ARCHANA AGARWAL,KOLKATA vs. ITO WARD 44(2), KOLKATA

ITA 1888/KOL/2025Status: DisposedITAT Kolkata17 February 2026AY 2016-176 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of ₹70,00,000 as bogus sundry creditors is incorrect and cannot be sustained. The Tribunal noted that the assessee received ₹1,10,00,000 under a joint development agreement, with ₹40,00,000 in FY 2014-15 and ₹70,00,000 in FY 2015-16. Crucially, the MOU was cancelled, and the entire amount was refunded through banking channels in April 2016. The Tribunal relied on the decision of the Hon'ble Gujarat High Court in 'Ambe Tradecorp (P.) Ltd.' ([2022] 145 taxmann.com 27 (Gujarat)), which held that once repayment of a loan is established by documentary evidence, credit entries cannot be viewed in isolation. The Tribunal found that the action of the AO and CIT(A) was incorrect. Consequently, the order of the CIT(A) was set aside, and the AO was directed to delete the addition. Regarding the second issue, the Tribunal held that the repayment of a loan of ₹21,07,456 to M/s Wonder Procon Pvt. Ltd. cannot be treated as bogus. The assessee had provided proof of payment through banking channels, and the loan was treated as genuine in the year it was borrowed. The Tribunal, relying on the reasoning in the first ground, set aside the CIT(A)'s order and directed the AO to delete the addition. Ground No. 3 was dismissed as not pressed, and Ground No. 4 was considered in support of Ground No. 1. Ground No. 5 was general.

What were the facts?

The assessee, Archana Agarwal, filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year (AY) 2016-17. The primary dispute concerns an addition of ₹70,00,000 made by the Assessing Officer (AO) and confirmed by the CIT(A), treating earnest money received under a joint development agreement as sundry creditors. The assessee had entered into a joint development agreement with M/s Combine Infra Ventures Pvt. Ltd. and received ₹1,10,00,000 in aggregate over two financial years. The AO considered the counterparty a shell company and the amount bogus. Subsequently, the MOU was cancelled, and the amount was refunded. The second issue pertains to an addition of ₹21,07,456, representing the repayment of a loan to M/s Wonder Procon Pvt. Ltd., which the AO also treated as bogus.

What were the issues?

1. Whether the addition of ₹70,00,000, representing earnest money received under a joint development agreement, to the assessee's income as bogus sundry creditors is justified, particularly when the agreement was subsequently cancelled and the amount refunded? (Question of law and fact, concerning Section 68 of the Income Tax Act, 1961). - Assessee's contention: The amount was received as earnest money under a joint development agreement, which was later cancelled, and the entire amount was refunded through banking channels. Therefore, it cannot be treated as bogus income. - Revenue's contention: The counterparty was a shell company, and the amount was treated as bogus. (Implicit from AO's action). 2. Whether the addition of ₹21,07,456, representing the repayment of a loan to M/s Wonder Procon Pvt. Ltd., is justified when the loan was treated as genuine in the year of borrowing and the repayment was made through banking channels? (Question of law and fact, concerning Section 68 of the Income Tax Act, 1961). - Assessee's contention: The loan was genuine in the earlier assessment year when borrowed, and its repayment through banking channels cannot be treated as bogus. - Revenue's contention: The company was non-existent, and the transaction was treated as bogus. (Implicit from AO's action).

Which sections of the Income-tax Act were involved?

Section 68,Section 143(2),Section 142(1),Section 131,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Akshay Ringasia, AR
For Respondent: Shri Prabhakar Prakash Ranjan
Hearing: 11.02.2026Pronounced: 17.02.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 09.07.2025 for the AY 2016-17. 2. The issue raised in the first ground of appeal is against the confirmation of addition of #70 lacs by the Id. CIT (A) as made by the Id. AO towards sundry creditors which represented the amount

received as earnest money under the joint development agreement.

2.1.

The facts in brief are that the assessee filed the return of income on 17.10.2016, declaring total income at %12,74,220/-. The case of the assessee was selected for scrutiny unde

The order continues below.

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