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Judgment
PER S. RIFAUR RAHMAN, AM
This appeal is filed by the revenue against the order of ld. Commissioner of Income Tax (Appeals), New Delhi [“ld. CIT(A)”, for short] dated 16.06.2025 for Assessment Year 2018-19. The assessee has also filed cross objecƟons in the aforesaid assessment year.
Since the issues are common, therefore, the same are heard together and being disposed off by this common order.
The Revenue has raised following grounds of appeal:
(i)That under the facts and circumstances of the case the id. CIT (A) erred in deleƟng the addiƟon on account of cash credit amounƟng to Rs. 1,00,00,000/- u/s 68 of the 1. T. Act.
(ii)That under the facts and circumstances of the case the ld. CIT (A) erred in deleƟng the addiƟon on account of interest expenses amounƟng to Rs. 10,34.905/- u/s 68 of the I. T. Act.
(iii)That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the Ɵme of hearing of the appeal.”
Brief facts of the case are, assessee is engaged in the business of manufacturing of printed circuit board (PCBs). The assessment was completed under faceless assessment scheme. The AO made following addiƟons in the assessment, which are as under:
| Amount | Section | Issue / Nature of Addition |
60,00,000 6,20,219 | 68 No Section | By adding unsecured Loan from M/s Red Bricks Impex Pvt. Ltd., for the reasons mentioned in the assessment order. By disallowing interest on above Loan |
60,00,000 6,25,644/- | 68 No Section | By adding unsecured loan from M/s. Rits Global Pvt. Ltd. for the reasons mentioned in assessment order and by assuming the receipt of loan at Rs. 60,00,000/- against correctly as Rs. 30,00,000/-only. By disallowing interest on above Loan |
40,00,000 4,09,261 | 68 No Section | By adding unsecured loan from M/s. Anni Shoes Pvt. Ltd., for the reasons mentioned in assessment order. By disallowing interest on above Loan By disallowing interest on above Loan |
| 1,76,55,124 | Total addition |
Aggrieved with the above order, the assessee filed an appeal before Ld CIT(A)-29, New Delhi and filed detailed submissions, for the sake of brevity, it is reproduced below:
“6.4The appellant submiƩed detailed submission. Summary of wriƩen submissions filed by the appellant and the documents placed on record is as under: -
i.The loan of Rs. 1,00,00,000/- from above menƟoned two enƟƟes was received through account payee cheque/RTGS.
ii.ConfirmaƟons, PAN, ITRs, bank statements and audited financials of the lenders were furnished and form part of assessment records.
iii.The appellant had repaid the enƟre loan in the subsequent year through banking channels and paid interest thereon, which further evidences the genuineness of the transacƟon. The details of repayment are given in table above.
iv.The AO has not demonstrated any specific cash deposit linked to the appellant or lender to support the allegaƟon of accommodaƟon entry.
v.Reliance was placed by AO on statements of third parƟes which were either vague, obtained under duress, or unrelated to the appellant. No opportunity for cross-examinaƟon was afforded, violaƟng principles of natural jusƟce.”
AŌer considering the above submissions and material available on record, Ld. CIT(A) allowed the claim of the assessee by observing as under:
“6.5I have carefully considered the facts of the case, the contenƟons of the appellant, the findings recorded by the AO, and the judicial precedents relied upon. The central issue is whether the loan of Rs. 1,00,00,000/-received by the appellant from above discussed to lenders can be treated as unexplained u/s 68 of the Act, despite the fact that the loan was subsequently repaid through banking channels and was supported by confirmaƟons, ITRs, financials, and other documentary evidences.
6.6It is now a seƩled posiƟon of law that for making an addiƟon under secƟon 68, the assessee is required to prove: (i) idenƟty of the creditor, (ii) creditworthiness of the creditor, and (iii) genuineness of the transacƟon. Once these three pillars are duly established, the burden shiŌs to the revenue to bring contrary evidence to disprove the assessee's claim. In the present case, the appellant has discharged the primary onus by furnishing PAN details, income-tax returns, financial statements, confirmaƟon leƩers, bank statements. Furthermore, the loan was repaid in full during the year itself, thereby negaƟng the suspicion of any layering or retenƟon of unexplained cash.
6.7It is perƟnent to refer here to the judgment of the Hon'ble Gujarat High Court in the case of CIT v. Rohini Builders [2002] 256 ITR 360 (Guj), wherein it was held that where the loans are received by account payee cheque, confirmaƟons are filed, and repayments are also made, no addiƟon under secƟon 68 can be sustained, even if the creditworthiness of the lender is not conclusively established. The court emphasized that mere non-enquiry into the affairs of the creditor cannot be the sole basis for treaƟng the loan as unexplained.
6.11In the present case, the appellant has gone beyond the ordinary threshold. Not only has the idenƟty and creditworthiness of the lender been substanƟated through financials, tax returns and confirmaƟons, but also the transacƟon has been conclusively proved by way of repayment of loan with interest through banking channels. This fact has not been denied or disputed by the AO in the assessment order.
6.15.To conclude, I find that the appellant has conclusively proved all three ingredients required u/s 68. The idenƟty and tax status of the lender are not in doubt. The loan was received and repaid through proper banking channels. The AO has not brought any credible evidence to establish that the said loan was an accommodaƟon entry. The addiƟon is based on general observaƟons without any direct linkage to the appellant's transacƟon.
6.16In view of the above facts, evidences on record, and judicial precedents cited, I am of the considered opinion that the addiƟon of Rs. 1,00,00,000/- made u/s 68 of the Act is unsustainable in law and on facts. The same is accordingly directed to be deleted. This part of grounds of appeal are allowed.”
Aggrieved with the above order, revenue is in appeal before us and assessee is in CO. However, at the Ɵme of hearing, Ld. AR submiƩed that assessee has a good case on merit and hence not pressed the CO filed by the assessee. We shall deal only with the revenue appeal.
At the Ɵme of hearing, Ld. DR brought to our noƟce the relevant facts on record and submiƩed that the AO had made proper enquiries and passed a speaking order. Accordingly, he relied on the detailed findings of AO.
On the other hand, Ld. AR submiƩed as under:
“BRIEF CONTENTIONS (IN BULLET POINTS) BY DEPTT.
Addition of Rs.1,00,00,000/-160 1.40 1.] U/s,68 for 02 unsecured loans deleted by CIT(A)
A.O. added Rs.60 Lacs for unsecured loan from Rits Global Pvt. Ltd. - and Rs.40 Lacs--Do-- from Anni Shoes Pvt. Ltd.
04 Reasons by A.O. for addition
1st Reason
Difference in the amts, as per books of assessee and books of parties as under:
Table 1 - Amt. as per Assessee's books viz a viz Parties books
As per Assessee’s books (Incorrect Due To Posting Error) As per Parties books (Correct) Rits Global Pvt. Ltd. 60,00,000 30,00,000 Anni Shoes Pvt. Ltd. 40,00,000 70,00,000 Total 1,00,00,000 1,00,00,000 2nd Reason
-De-activated DIN with ROC of Sh. Dinesh Singh [Commun Director of both Cos.]
3rd Reason
-Sh. Dinesh Singh [Common Director of both Cos.] not appeared in V.C. hearing.
4th Reason
Although same intt. amt, entered in the books of both the Cos., however in books of parties, in case of Rits..., intt. calculates @22% while in the case of Anni... it calculates @5.5% while in the books of assessee, in both cases it calculates 11%. CIT(A) after appreciating the facts and the posting error, deleted the addition.
BRIEF CONTENTIONS
Clarification for 1" Reason
-Loans from both the parties are to be examined collectively.
-Both the Cos. belongs to the same group [same management].
-Correctly the following loan amts. were taken from both the Cos. by assessee:-
Table 2-Correctly date wise Loan taken by assessee from Rits...
(40-Bank statement of Rits...)
Date Amt. 20.04.17 30,00,000 Table-3-Correctly date wise Loan taken by assessee from Anni...
Date Amt. 20.04.17 30,00,000 26.04.17 20,00,000 27.04.17 20,00,000 Total 70,00,000 - Thus in the books of Rits... and Anni... the amt. given as loan to assessee correctly appears at Rs.30 Lacs and Rs.70 Lacs.
- However it so happened that due to posting error of accounting, loan of Rs.30 Lacs recd. on 20.04.17 from Anni... was wrongly credited in the books of assessee in ledger A/c of Rits...
(38-Ledger A/c of Rits... in 'A' books)
(39-Ledger A/c of 'A' in books of Rits...) - On account of this wrong posting, in the books of assessee, loan from Rits... appeared at Rs.60 Lacs [30 L30 L.) and the loan amt. in the ledger of Anni... appeared at Rs.40 Lacs [20 L+20 L).
(13-Ledger A/c of Anni... in 'A' books) (14-Ledger A/c of 'A' in books of Anni...) - There is a definite bonafide reason for this posting error on the part of accountant as under:-
One RTGS and one NEFT of Rs.30 Lacs each Dtd.20.04.17 were recd. by assessee on the same date.
(10-12-Bank Stmt. of 'A'-R/Pg.-12) The accountant noticed these credits in the bank statement of the assessee from where he posted these receipts in his ledger A/c. In the bank statement, these credits appeared as under: -Table 4-Narration in bank Statement of "A"
Date Narration Credit Amount 20.04.17 RTGS RITS GLOBAL PVT LTD VIJBR 52 30,00,000 20.04.17 NEFT- VINTEK 30,00,000 Hence the accountant thought that both the amts. have been recd. from M/s Rits, therefore, he posted both Rs.30 Lacs receipts in the ledger A/c of M/s Rits. However, one entry of Rs. 30 Lac was received from M/s Anni. Hence, due to above bonafide mistaken understanding of the accountant, the said posting error took place which resultant into increase in the balance in the A/c of M/s Rits by Rs.30 Lacs and simultaneous reduction of Rs.30 Lacs in the ledger A/c of M/s Anni - In any case, the total loan from both the entities was only Rs.1 Cr. as per books of assessee as well as books of both parties. - Further, when this posting error was noticed during asstt., hence, corrected in books of "A' on 01.04.20 [A.V.21-22], wherein the same stands accepted U/s. 143(1).
(26)(52) - Further, complete loan stood returned back partly in A.Y.21-22 and partlyinA.Y.22-
23.(26-32) (56-58) - Complete loan is subjected to interest and subjected to TDS as per law. - Following docs. completely proves above facts, wherein no discrepancy could be found:-
Letter to A.O. Dtd. 01.07.2021 (59-66) Letter to A.O. Dtd. 19.07.2021 (67-74) Letter to A.O. Dtd. 11.08.2021 (75-78) Anni Shoes Pvt. Ltd
Ledger A/c of Anni Shoes Pvt. Ltd. in books of Assessee (13) Confirmed ledger A/c of assessee in the books of Anni (14) Relevant bank statement of assessee (10-12) Relevant bank statement of Anni... (15) Balance sheet of M/s Anni Shoes Pvt. Ltd-A.Y.18-19 (16-25) (showing the loan to assessee at Rs.70 Lacs & interest) Repayment of Loan:-
Ledger A/c of Anni Shoes... in books of assessee-A.Y.21-22 (26) Confirmation of A/c from Anni Shoes... -A.Y.21-22 (27) Bank statement of Assessee (Showing repayment to Anni) (28-32) Rits Global Pvt. Ltd
Ledger A/c of Rits Global Pvt. Ltd.in books of Assessee (38) Confirmed ledger A/c of assessee in the books of Rits Global (27) Relevant bank statement of assessee (28-32) Relevant bank statement of Rits Global Pvt. Ltd. (40) Balance sheet of M/s Rits Global Pvt. Ltd-A.Y.18-19 (41-51) (showing the loan to assessee at Rs.30 Lacs & interest) Repayment of Loan -
Ledger A/c of M/s Rits Global in books of assessee - A.Y.21-22 (52) Ledger A/c of M/s Rits Global in books of assessee - A.Y.22-23 (53) Confirmation of A/c from M/s Rits Global A.Y 21-22 & 22-23 (54-55) Bank statement of Assessee (Showing repayment to Rits) (56-58)
Further, difference and the issue were only of Rs.30 Lacs and not of Rs.1 Cr at any stage.”
Considered the rival submissions and material placed on record. We observed that the assessee had taken unsecured loans from its sister concerns viz Ritz Global Pvt Ltd and Anni Shoes P Ltd to the extent of Rs. One crore. The AO observed during assessment proceedings that the confirmation submitted by the assessee had mismatches and also paid the interest to the above loan based on the outstanding in the books of the assessee and also he observed that the common director DIN was deactivated by the ROC and the director had not present himself during ‘VC’ hearing.
After considering the facts available on record, we observed that the assessee had taken loan from the above sister concern and due to clerical mistake in the recording the bank entry in the books of the assessee, the accountant had wrongly posted the similar amount received from the above sister concerns. The above mistake was accepted by the assessee during the assessment as well as during appellate proceedings. Further it was submitted the relevant confirmations from the sister concerns and also filed the details of documents to prove the identity and details of repayment of the above said loan subsequently. This shows the genuineness of the transactions and Ld. CIT(A) had appreciated the above facts on record and in our view, it is only mistake apparent on record and assessee had already brought on record the relevant details to prove the genuineness of the transaction. Therefore, we do not see any reason to disturb the findings of Ld. CIT(A). In the result, ground raised by the revenue is dismissed.
With regard to interest expenses claimed by the assessee, the relevant facts are, the AO treated the above loans as non-genuine transactions, accordingly, he disallowed the same. Ld. CIT(A) had adjudicated the same as genuine transactions and we also held the same to be genuine in the above paragraph, we do not see any reason to disturb the findings of Ld. CIT(A). In the result, ground raised by the revenue is dismissed.
In the result, appeal filed by the revenue is dismissed and CO filed by the assessee also dismissed.