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Judgment
PER VIMAL KUMAR, JM:
The applications for condonation of delay of 15 days in filing appeals and appeals filed by Revenue are against orders dated 31.12.2025 of Ld. Commissioner of Income Tax (Appeals)-30, New Delhi[hereinafter referred to as "the CIT(A)"] under section 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") arising out of assessment orders dated 24.02.2025 and 10.02.2025 of the Ld. Assessing Officer/ACIT, Central Circle-32, Delhi (hereinafter referred to as ‘the Ld. AO’) u/s 147 of the Act for Assessment Years 2021-22 and 2022-23 respectively.
Both the appeals involved similar facts, grounds of appeal and issues. Both the appeals were heard together and are being decided through this order. ITA No. 4109/Del/2026 is taken as lead case.
Brief facts of the case are that, the Assessee filed return of income of Rs. 22,83,230/- under Section 139 of the Act on 13.03.2022. High Risk CRIU/VRV Information was received on basis of search under Section 132 of the Act conduced on 17.11.2021 on Galaxy Group Shri Pradeep Indra Prasad Agrawall and entry providers Shri Deepak Agarwal and Shri Himanshu Verma. Documents seized during the search contains information that the assessee is the beneficiary of accommodation entry to the tune of Rs. 1,00,00,000/- from the entities controlled by above stated entry operators. After getting approval from competent authority under Section 148/151 of the notice under Section 148 of the Act dated 19.03.2024 was issued. The Assessee filed return of income under Section 148 of the Act. Notice under Section 143(2) dated 29.06.2024 was issued. Notice under Section 142(1) of the Act dated 25.10.2024 was issued. Various letters were issued to the Assessee for compliance of notice under Section 142(1) of the Act. The case of the Assessee was centralized with Central Circle-32, Delhi from Circle 19(1), Delhi. On 24.12.2024 a notice under Section 129 of the Act was issued. The Assessee was show caused on 24.01.2025, the Assessee submitted submission dated 28.01.2205. On completion of proceedings Ld. AO vide order dated 24.02.2025 made additions of Rs. 1,00,00,000/-under Section 68 of the Act, Rs. 3,00,00,000/- under Section 69C of the Act and Rs. 5,28,238/- on disallowance under Section 36(1)(iii) of the Act for A.Y 2021-22.
Similarly Ld. AO vide order dated 10.02.2025 made additions of Rs. 5,28,238/- under Section 69A and Rs. 15,847/- under Section 69C of the Act for A.Y 2022-23.
Against assessment orders dated 24.02.2025 and 10.02.2025 of Ld. AO, the Assessee filed separate appeals before Ld. CIT(A) which were partly allowed vide order dated 31.12.2025.
Being aggrieved Revenue filed applications for condonation of delay of 15 days in filing appeal due to heavy workload in time barred scrutiny cases and judicial matters. The explanation does not smack of mala-fides, therefore, delay of 15 days in filing Appeals are condoned.
The grounds of appeal in ITA No. 4109/Del/2026 are as under:
“1.On facts and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by the Assessing Officer under section 68 & disallowance of interest u/s 36(1)(iii) of Rs. 5,28,238/-of the Income-tax Act, 1961, without appreciating that the alleged unsecured loans were routed through shell/non-descript entities- Rs. 1,00,00,000/- from non-descript companies M/s Saivi Finance Pvt. Ltd. by Shri Deepak Agarwal who is established accommodation entry operator as per Investigation Wing findings and past judicial pronouncements.
2.Ld. CIT(A) erred in not considering the fact that since loan taken from above mentioned non descript companies was in form of accommodation entries, accordingly, expenses of interest paid an amount of Rs. 5,28,238/- during year under consideration to above mentioned non-descript company are also not allowable u/s 36(1)(iii) of the Act.
3.The Ld. CIT(A) erred in law and on facts by disregarding conclusive findings of the Investigation Wing, including non-existence of lender entities at declared addresses, absence of any genuine business activity, lack of creditworthiness to advance substantial loans, and confirmations from past search actions (2012 and 2014) wherein Shri Deepak Agarwal was judicially held to be an accommodation entry provider. The CIT(A) thereby misdirected himself by granting relief contrary to overwhelming documentary and field-level evidence.
4.The Ld. CIT(A) erred in holding that repayment of alleged loans prior to issuance of notice u/s 148 constituted evidence of genuineness of transactions, ignoring the settled law that mere routing through banking channels does not establish genuineness, particularly in cases of accommodation entries, where circular routing and repayment are common elements of the modus operandi.
5.The Ld. CIT(A) erred in placing reliance on the decision in Real Innerspring Technologies Pvt. Ltd. vs. ACIT, without appreciating that the factual matrix in that case is distinguishable, genuine business activity was demonstrated therein, no adverse investigation material existed against lenders and the present case involves entities proven to be conduits for laundering unaccounted money. The ratio of the said decision is therefore not applicable to the instant case.
6.The Ld. CIT(A) failed to apply the statutory mandate of Section 68, to furnish the source of repayment, Further, the assessee fail to prove genuineness and creditworthiness of the transactions. When the lenders are paper entities with no financial capacity, the deletion of addition is contrary to law laid down by the Honable Supreme Court in PCIT v. NRA Iron & Steel Pvt. Ltd. (2019).
7.The Ld. CIT(A) erred in deleting the addition of Rs. 3,00,000/-made u/s 69C towards commission paid for procuring accommodation entries without examining the modus operandi, the standard commission rate (3 percent) established in Investigation Wing reports, and the judicial recognition of the same in cases of this group. Deletion of the primary addition u/s 68 being incorrect, deletion of consequential addition u/s 69C is equally unsustainable.
Annexure - A
8.The Ld. CIT(A)s order is perverse, as it fails to address detailed adverse material, overlooks incriminating evidence from search proceedings, accepts lender confirmations at face value, does not apply settled judicial principles governing accommodation entries, and relies solely on repayment without examining the source of funds for repayment, which is a critical statutory requirement.
9.The Ld. CIT(A) shifted the burden of proof from the assessee to the Department contrary to the settled principle that the assessee must conclusively establish the source of credits. The CIT(A) thus erred in granting relief without a proper enquiry into the real source and capacity of the lenders.
10.The present case involves organized tax evasion and accommodation entries, falling squarely within Exception (h) of Para 3.1 of CBDT Circular No. 5/2024. The Ld. CIT(A) failed to appreciate the gravity of the case, requiring strict scrutiny rather than unwarranted relief. The Ld. CIT(A) deleted additions without refuting findings regarding sham entities, addressing lack of creditworthiness, countering the investigative evidence on entry operations, or examining surrounding circumstances as required under section 68.
11.The relief granted is therefore unsustainable in eyes of law.
12.That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
13.The grounds of appeal are without prejudice to each other.
14.That the appellant craves to add, amend, after or modify any grounds of appeal at the time of hearing.”
The Ld. Departmental Representative submitted that Ld. CIT(A) erred in deleting additions made by Ld. AO without appreciating that the alleged unsecured loans were routed through shell/no descript entities i.e. M/s Saivi Finance Pvt. Ltd. by Sh. Deepak Agrawal. Ld. CIT(A) erred that the loan taken from non descript companies was in form of accommodation entries. Expenses of interest paid were not allowable under Section 36(1)(iii) of the Act. Ld. CIT(A) erred in holding repayment of alleged loans prior to issuance of notice under Section 148 of the Act, constituting genuine transaction. Ld. CIT(A) erred in deleting addition of Rs. 3,00,00,000/- under Section 69C of the Act towards commission paid for procuring accommodation entries.
The Ld. Representative for appellant/assessee relied on impugned orders.
Reliance was paled on following orders:-
“(i)Real Innerspring Technologies P. Ltd. vs. ACIT (2025) 174 taxmann.com 1130 (Delhi-Trib)
(ii)ITO vs. Mansarover Exim P. Ltd. (2025) 177 taxmann.com 70 (Delhi-Trib)
(iii)Dazzling Construction P. Ltd. vs. ITO (2025) 172 taxmann.com 860 (Delhi-Trib)”.
From examination of record, in light of aforesaid rival contention, it is crystal clear that Ld. CIT(A) vide order dated 31.12.2025 in Para No. 8 observed as under:
“8.Ground nos.6 to 20 (addition u/s 68/69C/36(1)(iii)):These grounds are inter-related and challenge the addition made by the AO under section 68, 69C and 36(1)(iii) of the Act treating the loan repayment transaction as bogus accommodation entry. Hence, these grounds are taken up together for adjudication.
8.1In this case, the loan of Rs.1,00,00,000/- was originally taken through banking channels from M/s. Saivi Finance Pvt. Ltd., and the entire repayment was also effected through proper banking channels. The ledger account, as reproduced in the assessment order, clearly shows an opening balance, reflecting the continuity of the transaction from prior years. Appellant strongly argued that it repaid the loan before the reassessment notice dated 19.03.2024 whereas AO has held that though appellant has repaid the loan along with interest but it was repaid to non-descript company.
8.2For this purpose relevant and recent judgment of the jurisdictional ITAT in Real Innerspring Technologies Pvt. Ltd. vs. ACIT (dated 27.03.2025). Hon'ble ITAT considered the same question on substantially similar facts (Himanshu Verma / Deepak Agarwal group) and held in favour of the assessee: because the loans had been repaid before the date of issue of notice under section 148. The ratio of same case is directly relevant and binding in the present appeal. A copy of the ITAT order is on file and has been examined. For sake of completeness, operating part of the said order is reproduced here as under:
11.In our considered view, the additions were made only on the basis of alleging that the loan taken by the assessee from the above said two companies are only accommodation entries and assessee's own money was routed through these companies with the help of accommodation entry providers. On careful note, the accommodation entries are taken which will remain in the books of account and they will ultimately written off over the period of time. These loans were normally not repaid. In the given case, it is brought to our notice that the assessee has received the unsecured loan through the banking channel and repaid thru the banking channel as under:-
Name of the Lender Amount of the loan Date on which loan taken Date of interest payment Date of repayment of loan M/s Citzy Infrabeights Pvt. Ltd. 50,00,000/- 09.07.2015 (Pg 38 of the PB) 30.12.2017 (Pg 40 Of the PB) 06.12.2017 30.12.2017 (Pg 39 & 40 of the PB) M/s CEA Consultants Pvt. Ltd 50,00,000/- 18.03.2016
(Pg 81 of the PB)
27.04.2016 28.03.2017
(page 81 of the PB)
17.03.2017 18.03.2017 21.03.2017 (Pg 83 & 34 of the PB) 12.From the above, it is clear that the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan and repaid along with the interest clearly shows that the transactions are genuine. By returning the loan, the assessee has only utilised the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs and all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee.
13.In the result, appeal filed by the assessee is allowed."
Applying the above principle to the facts before me and on a careful scrutiny of the ledger entries and the bank transaction evidence placed on record which show repayment prior to the issuance of notice u/s 148 on 19.03.2024. In this case, repayment was made even before search in Galaxy group. Therefore, I find that the addition cannot survive and is hereby deleted. section 69A the consequential additions made under section 69C and 36(1)(iii) must also be deleted. Grounds are allowed.
From perusal of above observations and discussions it is apparent on record that the loan of Rs. 1,00,00,000/- was originally taken through banking channel from M/s Saivi Finance Pvt. Ltd. The loan was repaid by the Assessee along with interest prior to issuance of notice dated 19.03.2024. In absence of anything to the contrary, the grounds of Appeal of revenue being devoid of merit are untenable. The Grounds of appeal are rejected.
As the facts, grounds and issue in ITA No. 4110/Del/2026 is mutatis mutandis similar to ITA No. 4109/Del/2026 hereinabove, we hold accordingly.
In the result, the applications for condonation of delay of 15 days in filing appeals are allowed and the Appeals filed by the Revenue are dismissed.