S K SARAWAGI & COMPANY (P) LTD.,,KOLKATA vs. DCIT, CIRCLE 5(1),, KOLKATA
Facts
The assessee, engaged in mining, received an unsecured loan of ₹1 crore from M/s Harish Tie Up Ltd. Information from DIT (investigation) suggested the loan provider was an "entry operator." The assessee furnished all details and confirmations of the loan, including PAN and bank statements, and subsequently repaid the loan with interest after TDS. The Assessing Officer treated this loan as unexplained cash credit under Section 68, which the CIT(A) confirmed, deeming the lender a shell company.
Held
The Tribunal noted that the assessee provided all necessary documentary evidence for the loan and had repaid it with interest after TDS. Citing various High Court judgments, the Tribunal held that if the assessee establishes the identity, creditworthiness, and genuineness of the transaction, and the loan is repaid, no addition under Section 68 can be made, especially when the AO failed to conduct proper inquiries into the provided evidence. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.
Key Issues
Whether an unsecured loan, for which identity, creditworthiness, and genuineness were established and which was subsequently repaid, can be added as unexplained cash credit under Section 68 of the Income Tax Act.
Sections Cited
Section 68 of the Income-tax Act, 1961, Section 143(3) of the Income-tax Act, 1961, Section 133(6) of the Income-tax Act
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals)-4, Chennai, (hereinafter referred to as the “Ld. CIT(A)”] dated 30.10.2025 for the AY 2011-12.
The issue raised in ground no.1 is against the order of ld. CIT (A) confirming the addition of ₹1.00 crores as made by the ld. AO u/s 68 of the Act on account of unsecured loan by treating the same as unexplained cash credit.
2.1. The facts in brief are that the assessee filed the return of income on 19.09.2011, declaring total income at ₹6,31,61,245/-. The assessee is engaged in the business of mining of Manganese Ore, Iron
2.2. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO on the ground that the loan was received from a shell company and therefore, rightly added by the ld. AO.
2.3. After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the assessee raised an unsecured loan of ₹1.00 crores from M/s Harish tie Up Ltd. According to the ld. AO, the said entity is a shell entity operated by Shri Anand Sharma an entry provider. We note that the assessee during the assessment proceeding, provided all the details of the said loan
"3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the
3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions. 3.2 The appellate authority observed that, "In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information." 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 Durga Prasad More (82) ITR 540 and also in Sumati Dayal (214) ITR 801, 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 transactions were in 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. 5. As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the
The issue raised in ground no.2 is consequential to ground no.1 and is accordingly, allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 26.02.2026.
Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.02.2026 Sudip Sarkar, Sr.PS
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata
