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Judgment
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), New Delhi dated 08/10/2025 for the Assessment Year 2019-20.
Brief facts of the case are that, the Assessee filed revised return of income at Rs. 4,19,00,740/-. Based on the information received from inside portal by DDIT/ADIT (Inv), it came to light that the Assessee company has taken accommodation entries of bogus unsecured loan of Rs. 1,19,68,090/- from dummy entity M/s Odisha Finlease Pvt. Ltd. during Financial Year 2018-19 relevant to Assessment Year 2019-20, accordingly the case of the Assessee was reopened by issuing notice u/s 148 of the Act. An assessment order came to be passed on 22/03/2024 by making an addition of Rs. 70,00,000/- under Section 69A of the Act and also made addition u/s 68 of the Act to the tune of Rs. 1,73,97,501/-. Aggrieved by the assessment order dated 22/03/2024, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 08/10/2025, deleted the addition of Rs. 1,73,97,501/- made by the A.O. u/s 68 of the Act. However, sustained the addition of Rs. 70,00,000/- made u/s 69A of the Act. Aggrieved by the order of the Ld. CIT(A) dated 08/10/2025, Assessee preferred the captioned Appeal.
The Ld. Counsel for the Assessee vehemently submitted that the reasons recorded by the A.O. as mentioned in the notice issued u/s 148A(d) of the Act was on the ground that the ‘Assessee Company has taken accommodation entries of bogus unsecured loan of Rs. 1,19,68,090/- from dummy entity M/s Odisha Finlease Pvt. Ltd. during the F.Y 2018-19 relevant to Assessment Year 2019-20’, however, no addition has been made by the A.O./sustained by the Ld. CIT(A), on the contrary the addition has been made by the A.O. u/s 69A of the Act to the tune of Rs. 70,00,000/- which was sustained by the Ld. CIT(A). The Ld. Counsel further submitted that the Assessee has not availed any loan for the year under consideration, on the other hand, the Assessee made repayment of the loan, therefore, the assessment order and the order of the Ld. CIT(A) deserves to be set aside. The Ld. Counsel relied on plethora of judicial precedents and submitted that, if the reasons recorded are entirely different than the addition made by the A.O., such addition cannot be sustainable in the eyes of law. Thus, sought for allowing the Appeal.
Per contra, the Ld. Departmental Representative submitted that the addition has been made on its merit. The Assessee company has repaid an amount of Rs. 70,00,000/- to Orissa Finlease Pvt. Ltd. and on issuing notice u/s 133(6) of the Act, no response was received by the party and as per the verification, it is found that the address given by the Assessee either incomplete or the said entity is dummy one. The addition has been madeu/s 69A of the Act by treating the same as unexplained money, which has been upheld by the Ld. CIT(A) and the same requires no interference at the hands of the Tribunal.
We have heard both the parties and perused the material available on record. The case of the Assessee was reopened and the notice u/s 148A(d) of the Act was issued for taking accommodation entries of bogus unsecured loan. For the sake of ready reference, the reasons as mentioned in the notice dated 27/02/2023 issued u/s 148A(d) of the Act is reproduced as under:-
“Whereas I have information which suggests that income chargeable to tax for the A.Y. 2019-20 has escaped assessmet within the meaning of sec. 147 of the Income-tax Act, 1961. As per information in possession of the undersigned, the assessee company M/s Spar Geo Infra P. Ltd. has taken accommodation entries of bogus unsecured loan of Rs. 1,19,68,090/- from dummy entity M/s Odisha Finlease Pvt. Ltd., during the F.Y. 2018-19 relevant to the A.Y. 2019-20. The details of the information / enquiry conducted on which reliance is being placed, alongwith supporting documents, are enclosed with this notice.”
However, the addition has been made by the A.O. u/s 69A of the Act for repayment of the unsecured loan by treating the same as unexplained money u/s 69A of the Act. Admittedly no addition has been made by the A.O. for taking accommodation entries of bogus loan of Rs. 1,19,68,090/-. It is also not in dispute that the Assessee has not taken any loan for the year under consideration.
The Hon'ble High Court of Delhi in the case of Sunlight Tour and Travel Pvt. Ltd. (supra), while dealing with the identical issue decided in favour of the Assessee in following manners:-
17.The said view has also been consistently followed by this Court including recent decisions in The Principal Commissioner of Income Tax-1v. Naveen Infradevelopers& Engineers Pvt. Ltd. (supra) and PCIT v. Jaguar BuildconPvt. Limited (supra). We concur with the aforesaid view. It is well established that Section 147 of the Act enables the reopening of concluded assessments only in exceptional cases, where there the AO has reason to believe that Assessee’s income for the relevant period has escapedassessment. It is trite law that concluded assessment should not be lightlyinterfered with. If the ground on which the concluded assessment is soughtto be re-opened, cannot be sustained, there would be little rationale forexpanding the reassessment proceedings. In our view, it would not beapposite to accept an expansive interpretation to the provision of Section147 of the Act. Given that the nature of the proceedings is to unsettle concluded assessment, a strict interpretation of the plain language of Section147 of the Act, is warranted. We respectfully concur the view of this courtas articulated in Ranbaxy Laboratories Limited v. CIT; ATS InfrastructureLtd. v. ACIT; and PCIT v. Jaguar BuildconPvt. Limited (supra).
18.It is also relevant to note that various courts had taken a view that the reassessment proceedings were confined under Section 147 of the Act only to the issues (reasons to believe) on the basis of which the assessments werereopened. Thus, there was no scope for making any addition other thanthose which were circumscribed by the reasons to believe as recorded by theAO prior to the issuing a notice under Section 148 of the Act. However, thiscontroversy was set at rest by introduction of Explanation 3 by virtue of theFinance Act, 2009 with retrospective effect from 01.04.1989. Explanation 3to Section 147 as applicable at the material time reads as under:
“Explanation 3. – For the purpose of assessment or reassessmentITA 222/2022 Page 14 of 15under this section, the Assessing Officer may assess or reassess theincome in respect of any issue, which has escaped assessment, andsuch issue comes to his notice subsequently in the course of theproceedings under this section, notwithstanding that the reasons forsuch issue have not been included in the reasons recorded under sub section (2) of section 148.”
19.It is apparent from the above that the said explanation merely clarified that the AO would assess or reassess the income in respect of the issue which had escaped assessment and such other issue, which came to the notice subsequently. However, the said explanation does not control the import of the plain language of Section 147 of the Act. Explanation 3 to Section 147 of the Act, merely clarifies that the jurisdiction of the AO was not confined to assessing or reassessing of the income of an Assessee only inrespect of the issue, which formed a part of the reasons recorded for reopening the assessment. The said explanation cannot be interpreted to mean that the AO could assess other incomes of the Assessee even in cases where no addition is made on account of the reasons for which reassessmentwas initiated.”
Identical ratio has also been laid down in the case of Jaguar Buildcon (P) Ltd. (supra) by the Jurisdictional High Court.
It is also observed that the genuineness of the unsecured loan has not been doubted by the Department in the earlier Assessment Years in which the said loan has been obtained, thus, in our opinion, without doubting the receipt of the loan, the Department cannot doubt the repayment of the loan.
In view of the above discussion and by respectfully following the above ratio down by the Hon’ble Jurisdictional High Court in the case of Sunlight Tour and Travel Pvt. Ltd. (supra),we are of the considered opinion that, the Ld. CIT(A) committed error in sustaining the addition of Rs. 70,00,000/- made u/s 69A of the Act. Accordingly, we allow the Grounds of Appeal of the Assessee and delete the addition made by the A.O. which has been confirmed by the Ld. CIT(A).
In the result, Appeal of the Assessee is allowed.