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Facts
The assessee received a loan of ₹4,50,000 from M/s. Natasha Enterprises. The Assessing Officer added this amount under Section 68 of the Income Tax Act, alleging it to be an accommodation entry, a decision upheld by the CIT(A). The assessee contended that all necessary details regarding the loan's nature and source were provided, and the loan was subsequently repaid.
Held
The Tribunal held that the assessee successfully discharged the primary onus by providing comprehensive documentary evidence for the identity, genuineness of the transaction, and creditworthiness of the creditor, and that the loan was repaid. The Revenue failed to controvert these facts, and the Tribunal noted that the "source of source" rule under Section 68 was not applicable for the relevant period (prior to 01.04.2013 amendment). Consequently, the addition was deleted.
Key Issues
Whether the addition of a loan amount under Section 68 of the Income Tax Act as an accommodation entry was justified when the assessee proved the identity, genuineness, and creditworthiness of the creditor, and the loan was repaid, especially considering the pre-amendment position of Section 68.
Sections Cited
Section 250 of the Income Tax Act, 1961, Section 143(3) of the Income Tax Act, 1961, Section 147 of the Income Tax Act, 1961, Section 68 of the Income Tax Act, 1961, Section 133(6) of the Income Tax Act, 1961, Section 131 of the Income Tax Act, 1961
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Income Tax Appellate Tribunal, PUNE “SMC” BENCH : PUNE
Before: DR. MANISH BORAD
I.T.A.No.2125/PUN/2025 (Assessment Year 2008-2009) Suketu Rajnikant Jhaveri, ACIT, Central Circle-1, C/o R.C. Reshamwala & vs. Aurangabad. Co., CAs, 323, Varma Chambers, 11 Homji Street, Fort, Mumbai Maharashtra-400 001 PAN : AACPJ 2155 R (Appellant) (Respondent) For Assessee : Shri Kirit Sanghvi (virtual) For Revenue : Shri Eknath Abhang, Addl.CIT (virtual) Date of Hearing : 02.02.2026 Date of Pronouncement : 16.02.2026 ORDER
PER : MANISH BORAD, AM
This appeal at the instance of the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-12, Pune [“CIT(A)”] dated 15/07/2025 passed under section 250 of the Income Tax Act, 1961 (“Act”) which is arising out of assessment order dated 29.01.2016 passed u/s. 143(3) r.w.s. 147 of the Act by the ACIT, Circle-1, Aurangabad, for the Assessment Year (AY) 2008-09.
2 ITA.No.2125/PUN./2025 (Suketu Rajnikant Jhaveri) 2. The sole grievance of the assessee is that Ld.CIT(A) erred in confirming the addition of ₹ 4,50,000/- made by the Assessing Officer (AO) invoking section 68 of the Act for the alleged accommodation entry received from M/s. Nitasha Enterprises.
At the outset, learned counsel for the assessee referring to the submissions made before the lower authorities submitted that assessee filed all necessary details to explain the nature and source of loan of ₹ 4,50,000/- which was taken by the assessee for the purpose of repaying housing loan and the alleged loan has been repaid back after two years.
On the other hand, Ld. Departmental Representative (DR) supported the order of the Ld.CIT(A).
I have heard rival contentions and perused the records placed before me. I notice that assessee received loan of ₹4,50,000/- from M/s. Natasha Enterprises during the year under consideration. The assessee has declared income of ₹17,14,260/- in the return of income for A.Y. 2008-09 filed on 09.08.2008. Ld.AO based on the information about the alleged involvement of M/s. Natasha Enterprises with Shri Praveen Jain and that M/s. Natasha Enterprises is engaged in providing accommodation entries has made the impugned addition for the loan taken by the assessee. I observe that the assessee in order to explain the nature and source of loan taken from M/s. Natasha Enterprises has filed the ledger, 3 ITA.No.2125/PUN./2025 (Suketu Rajnikant Jhaveri) confirmation, complete address and PAN no. of the proprietor of M/s. Natasha Enterprises, bank statement, original loan confirmation, income tax return along with balance sheet and profit & loss account of M/s. Natasha Enterprises. It is also an admitted fact that the assessee has subsequently repaid loan. Now once the assessee has discharged its primary onus casted upon it, as provided the provisions of section 68 of the Act by filing necessary evidence to explain the identity and genuineness of the transactions and creditworthiness of the cash creditor then the burden of proof shifts on the Revenue which is required to find any material controverting the details filed by the assessee. However, in the instant case, there is no observation of the Ld.AO that any information has been called for from M/s. Natasha Enterprises by issuing notice u/s. 133(6) of the Act or issued any summons u/s. 131 of the Act nor any discrepancy has been communicated in the documents furnished by the assessee. The only basis observed by the Ld.AO is the relation between M/s. Natasha Enterprises and Shri Praveen Jain. However, prior to amendment made in section 68 effective from 01.04.2013, assessee was required to file the details to explain the nature and source of sum received by it and not the source of source to the satisfaction of the Assessing Officer.
Under these given facts and circumstances and also considering the income of ₹ 17,14,260/- offered in ITR and the 4 ITA.No.2125/PUN./2025 (Suketu Rajnikant Jhaveri) alleged loan having been repaid subsequently, I am of the considered view that since the assessee has successfully explained the nature and source of alleged sum with sufficient documentary evidence, the Ld.AO grossly erred in invoking section 68 of the Act. Accordingly, impugned finding is reversed and addition made u/s. 68 of the Act at ₹ 4,50,000/- is deleted. Effective grounds of appeal raised by the assessee are allowed.
In the result, appeal of the Assessee is allowed.