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Judgment
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 12.09.2025 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-21/10940/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 23.12.2019 passed u/s 147 r.w.s. 143(3) of the Act pertaining to Assessment Year 2012-13.
Brief facts of the case are that the assessee filed his return of income on 28.07.2012 declaring income of INR 21,92,990/-. Based on the information received from office of DDIT, Investigation as a result of search and survey operation on 25.04.2017 on Skylark group, that the assessee has received accommodation entry of unsecured loan from M/s South Asia Impex Pvt. Ltd. of INR 28.00 Lakhs reassessment proceedings were initiated in the case of assessee. Thereafter notice u/s 148 was issued on 06.11.2019 and after considering the submissions of the assessee, the AO has passed the reassessment order u/s 147/143(3) of the Act by making addition of INR 28.00 Lakhs u/s 68 of the Act.
Against the said order, the assessee preferred appeal before Ld. CIT(A) who vide impugned order dated 12.09.2025 though observed that assessee has filed the submission in response to every notice, however, the ld. CIT(A) by observing that non appeared on behalf of the assessee to explain the case and thus, dismissed the appeal of the assessee by confirming the additions made.
Aggrieved by the order of Ld. CIT(A), the assessee is in appeal before the Tribunal by taking various grounds of appeal wherein, Grounds of appeal 1 & 2 are against the reopening of assessment and Grounds of appeal Nos. 3 & 4 are with respect to the addition of Rs. 28.00 lacs made u/s 68 of the Act.
Before us, in support of Grounds of appeal No. 3 & 4, ld. AR submits that all the documentary evidences including PAN, ITR, financial statements, bank statements, certificate of incorporation and confirmation of the lender company were filed before the AO and by filing these evidences, assessee has discharged the burden casted upon him u/s 68 of the Act of proving the identity and creditworthiness of the lender and genuineness of the transaction of loan. These evidences are placed at pages 7 to 20 and 56 to 71 of the Paper Book.
Ld.AR further submits that the borrowed funds were repaid in subsequent assessment year and merely for the reason that the assessee the notice u/s 133(6) of the Act sent to the lender company returned unserved and further in the case of some other party, one person has admitted that he was managing and controlling the lender company for providing accommodation entries of unsecured loans, addition was made. Ld. AR submits that effort was made to make further inquiry from the lender company when the address appearing in the bank statements and confirmation of the lender have different address than where the notice u/s 133(6) was sent by the AO. Ld. AR further submits that the AO has doubted the source of source which has been introduced in the statute by Finance Act, 2022 w.e.f. 01.04.2023 and applicable from 2023-24 onwards.
Ld. AR submits that the AO has observed that he has sent the notice u/s 133(6) was returned unserved however, it was sent on the incorrect address and therefore, without making any independent enquires by issue of notice at the correct address, it cannot be said the lender company is a shell company. Ld. AR also placed reliance on the judgements of various High Courts and placed before us, a recent order of Hon’ble Rajasthan High Court at Jaipur Bench in DB ITA No.59/2025 dated 12.02.2026. He prayed that the addition be deleted.
On the other hand, Ld. Sr. DR vehemently supported the orders of lower authorities and submits that during the course of search, in the case SkyLark Group statements of various persons were recorded wherein they have admitted engaged in providing accommodation entries of unsecured loans through various firms / companies controlled and managed by them to various beneficiaries and M/s. South Asia Impex Pvt. Ltd. i.e. lender in the instant case is one of them. Ld. Sr. DR further submits that the AO has issued notice u/s 133(6) of the Act to the said company which was returned unserved. As per ld. Sr. DR this fact further established that the lender company was not in existence and is merely a shell company. He therefore, prayed that the AO has rightly made the addition which deserves to be uphold.
Heard the parties and perused the material available on record. It is observed that assessee has filed all the relevant details in order to discharge the burden casted upon it of proving the genuineness of transaction and identity and creditworthiness of the lender as per section 68 of the Act. It is further observed that the AO has issued notice u/s 133(6) to the lender company which remained unserved it was sent at the address which is different from the address provided in its bank statement and confirmation of account. It appears that AO has made no effort to make further enquiry or verification of facts from the lender company by issue fresh notice at the correct address. It is further observed that by filing the PAN Card and certificate of incorporation issued by ROC, assessee has discharged the burden of proving the identity of the lender company and by filing its bank statements and financial account, assessee has established the genuineness of transaction and creditworthiness of the lender. From the bank statement of the lender company, it is observed that it had sufficient funds when the funds were transferred to the assessee company and these facts were not appreciated by the lower authorities.
The Hon’ble Rajasthan High Court in the case of PCIT vs Harsh Stock Portfolio Pvt. Ltd. in DB ITA No.59/2025 vide its order dated 12.02.2026 has appreciated these facts and further by appreciating that the assessee has repaid the loans, has dismissed the appeal of the Revenue. The relevant observations of the hon’ble court are reproduced as under:
1.“Learned counsel for the Revenue submits that the CIT and ITAT have erred in deleting the addition made by the Assessing Officer relating to the unsecured loans obtained by the assessee company from M/s Desire Vincom Pvt. Ltd. and M/s Wellworth Tradelink Pvt. Ltd. Once a doubt is created relating to the credit worthiness of the concerned loan company, which is alleged to be a shell company, the onus would lie upon the assessee to produce the parties along with the necessary documents to establish the genuineness of the transaction.
2.We notice that the loan taken by the assessee was returned along with interest to the said companies in the same assessment year, Therefore, it is apparent that no addition can be made of such income received by way of loan as the same has already been returned. The assessee has sufficiently proved the genuineness of the companies as their PAN numbers were produced as well as the companies remain duly registered with the ROC and, therefore, cannot be said to be shell companies.
3.The requirement of the companies being produced by the assessee in support, to remove the doubt of the Assessing Officer is only far-fetched and cannot be said to be a question of law to be examined by this Court. All the other aspects have been factually examined by both the CIT as well as ITAT. The present appeal being devoid of merits is accordingly, dismissed.
4.All the pending application(s), if any, stand disposed of.
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].”
With respect to the repayment of loan, 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.”
As observed above, in the instant case, the summon issued u/s 133(6) of the Act by the AO to the lender company was returned unserved. In this respect, claim of the assessee was that the said notice was send on the incorrect address whereas the correct address was as stated in the bank statement of the said part and its confirmation of account which are placed at pages 9 & 20 of the paper book. However, no effort was made by the AO of making enquiry by issue fresh notice at the given address. It is further observed that the AO has alleged the source of source in the hands of the lender company. To examine the source of source, 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 explained in the hands of the creditor or entry provider. 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 year before us is AY 2012-13, 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 above facts and in the circumstances of the case, we are of the considered view when all the relevant documents were filed by the Assessee to establish identity and creditworthiness of the lender company. Further the genuineness of the transactions is proved from the fact that funds were received through banking channel and assessee has repaid the same through banking channel itself. The hon’ble Gujarat High Court in the case of PCIT Vs. Ojas Tarmake Pvt. Ltd. (supra) has held that where major portion of the credit has been repaid during the year and the AO has accepted the debit entries as genuine, the Hon'ble court on the said facts ultimately affirmed the decision of the Tribunal in deleting the addition.
In view of the overall discussion made herein above and considering the material available on record and by respectfully following the judgements of Hon’ble jurisdictional high court and other hon’ble high courts, we are of the considered view that the loan taken by the assessee was genuine and addition of Rs. 28.00 lacs made is hereby deleted. Accordingly, grounds of appeal No. 3 & 4 taken by the assessee are allowed.
Since we have allowed the Gorunds of appeal No. 3 & 4 and deleted the addition made, therefore, the other Grounds of appeal challenging the re-opening of assessment become academic, thus, not adjudicated.
In the result, the appeal of the assessee is allowed.