Trishul Realcon (P) Ltd. vs ACIT, Central Circle-31, Delhi

PER SHRI SUDHIR KUMAR, JM:

The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)-30, New Delhi (for short ‘ld. CIT (A)’) dated 28.07.2025 for Assessment Year 2019-20.

Brief facts of the case are, the assessee company is engaged in the business of works contracts for the construction of Affordable Group Housing projects and filed its return of income for the AY 2019-20 on 29.10.2019 declaring income of Rs. 15,37,230/-. A revised return of income was subsequently filed under section 139(5) on 24.2.20220, declaring a total income of Rs. 25,39,180. The assessee thereafter received a notice under section 148 of the Act, alleging “that the books of accounts or documents seized under section 132 of the Act in the case of Shri Himanshu Verma pertain to the assessee, or that the information contained therein relates to the assessee or to any other person in respect of whom the assessee is assessable under the Act” In compliance with the notice under section 148, the assessee filed its return of income on 28.4.2023, declaring the same total income of Rs. 25,39,180/-. The specific reasons for reopening were not clearly communicated to the assessee until the notice u/s. 142(1) dated 14.11.2023, which stated inter alia “during the search and post-search investigation, it has been found that you are the beneficiaries of accommodation entries from nondescript entities i.e. M/s RCM Finance and Leasing Private Limited, controlled and managed by Shri Himanshu Verma during FY 2018-19. During the search, Tally data was found and seized.” The assessee clarifies that during the relevant previous year, it had availed a loan of Rs. 40,00,000/- from m/s RCM Finance and Leasing Private Limited, a registered Non-Banking Financial Company (NBFC), which was duly repaid in the subsequent financial year through regular banking channels. During the assessment proceedings, assessee furnished documentary evidences to establish the genuineness of the transactions, the identity of the lender, and its creditworthiness, but AO observed that assessee company had not paid any interest on loan received from M/s RCM Finance and Leasing Pvt. Ltd. For the period FY 2019-20. It was also noted that from the perusal of the statement of Sh. Himanshu Verma, that M/s RCM Finance and Leasing Pvt. Ltd is a non-descript entities which is controlled and managed by Sh. Himanshu Verma (entry operator). They used to rotate unaccounted income of various companies through various layers and charged commission accordingly. Hence, he noted that the assessee company received an accommodation entry of Rs. 40,00,000/- in the form of loan and paid commission of amounting to Rs. 13,561/- which was charged (showing as interest paid) only in FY 2018-19 at the time of receiving of loan. Hence, accommodation entry amounting to Rs. 40,00,000/- received by the assessee company from non-descript entities was added to the income of the assessee company as unexplained cash credit u/s. 68 of the Act on account of failure on the part of the assessee to establish the unexplained cash credit and amount of Rs. 13,561/- paid as interest being added to the income of the assessee as unexplained expenditure u/s. 69C of the Act, thus made the total addition of Rs. 40,13,561/- u/s 68 and 69C of the Act.

Aggrieved with the above order, the assessee preferred an appeal before Ld CIT(A)-30, New Delhi. The assessee raised the issues of reopening without their proper recording of satisfaction and on merit filed a detailed submission. He rejected the submissions and sustained the additions made by the AO.

Aggrieved, the assessee is in appeal before us raising following grounds of appeal :-

At the time of hearing, Ld AR brought to our notice the facts and submitted that the assessee had obtained a loan of Rs. 40,00,000/- from M/s RCM Finance and Leasing Pvt. Ltd., a registered NBFC, and fully repaid it via banking channels. The assessee placed on record loan confirmations, PAN, bank statements, NBFC registration certificate, ITRs, and audited accounts of the lender. However, AO disregarded all these genuine documents and made additions based solely on a third party ledger, with no defect, inconsistency, or contradiction pointed out in the assessee’s evidences. No enquiry was conducted, no notice under Section 133(6) or summons under Section 131 was issued. There was no evidence of any accommodation entry, nor was the assessee ever named directly in any seized material or sworn statement. Despite full compliance, the AO proceeded to treat the transaction as sham transaction and added the same in the hands of the assessee. He relied upon the decision of the Coordinate Bench of Delhi Tribunal in the case of Real Innerspring Technologies Pvt. Ltd. Vs. ACIT in ITA no. 647/Del/2023 (AY 2016-17) vide order dated 27.3.2025.

On the other hand, Ld. DR of the Revenue brought to our notice page 14 of the assessment order and submitted that the conditions of section 68 was not fulfilled in the transactions carried on by the assessee with the sham transaction. All these facts were found during the search conducted in the case of Galaxy Group and coordinated search carried out in the case of Shri Himanshu Verma. He relied on the findings of lower Authorities.

Considered the rival submissions and material placed on record. During the assessment proceedings, assessee furnished documentary evidences to establish the genuineness of the transactions, the identity of the lender, and its creditworthiness, but AO observed that assessee company had not paid any interest on loan received from M/s RCM Finance and Leasing Pvt. Ltd. For the period FY 2019-20. It was also noted by the AO that from the perusal of the statement of Sh. Himanshu Verma, that M/s RCM Finance and Leasing Pvt. Ltd is a non-descript entities which is controlled and managed by Sh. Himanshu Verma (entry operator). They used to rotate unaccounted income of various companies through various layers and charged commission accordingly. Hence, he noted that the assessee company received an accommodation entry of Rs. 40,00,000/- in the form of loan and paid commission of amounting to Rs. 13,561/- which was charged (showing as interest paid) only in FY 2018-19 at the time of receiving of loan. Hence, accommodation entry amounting to Rs. 40,00,000/- received by the assessee company from non-descript entities was added to the income of the assessee company as unexplained cash credit u/s. 68 of the Act on account of failure on the part of the assessee to establish the unexplained cash credit and amount of Rs. 13,561/- paid as interest being added to the income of the assessee as unexplained expenditure u/s. 69C of the Act. It is noted that assessee has submitted detailed submissions including ITRs, balance sheets, bank statements, confirmations, and NBFC certificates of the lenders, without indicating what further evidence was lacking to establish identity, creditworthiness, and genuineness of the transactions. The assessee submitted voluminous relevant evidences to prove the triple test of section 68 which has been rejected by the assessee is not found tenable due to Interest Not Paid in the next year while the interest was paid for the A.Y. in question and also added by stating modus operandi of some entry operators. The transaction was carried out through proper banking channels, fully supported by documentary evidence, and has been entirely paid. Moreover, even assuming without admitting that interest non-payment was a relevant consideration, such issue pertains to a subsequent assessment year and has no relevance to the present A.Y. 2019-20, in which the loan was duly availed, utilized, and repaid in full. Therefore, the addition made on such ground is not sustainable. A.O. has failed to rebut or even address the comprehensive documentary evidence filed by the assessee to prove the identity, creditworthiness and genuineness of the loan transaction. The assessee had submitted a valid NBFC certificate, confirmation of account, ITR and balance sheet of the lender, a duly executed loan agreement, and the bank statements clearly showing the flow and repayment of funds. It is well settled law that no addition should have been made in the case of the assessee, since the assessee had discharged the primary onus cast under Section 68, and all transactions were genuine, well-documented, and routed through proper banking channels. Even the A.O. has not brought any contrary material on record to justify the rejection of these documents or establish that the loan was actually an accommodation entry. It is a well-settled legal principle that where a loan is taken and repaid within the same year or in the immediately succeeding year and there is no evidence of any accommodation entry or bogus transaction, no addition can be made under Section 68 merely on assumptions. The rationale behind this principle is that no undue advantage or spurious benefit can be derived from a short-duration loan which has already been repaid. 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. Even the 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 delete the additions in dispute and allow the grounds raised by the assessee.

In the result, appeal filed by the assessee is allowed.