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Judgment
PER MANISH AGARWAL, A.M.:
The captioned appeals are filed by the assessee against the common order dated 10.09.2025 passed by Ld. Commissioner of Income Tax (A)-3, Noida [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of separate assessment orders, all dated 29.03.2022 passed u/s 143(3) r.w.s. 147 of the Act pertaining to Assessment Years 2014-15 to 2016-17 respectively.
Before us, both the parties have fairly stated that the facts involved in all these three appeals are common, therefore, they are taken together and decided by a common order.
Briefly stated the facts of the case are that the assessee is an individual and having income from Salary, house property and other sources. The return of income was filed on 30.07.2014, declaring total income of INR 7,66,960/- after claiming deduction under Chapter VI-A. The case of the assessee was re-that the assessee has taken loans from Two companies which were managed and controlled by Shri Mukesh Banka and therefore, the said loans were alleged as accommodation entries. Thereafter, notice u/s 148 was issued on 24.03.2021, in response to which return of income was filed on 12.04.2021, declaring same income as was declared in the return of income filed u/s 139 of the Act. During the course of assessment proceedings, the AO asked the assessee to prove the genuineness of the transactions and identity and creditworthiness of the lender companies. In response, the assessee filed confirmed copies of the accounts, their bank statements, ITRs of both the companies however, the AO observed that the genuineness of the transaction was not proved nor the creditworthiness of the lenders was established and therefore, loans taken of INR 1,45,00,256/-from M/s. Pawanshiv Construction Ltd. (INR 70,00,084/-) and from M/s. Sankat Sathi Infrastructure Pvt. Ltd. (INR 75,00,172/-) was held as unexplained credits and addition was made u/s 68 of the Act. By making similar allegations, the loans taken in AY 2015-16 of INR 2,10,00,336/- from M/s Outlook Highrise Pvt. Ltd. (INR 1,00,00,168/-); from M/s Prem Kunj Infrastructure Pvt. Ltd. (INR 50,00,056/-) and from M/s Tuberrose Projects Pvt. Ltd. (INR 60,00,112/-) were held as unexplained credit u/s 68 of the Act. By making similar allegations, additions of INR 83,00,180/- were made u/s 68 of the Act in AY 2016-17 for the loans taken from M/s. Complete Softech Pvt. Ltd. (INR 50,00,120/-) and from M/s. Rangoli Plaza Pvt. Ltd. (INR 33,00,060/-). It is observed that except the name of the companies and figures of the loans, all the allegations made by the AO in while treating the loans taken from different companies are the same in all the three assessment years without even any major changes the words used therefore all the three appeals are decided as under :
Aggrieved by the assessment orders for all the three assessment years, assessee preferred separate appeals before the ld. CIT(A) who vide impugned order dated 10.09.2025, dismissed the appeals filed by the assessee for all the three assessment years by confirming the allegations made by the AO.
Against the common order of ld. CIT(A), assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memos for respective assessment years.
With respect to Grounds of appeal Nos. 1 to 14, the assessee has challenged the re-opening of the assessment on the ground of limitation, change of opinion etc. and in the remaining Grounds of appeal Nos. 15 to 20, assessee has challenged the additions made.
Before us, ld.AR for the assessee submits that the assessee has taken unsecured loans from two companies i.e. M/s. Pawanshiv Construction Pvt. Ltd. & M/s. Sankat Sathi Infrastructure Pvt. Ltd. and filed the necessary copy of confirmations, their ITRs and bank statements. The relevant copy of the same are placed at pages 217 to 260 of the Paper Book. Ld. AR submits that both the companies are having sufficient net worth and sufficient funds were available in the bank accounts when the funds were transferred to the assessee. Ld.AR further drew our attention to pages 244 to 245 of the Paper Book wherein in the list of loans and advances appended in the Balance Sheet of M/s. Sankat Sathi Infrastructure Pvt. Ltd., name of the assessee is appearing. Likewise at page 231, loans given to assessee is appearing under the head “loans and advances” in the Balance Sheet of M/s. Pawanshiv Construction Pvt. Ltd. The Ld. AR submits that these loans were repaid subsequently through banking channels and submits that by filing their ITRs and Balance Sheets, the assessee has proved the identity. In order to establish the creditworthiness, as per the Balance Sheet of M/s. Pawanshiv Construction Pvt. Ltd., balance of Share capital and Reserves was of INR 9.85 crores and in the case of M/s. Sankat Sathi Infrastructure Pvt. Ltd. the corresponding figure was of INR 10.28 crores. Further, the payments were made through banking channels, thus the genuineness of transactions cannot be doubted. Ld. AR placed reliance on the judgement of Hon’ble Kolkata High Court in the case of CIT vs M/s Dataware Pvt.Ltd reported in [2011] (9) TMI 175 (Cal). Ld.AR submits that merely for the reason that Shri Mukesh Banka in his statement recorded during the course of search, admitted that he had provided accommodation entries of unsecured loans to various persons, addition cannot be made. As per the ld. AR nowhere in the statement, Revenue has pointed out that Shri Mukesh Banka has stated the name of the assessee as one of the beneficiary of accommodation entries of unsecured loans through him. He further submits that Shri Mukesh Banka has retracted from such statement in terms of two separate affidavits dt. 01.06.2018 & 23.07.2018 and thus, such statements cannot be relied upon for holding that the companies from which the assessee has taken loans were dummy entities. Ld. AR submits that assessee by filing every precise detail of lender companies has discharged the burden casted upon it u/s 68 of the Act and the AO has not made any independent inquiry or investigation during the course of assessment proceedings by issue summons to the lender companies therefore, the entire addition made be deleted. For this, he placed reliance on the judgement of Hon’ble Apex Court in the case of CIT vs Orissa Corporation Pvt.Ltd. reported in (1986) 159 ITR 78 (SC).
In the last, it is submitted that the assessee has repaid all the loans and no doubts were raised in the year of repayments of these loans. He further submits that evidences of similar nature in respect of the loans taken for other two years were also submitted where by making identical allegations additions were made. He thus, requested that the additions made u/s 68 of the Act in all the three assessment years be deleted.
On the other hand, ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that assessee has taken loans from the companies which are found to be the entities managed and controlled by Shri Mukesh Banka which fact was admitted by him in the statements recorded during the course of search carried out that he was engaged in providing accommodation entries of unsecured loans through various companies. AS per ld. CIT DR, all the lender companies from who the assessee has taken loans in all the three years were also managed and controlled by him. Ld. DR further submits that ld. CIT(A) has very elaborately discussed the modus operandi and the information gathered and other evidences regarding the creditworthiness of the lender companies and thus, confirmed the additions. He thus, placed heavy reliance on the order of ld. CIT(A) and requested for the confirmation of the same.
Heard the contentions of both the parties at length and perused the material available on record. At the outset, it is observed that both the lower authorities have placed heavy reliance on the statement of Shri Mukesh Banka given during the course of search wherein he had admitted that the Banka Group was involved in providing accommodation entries to various beneficiaries through the companies managed and controlled by him and loan taken by the assessee were out of such companies, therefore, these companies were held as Shell entities by the lower authorities. It is further observed that ld. CIT(A) at page 30 of the order, has made a chart with respect to the source in the hands of the lender companies. However, ld. CIT(A) has not considered the Reserves and Surpluses and only paid up share capital of these companies were taken into consideration. It is further observed that out of the Seven companies from whom assessee has taken loans in all the three assessment years, ld. CIT(A) has observed that only two lender companies were continued to be in existence and the remaining Five lender companies were struck off after 2018. Thus, ld. CIT(A) has concluded that these companies are Shell companies and have no creditworthiness to give the loans to the assessee. While observing so, ld. CIT(A) has failed to appreciate the facts that though some of the lender companies were struck off by the Registrar of Companies however, the facts remained that they were active atleast upto 31.03.2018 and the loans taken by the assessee in FY 2013-14 to 2015-16 and they were repaid much prior to 31.03.2018. It is also a matter of fact that though Shri Mukesh Banka has admitted in his statement recorded during the course of search that he was providing accommodation entries of loans however, vide two affidavits dated 01.06.2018 and 23.07.2018, had made retraction from such statements and such retracted statements has been made the sole basis for making the additions in the hands of assessee for all the three assessment years. The Co-ordinate Jaipur Bench of Tribunal in the case of ITO vs Kedia Builders and Colonizers Pvt. Ltd. in ITA Nos.872 to 875 and 901/Jpr/2024 vide order dt. 11.03.2025 has discussed these affidavits and treated the loans taken from the companies alleged as managed and controlled by Shri Banka as genuine, the copy of the order is placed at PB pages 803-980 of Paper Book. Thus, such statements cannot be relied upon more particularly, when the persons who deposed such statements had change his stand time and again. The Hon’ble Rajasthan High Court in the case of CIT Vs A.L. Lalpuria Construction (P) Ltd reported in 215 taxmann 12 (Rajasthan HC) has held that such retracted statements cannot be relied upon for making the additions.
Now coming to the issue of the genuineness of the transactions and identity and creditworthiness of the lender companies. As observed above, the assessee in order to discharge the burden casted upon it u/s 68 of the Act of proving the identity and creditworthiness of the lender companies and genuineness of the transactions had filed the following documents of the lender companies:-
[i] copy of their ITRs;
[ii] complete financial statements of the lender companies wherein name of the assessee was appearing in the list of loans and advances given;
[iii] copy of confirmations evidencing receipt as well as repayment;
[iv] copy of their bank statements in support of the availability of the funds.
By filing the aforesaid documents, the assessee has discharged the burden casted upon u/s 68 of the Act and as observed from the assessment order, the AO has made no efforts of making independent verification of the details so filed by the assessee by issuing summons u/s 131 or 133(6) of the Act to the lender companies and simply proceeded to make the addition on assumptions and presumptions and merely by placing heavy reliance on the information supplied by the Investigation Wing gathered during the course of search in the case of Shri Mukesh Banka. Failure to make proper investigation before reaching to the conclusions of loans taken as unexplained is a fatal error and cannot be cured later. The Hon’ble Supreme Court in the case of Orissa Corporation Ltd. (supra) has held that “when the assessee has provided complete details of the creditors, AO should have issued summons u/s 133(6) of the Act if he has in doubts about the creditors”. As observed in the instant case, no such action has been taken and therefore, without bringing on record any contrary material to controvert the details filed by the assessee. The loans taken from the parties cannot be doubted. Coming to the creditworthiness of the lender companies, it is observed from the financial statements of all the companies that they are having sufficient creditworthiness which is tabulated as under:-
S. No. Name of Company Amount (in INR) PB No.
| 1. | M/s Pawan Shiv Construction Pvt. Ltd. | 9,85,97139.00 | 222 of AY 14-15 | ||||||||||||
| 2. | M/s Sankatsathi Infrastructure Ltd. | 10,28,13,164.00 | 236 of AY 14-15 | ||||||||||||
| 3. | M/s Outlook High Rise Pvt. Ltd. | 15,90,61,788.00 | 293 of AY 15-16 | ||||||||||||
| 4. | M/s Prem Kunj Infrastructure Pvt. Ltd. | 15,01,95,780.00 | 259 of AY 15-16 | ||||||||||||
| 5. | M/s Tuberose Projects Pvt. Ltd. | 9,92,97,825.00 | 276 of AY 15-16 | ||||||||||||
| 6. | M/s Complete Softech Pvt. Ltd. | 21,06,59,560.00 | 263 of AY 16-17 | ||||||||||||
| 7. | M/s Rangoli Plaza Pvt. Ltd. | 25,33,13,500.00 | 284 of AY 16-17 | ||||||||||||
Further, from the perusal of the bank statements of the lender companies placed before us, it is observed that they were having sufficient funds when the loans were advanced to the assessee thus, the assessee has been able to demonstrate that the lender companies are having sufficient creditworthiness to advance the loans.
It is also a matter of facts that all the loans have been repaid during the year itself or in subsequent assessment years and no doubts were raised at the time of repayment. Had there been any allegation of the AO that the loans taken are bogus, the corresponding repayment should have been doubted which has not been done in the instant case. The Hon’ble Gujarat High Court in the case of PCIT Vs Ojas Tarmake Pvt Ltd reported in 156 Taxmann.com 75 has observed as under:
“Where appellant showed unsecured loans received during relevant assessment year and AO made addition on ground that appellant failed to discharge onus of liability as laid down under section 68, since amount of loan received by appellant was returned to loan party during year itself and all transactions were carried out through banking channels, impugned addition was to be deleted.”
Further if the allegation that the loans taken are accommodation entries is accepted, why the same were repaid that too within one or two years which fact has not been controverted by the revenue.
On the issue of discharging of onus, the Hon'ble Delhi High court in the case of Mod. Creations (P.) Ltd. v. ITO reported in [2013] 354 ITR 282, has held as under:
"It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors.”
It was further observed by the Hon’ble Court as under:
“14.With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the ASSESSING OFFICER that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala Ride. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.0. had any doubt about the material placed on record, which was largely bank statements or the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Etd (20092-229-178.268 (Delhi) and CIT v. Lovely Exports (P.) Ltd. 2006) 215 CTR 495 (SC).*
The Hon’ble Allahabad High Court in the case of Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd. reported in [2024] 162 taxmann.com 792 (Allahabad) held as under:-
“INCOME TAX : Where assessee had received unsecured interest bearing loans from three corporate entities and had furnished necessary acknowledgement of return, balance sheet, profit and loss account, etc., to prove identity, creditworthiness and genuineness of transaction of unsecured loan taken by it, addition under section 68 was not warranted.”
Similarly in the case of Deputy Commissioner of Income-tax v. Paswara Papers Ltd. reported in [2024] 159 taxmann.com 604 (Allahabad), the Hon’ble Court has held as under:
“INCOME TAX : Where assessee received loan from various creditors who sold their old jewellery and gave loan to assessee out of sale consideration, since assessee had disclosed name of jewellers to whom jewellery was sold and also established mode of payment through banking channel, and moreover existence of deposits made to assessee by creditors was not in dispute, impugned addition under section 68 with respect to loan could not be sustained.”
The Hon’ble Jurisdictional High Court in the case of CIT v. Kamdhenu Steel and Alloys Ltd. reported in [2012] 361 ITR 220 (Delhi) has held as under:
28.“The contention of the assessee has been found to be convincing by the Tribunal and the learned Tribunal has allowed the appeal thereby deleting the addition. The Revenue is in appeal before us. The entire case of the Revenue based on the plea that as per the report, the investing companies were not found at the given addresses and on this basis, argument is raised that the companies are non-existing and the transactions were bogus and not genuine. Here, the case of the Revenue is even weaker than the cases discussed above. It is not even the case that the Directorate of Income Tax (Investigation) has found Mr. Mahesh Garg in such racket of floating bogus companies. We state at the cost of repetition that after the assessee had furnished the evidence, initial onus had been discharged and it was for the AO to make further necessary inquiries which are completely missing. 29. We are, thus, of the view that no question of law much less substantial question of law arises. This appeal is dismissed.”
The SLP filed by the revenue against the aforesaid of hon’ble Delhi High Court was dismissed by the Hon’ble Supreme Court in SLP (CC) no. 15640 of 2012.
The Hon’ble Jurisdictional High Court in the case of Pr. CIT-5 v. Laxman Industrial Resources Ltd. reported in [2017] 397 ITR 106 (Delhi) has held as under:
“This Court notices that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. It was not a case where the share applicants are merely provided confirmation letters. They had provided their particulars, PAN details, assessment particulars, mode of payment for share application money, i.e. through banks, bank statements, cheque numbers in question, copies of minutes of resolutions authorizing the applications, copies of balance sheets, profit and loss accounts for the year under consideration and even bank statements showing the source of payments made by the companies to the assessee as well as their master debt with ROC particulars. The AO strangely failed to conduct any scrutiny of documents and rested content by placing reliance merely on a report of the Investigation Wing. This reveals spectacular disregard to an AO's duties in the remand proceedings which the Revenue seeks to inflict upon the assessee in this case. No substantial question of law arises. The appeal is dismissed.”
The Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax-12, Delhi vs. Jagmag Builders in ITA No. 325/2024 has held as under:
2.“The issue itself pertains to additions under Sections 68 and 37 of the Income Tax Act, 1961 [‘Act’] which were made by the Assessing Officer [‘AO’] on account of unexplained unsecured loans and disallowance of interest expenses. We note that the Tribunal while affirming the conclusions which were arrived at by Commissioner of Income Tax (Appeals) has observed as follows:-
“6.From the evidences furnished by the assessee before the departmental authorities, it is established that the entire loan, which is subject matter of addition, as unexplained cash credit has been repaid either in the year under consideration or subsequent assessment years. The entire transaction relating to availing of and repayment of loan has been done through banking channel. All details relating to loan availed and repayments made have been furnished before the departmental authorities, the details of which have been produced at pages 24 to 29 of the order of learned First Appellate Authority. It is also a fact on record that assessee has furnished all supporting evidences not only to prove the identity of the lenders but even creditworthiness as well as genuineness of the transaction by furnishing their bank statements, income-tax return copy, confirmations etc. Thus, it is evident, assessee has discharged its onus of proving the identity and creditworthiness of the creditors as well as genuineness of the loan transactions. Therefore, in our considered opinion, learned First Appellate Authority was justified in deleting the addition of Rs.2,67,05,959 made under Section 68 of the Act. Since, the addition made under Section 68 of the Act has been deleted, as a natural corollary, the disallowance of interest paid on such loan also has to be deleted. Accordingly, we do so. Grounds are dismissed.”
The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd. etc. in ITA. No.71 of 2015 dated 12th August, 2015 held as under:
"The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. lt was observed by the ITAT that the Assessing Officer had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon’ble High court.”
The Hon'ble Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd reported in [2022]134 Taxmann.com 256 (Delhi) while allowing the appeal in favour of the assessee towards the additions made u/s 68 of the Act has held as under:
“Section 68 of the Income-tax Act, 1961 – Cash credits (Share capital money) – Assessment years 2012-13 to 2017-18 – Assessee-company received share capital and share premium money from several investors – Assessing Officer made addition in respect of same on account of unaccounted income under section 68 on basis of recorded statement of managing director of assessee-company – Whether since assessee placed sufficient documentary evidence to establish that money which assessee had paid to investors was routed back to it in form of share capital/share premium and identity, creditworthiness and genuineness of investors was proved, there was no justification to make addition under section 68 – Held, yes [Paras 11.4, 11.5 and 14.4] [In favour of assessee]”
An amendment is made vide Finance Act, 2022 wherein second proviso to section 68 is added, so as to provide that the nature and source of any sum, whether in the form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider. However, this additional onus of proof of satisfactorily explaining the source in the hands of the creditor, would not apply if the creditor is a well-regulated entity, i.e., it is a Venture Capital Fund, Venture Capital Company registered with SEBI. This amendment has taken effect from 1st April, 2023 and accordingly applies in relation to the assessment year 2023-24 and subsequent assessment years. The assessment years before us are AY 2014-15 to 2016-17 and thus this amendment is not applicable and as has been held by the Hon’ble Delhi High Court in the case of Vrindavan farms (supra), when the assessee had filed all the details, the burden of proving the genuineness and creditworthiness of the creditor stood discharged by the assessee.
In view of the overall discussions made herein above and considering the facts and material available on record, we hereby, delete the additions made u/s 68 of the Act in all the three assessee years. Accordingly, Grounds of appeal Nos. 15 to 20 of the assessee are allowed.
Since we have allowed the assessee’s Grounds of appeal taken on merit and deleted the addition, the legal Grounds of appeal are not adjudicated and left open.
Registry is directed to place the copy of order in the respective files.
In the result, all three captioned appeals of the assessee in ITA Nos. 7835 to 7837/Del/2025 for Assessment Years 2014-15 to 2016-17 respectively, are allowed.