submission was made before us, thus the same is hereby dismissed.
Ground of appeal No. 4 is challenging the jurisdiction of AO in converting limited scrutiny into complete scrutiny without following the procedure mandated by CBDT.
Before us, ld. AR for the assessee submits that its case was selected for "Limited Scrutiny" as per notice issued u/s 143(2) of the Act, which is available at pages 16 to 23 of PB. He submits that the AO enlarged the scope of limited scrutiny to "Complete Scrutiny" without obtaining mandatory prior approval from Pr. CIT/CIT which is in contravention to the binding CBDT instruction No. 225/402/2018/ITA-II dated 28-11-2018, copy of the same is placed at pages 14 to 15 of PB. Ld. AR thus submits that due to this, assessment order suffers from jurisdictional defect and is bad in law Passion Realtech Pvt. Ltd. Vs ACIT and liable to be quashed. He placed reliance on the judgement of coordinate bench of ITAT Delhi in the case of Nisha Goel vs. ITO in and in the case of M/s CBS International Projects (P.) Ltd. vs. ACIT in ITA No.144/DEL/2019.
8.1 In alternative, ld. AR submits that one of the reasons for limited scrutiny was “investments / advances / loans”. As per ld. AR, the expression "advances/loans" when used in conjunction with "investment" is to be understood in the context of Assets and not liabilities vide applying the principle of "ejusdem generis". However, in the notice u/s 142(1) dated 04-10-2019, AO sought details of “investment / advances / loans," and further, vide notice dt.12.12.2019, required an explanation regarding the nature of advances received, i.e., liabilities (Sundry creditors), therefore the AO travelled beyond the scope of limited scrutiny and the addition made on the basis of liabilities are contrary to the very foundation of the notice. He prayed accordingly.
On the other hand, ld. CIT DR vehemently supported the order of the lower authorities and submits that one of the reasons for limited scrutiny was “investments/advances/loan” and all three terms used are having different meaning and cannot be read together more particularly when they are alternatively used. It is thus prayed by ld. CIT DR that AO has rightly made the addition towards unsecured loan which is one of the reasons for limited scrutiny. She Prayed accordingly.
Passion Realtech Pvt. Ltd. Vs ACIT 10. Heard the parties and perused the material available on record. After considering the facts of the case at hand, we find that the AO has not exceeded the jurisdiction while examining the credits in the shape of loans as it lies well within the scope of reasons for limited scrutiny. As observed hereinabove, one of the reasons of limited scrutiny was “Investments/Advances/ Loans” and the AO has examined loans which is well within his jurisdiction of limited scrutiny. Once examination of “loans” is observed to be forming a part of the reasons recorded, we find no error in the action of the AO. The ld. AR for the assessee has placed reliance on principle of "ejusdem generis", however, the same is not applicable to the facts of present case as all the three terms i.e. ‘Investments’, ‘Advances’ and ‘Loans’ are used alternatively and not as ‘synonymous’ to each other. Thus, it cannot be inferred that they are of the same kind. Therefore, the contention of assessee is not acceptable on this score also. Accordingly, ground of appeal no. 4 taken by the assessee is dismissed.
11. The remaining Grounds of appeal Nos. 5 to 9 are regarding addition of Rs. 4.87 crores made u/s 68 of the Act by holding the loan taken from M/s Height Propcon Pvt. Ltd. as unexplained cash credit.
12. Before us, ld. AR for the assessee submits that during the year under appeal, assessee has taken loan of Rs. 4.87 crores from M/s Height Propcon Pvt. Ltd. for which all necessary evidences to establish identity and genuineness of transaction and its Passion Realtech Pvt. Ltd. Vs ACIT creditworthiness were filed in terms of letter dt. 16.12.2019, placed at pages 48 to 66 of PB. These include confirmation, ITR, bank statement and financial statements of lender company. The Ld. AR further submits copy of ledger account of lender company as appearing in its books of accounts as per which there was an opening balance of Rs. 26.15 crores of loan taken from this lender company and entire loan was repaid in FY 2022-23. It is submitted that except for the year under appeal, revenue has never doubted the existence and creditworthiness of lender company though loan amounts of more than 26.00 crores were taken in preceding years. Ld. AR also placed before us a copy of assessment order passed u/s 143(3) in the case of lender company dt.18.12.2019 wherein not only was its existence was accepted but its capacity to provide huge loans was also accepted by revenue. Our attention is also drawn to the fact that the said order was passed for the same assessment year i.e. AY 2017- 18 and was passed only 10 days prior to the order passed in the case of assessee. Ld. AR thus argued that once no adverse inference is called for in case of lender company, its existence and creditworthiness could not be doubted in the case of assessee who is the recipient of loan. Ld. AR thus requested for the deletion of the addition. He placed reliance on the following judicial pronouncement of coordinate benches of ITAT:
- ITO vs. Sun Infrastate Private Limited (ITA No. 1469 to 1470/Del/2023). - DCIT vs. M/s Jain Carrying Corporation, Bikaner (ITA No. 369/JODH/2018).
Passion Realtech Pvt. Ltd. Vs ACIT 13. On the other hand, ld. CIT DR vehemently supported the orders of the lower authorities and submits that assessee has received loan of Rs. 4.87 crores from M/s Height Propcon Pvt. Ltd. Ld. CIT DR submits that AO relied upon the statement of Shri Puran Bahadur, director of eh lender company recorded on oath u/s 132(4) of the Act during search & seizure action conducted on 21.07.2016 at C-13, Sushant Lok-1, Gurgaon in which Shri Puran Bahadur accepted that he works as driver for Shri Basant Bansal and his family members from three years and getting a salary of Rs 17,000/- per month in cash. Ld. CIT DR further submits that Investigation Wing also made inquiries through Inspector who personally visited the address registered at MCA website and reported that lender company, M/s Height Propcon Pvt Ltd, does not exist at the registered address. Ld. CIT DR also drew our attention to the fact that during survey proceedings conducted u/s 133A of the Act, statements of owners/tenants were recorded in which they have disproved the identity of M/s Height Propcon Pvt Ltd. It is thus prayed by ld. CIT DR that the made by AO deserves to be sustained. She prayed accordingly.
Heard both the parties and perused the material placed before us. In the instant case, revenue alleged that assessee has failed to establish identity as well as creditworthiness of lender company M/s Height Propcon Pvt Ltd. from whom assessee has received loan of Rs.4.87 crores during the year under appeal. It is further seen that there was an opening balance of loans taken from the said company of Rs. 26.15 crores. A query was made by the bench from ld. AR Passion Realtech Pvt. Ltd. Vs ACIT whether any doubts were raised by revenue in preceding years when these loans were taken, to which ld. AR stated at Bar that no action whatsoever was taken against the lender company in any of the preceding years when loans were advanced to assessee. It is further stated by ld. AR that in AY 2011-12 and 2012-13, additions were u/s 68 of the Act in the case of assessee company towards the loans taken from other companies by doubting their (lender companies) creditworthiness however, same were deleted by the coordinate bench of ITAT Delhi, in and 1269/Del/2025 vide order dt. 26.11.2025 for AY 2011-12 and 2012-13 respectively.
It is also seen that in the case of lender company, assessment for AY 2017-18 was completed by the department almost simultaneously wherein one of the reasons for scrutiny was “low income in comparison to high loans/ advances/ investment in shares appearing in Balance Sheet”. However, from the perusal of assessment order dt. 18.12.2019 placed before us, we find that no adverse inference was drawn against the company and returned income was accepted. This fact clearly establishes that the identity of lender company has been accepted by the department and its capacity to grant loans/ making investments in shares of companies is also not in doubt. Now making addition in the hands of assessee company by alleging the identity and creditworthiness of the same company is contrary to the view already taken in the case of lender company and is not permissible. The AO cannot play hot and cold at the same time more particularly when the assessee has filed all the relevant details like confirmation, ITR, Bank statement and financial Passion Realtech Pvt. Ltd. Vs ACIT statements of lender company to discharge the burden casted upon it of proving the identity, genuineness of transaction and creditworthiness. In assessee’s own case in & 1269/Del/2025 under similar circumstances, tribunal has deleted the additions by making following observations: 29. We have heard both the parties and perused the material available on record. It is the specific case of the Assessee that the Assessee has duly repaid the loan amount and provided the details of identity, creditworthiness and genuineness of the transaction before the A.O., however, the same has not been considered while framing the assessment. The Ld. Counsel has provided the chart showing repayment made to the parties and also produced evidence in support of such re-payment made. The chart produced by the Assessee is reproduced as under:-
Name of the party Amount of Date of Paper Book Repayment (in Repayment Page No. Rs.) Sunrise Propbuild 1,00,00,000/- 20.01.201 321 of Addl. PB Private Limited 3 2,00,00,000/- 24.01.2013 321 of Addl. PB 1,00,00,000/- 29.01.2013 321 of Addl. PB 3,00,00,000/- 16.01.2013 323 of Addl. PB 40,00,000/- 25.06.2013 324 of Addl. PB 30. Further, in order to prove the identity, creditworthiness and genuineness of the parties, the Assessee along with the reply filed before the A.O., produced the copy of confirmation of accounts, ITR acknowledgement, bank statements and audited financial statements of the party from which loan has been taken. Those documents are placed by the Assessee in the paper book at Page No. 52 to 69.
The Co-ordinate Bench of the Tribunal in the case of Dazzling constructions (P.) Ltd. Vs. ITO in order dated 26/03/ 2025 reported in [2025]172 taxmann.com 860 (Delhi- Trib), while deleting the addition on the similar facts and circumstances, held as under:- “9. On perusal of the para 5 of the first appellate order, we observe that the CIT(A) has acknowledged the factum of production of documentary evidences and subsequent Passion Realtech Pvt. Ltd. Vs ACIT repayment of loan to the creditors in FY 2013-14. The fact of independent enquiry carried out by the AO under s. 133(6) was also noticed by the CIT(A). The CIT(A) however, declined to grant relief to the assessee mainly in the light of judgement rendered by the Hon’ble Apex Court in the case of PCIT vs NRA Iron & Steel Pvt. Ltd. [2019] 412 ITR 161 (SC). 9.1. It is evident from the record that the assessee, on its part, has filed clinching documentary evidences to support the source of loan received. No legal obligation is prescribed upon the assessee in law to prove the creditworthiness of ‘source of source’ of receipts obtained by the assessee in view of firstly, the prospective insertion to proviso to section 68 of the Act from AY 2013-14 foisting such obligation and secondly, such proviso is limited in its scope and attributable to receipt of share application money, share capital, share premium etc. and does not extend to loan transactions. The legal propositions are derived from the judgement rendered in the case of Mod. Creations Pvt. Ltd. (supra); CIT vs Shiv Dhooti Pearls & Investments Ltd.(supra) and CIT vs Gagandeep Infrastructure P. Ltd. 80 taxmann.com 272 (Bom.). 9.2. It is trite that additions under s. 68 cannot be made merely on the basis of some perception of culpability towards receipt of loan. The money in the instant case has been received from a company whose financial standing has been demonstrated to be fairly good. The defining feature in the instant case is repayment of such loan in the subsequent years which distinguishes the facts of this case vis-a-vis the facts involved in NRI Steel and other judgements quoted by the Revenue authorities. 9.3. The factum of repayment quells the apprehension entertained by the Revenue. The over-riding factum of repayment of loan itself repels any form of disguise on the part of the assessee and dispels the perception of any sordid or extraneous affairs. The clinching evidences towards loan procurement discharge the primary onus which lay upon the assessee under s. 68 of the Act. Besides, the loan itself having been repaid, the assessee does not ultimately stand to gain any spurious benefit from such alleged unexplained cash credit. Such fact justifies the plea of the assessee towards existence of Bonafide in the transactions. In the totality of facts, where the trail for obtaining of loan and repayment thereof is proved and the Passion Realtech Pvt. Ltd. Vs ACIT lender has duly filed its return of income encompassing the transaction carried with the assessee, the action of the Revenue cannot be countenanced in law. 9.4. In the wake of peculiar facts subsisting in the present case, the additions towards unexplained credit under s. 68 and estimated addition under s. 69C is wholly unjustified. 9.5. The Hon’ble Gujarat High Court in the cases of CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj) and CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj) have held that when the Department has accepted the factum of repayment, the additions under Section 68 is not sustainable in law. Similar view has been expressed in CIT Vs. Karaj Singh (2011) 15 Taxmann.com 70 (P&H) &Panna Devi Chowdhary Vs. CIT, 208 ITR 849 (Bom).
In the light of the view expressed on merits in favour of the assessee, we are not inclined to examine the nuances of challenge to the jurisdiction assumed under s. 147 of the Act, approval granted under s. 151 of the Act, invocation of s. 147 instead of s. 153C and absence of DIN on the body of the assessment order.
In conclusion, the order of the CIT(A) is set aside and the additions made by the AO are reversed and cancelled.”
Considering the fact that the Assessee has not only produced cogent documents such as confirmation of accounts, ITR acknowledgment, bank statement and audited financial of the party from which loan has been taken in order to discharge the onus cast upon u/s 68 of the Act but also repaid the loan. Therefore, by following the ratio laid down by the Tribunal in the case of Dazzling constructions (P.) Ltd. Vs. ITO (supra), we delete the additions made by the A.O. which has been confirmed by the Ld. CIT(A). Accordingly, Ground No. 11 and 11.1 of the Assessee are allowed.
In view of above discussions and further considering the facts that assessee has provided all the relevant information to discharge the burden casted upon it u/s 68 of the Act and further looking to the fact that revenue itself in the case of lender company has accepted its existences and passed the assessment order for AY Passion Realtech Pvt. Ltd. Vs ACIT 2017-18 without raising any doubts about its capacity to advance loans including the assessee, we find no reason to hold the loan taken by the assessee from M/s Height Propcon Pvt. Ltd. as unexplained credit u/s 68 of the Act. It is also relevant to state that the entire loan was repaid in subsequent years where no adverse inference was drawn by the revenue and further no action was taken in preceding or subsequent assessment years where the assessee has taken additional loan from the same lender company. Therefore, by respectfully following the decision of the coordinate bench in the case of assessee itself, and considering the facts stated above, we hereby delete the addition of Rs.4.87 crores made by the AO u/s 68 of the Act. Accordingly, grounds of appeal No. 5 to 9 are allowed.
In the result appeal of the assessee is partly allowed. Order pronounced in the open Court on 07.01.2026.