Dharampal Premchand Ltd. vs Deputy Commissioner Of Income-tax

PER YOGESH KUMAR, U.S. JM:

The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short), 30, New Delhi dated 25/09/2025 for the Assessment Year 2018-19.

The grounds of Appeal are as under: -

Brief facts of the case are that, the Assessee filed return for the year under consideration declaring income of Rs. 30,45,37,370/- which has been processed under Section 143(1) of the Income Tax Act, 1961 ('Act' for short). The case of the Assessee was picked up for scrutiny and an assessment order came to be passed on 10/06/2021 under Section 143(3) of the Act by disallowing Rs. 17,93,000/- under Section 14A of the Act, reduced the exemption under Section 10AA of the Act to the tune of Rs. 49,74,000/- and also made addition of Rs. 10,53,05,397/- under Section 69A of the Act. Aggrieved by the assessment order dated 10/06/2021, Assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 25/09/2025, confirmed the addition of Rs. 10,53,05,397/- and partly allowed the Appeal. As against the order of the Ld. CIT(A), the Assessee preferred the above appeal.

The Ld. Counsel for the Assessee canvassing on Grounds of Appeal submitted that the loans were raised in preceding years and all those assessments were completed under Section 143(3) of the Act and genuineness of the loans were duly scrutinized and verified. Further submitted that the loans were duly repaid during preceding years and the loans were repaid out of self-generated business funds and bank over draft limits and all the transactions were recorded in books of account. Therefore, there is no case of violation of Section 69A of the Act, thus, sought for allowing the appeal.

Per contra, the Ld. Departmental Representative vehemently submitted that the lender companies are controlled by Sh. Himanshu Verma/Vikas Kumar Agarwal and the transactions are not genuine. The A.O. after recording the statement of the lenders, made the addition. The creditors are established to be shell Companies controlled by the entry operators. The Ld. Assessee's Representative relying on the findings and the conclusion of the authorities below sought for dismissal of the Appeal of the Assessee.

We have heard both the parties and perused the material available on record. The A.O. while making addition of Rs. 10,53,05,397/- observed that the Assessee company had made repayment of unsecured loan outstanding as on 31/03/2018 during Financial Year 2018-19 along with accrued interest to the lenders. Further observed that during the Financial Year under consideration, the Assessee Company in actual was not under any liability with respect to repayment of the loan and it was only an eye wash colored those transaction by claiming that it had repaid the unsecured loans, while in actual the genuine transaction was that the Company had received back the unexplained cash from the entry operator and reversed those bogus accommodation entry back to those Companies. The A.O. further held that the Assessee Company had failed to discharge its onus to prove the genuineness of the transactions. The Ld. A.O. has relied on the statement of one Mr. Himanshu Verma and Sh. Vikas Kumar Aggrawal while drawing adverse inference as in respect of genuineness of the loans received and repaid by the Assessee. The Ld. CIT(A) upheld the addition made under Section 69A of the Act holding that loans are not genuine and the Assessee had failed to explain the source of repayment.

It is not in dispute that the loans availed by the Assessee have been repaid. The Assessee's Representative has produced the Chart giving details of loans taken and repaid which is reproduced as under:-

As could be seen from the above the loans were raised by the Assessee in preceding years. Further it is observed that all those assessments were complete under Section 143(3) of the Act and the genuineness of the loans were duly scrutinized and verified. The Ld. Assessee's Representative has produced the assessment orders framed under Section 143(3) of the Act for Assessment Year 2014-15 to 2017-18 in Paper Book at Pages 51 to 84. Admittedly the parts of loans were repaid during the preceding years and there is no dispute in respect of the same. It is the specific case of the Assessee that loans were repaid out of self-generated business funds and bank over draft limits.

Further, it is observed that during the Assessment Year 2018-19, the total sale was Rs. 557 crore, net profit as per P & L Account is Rs. 21.61 crore and general reserve and retained earnings was Rs. 210 crore. The subject transactions were duly recorded in the books of accounts. Though the A.O. relied on the statements of Sh. Himanshu Verma and Sh. Vikas Kumar Aggarwal, even after seeking for opportunity to cross-examination, the same was not provided to the Assessee.

In so far as source of repayment is concerned, the same has been explained from audited books of account and corresponding bank statements evidencing availability of sufficient funds. The allegation of accommodation entries is merely based on generalized statements and surmises without any direct or corroborative evidence linking the Assessee to unaccounted cash or circular transaction in the year under consideration. The A. O has not brought any positive evidence or direct or in direct material to establish existence of any cash transaction and as such the provisos of Section 69A of the Act cannot be applied. The deeming provision of Section 69A of the Act can only be invoked on actual discovery of money, bullion, jewellery or other valuable article and the same cannot be applied based on presumption or supposition.

Further, it is found that the loans in questions were received in earlier Assessment Years and the Assessments have been completed under scrutiny proceedings under Section 143(3) of the Act. In those years, the A.O. has accepted the loans/transactions without drawing any adverse inference with regard to identity, creditworthiness or genuineness of the lenders. Further the part repayment of the very same loans had been made in the Assessment Years, which has been duly accepted by the A.O. without any dispute while framing the assessment under Section 143(3) of the Act. Having accepted the loan transactions as well as their partial discharge in preceding years, the A.O. cannot selectively the question the balance repayment in the year under consideration without any distinguishable feature. The Assessee had demonstrated availability of sufficient funds through its books of account which have neither been rejected nor any specific defect has been pointed out by the A.O. In the absence of any material to indicate that the repayment has been made out of unexplained source, the addition under Section 69A of the Act is devoid of any factual or legal basis. In view of the above, considering the fact that genuineness of the loans were accepted in the year of receipt, there is no dispute vis-à-vis source of repayment and the alleged accommodation entries is not supported by any cogent evidence. Therefore, we find no reason to uphold the addition which has been confirmed by Ld. CIT(A), accordingly addition of Rs. 10,53,05,397/- made under Section 69A of the Act is hereby deleted.

In the result, appeal of the Assessee is allowed.