Bihari Parmanand Kandhari Vs ACIT (ITAT Mumbai)
Section 68 Addition Can’t Survive Merely on ‘Accommodation Entry’ Allegation When Loan Is Repaid Through Bank” – Mumbai ITAT
In a major relief to the assessee, the Mumbai ITAT deleted a ₹30 lakh addition u/s 68, holding that merely because the lender was allegedly involved in providing accommodation entries, a genuine loan transaction supported by documentary evidence and routed entirely through banking channels cannot be treated as unexplained cash credit.
The assessee, engaged in real estate development, had originally completed assessment u/s 143(3). Subsequently, based on information from the Investigation Wing alleging that the assessee had received accommodation entries from the “Ahuja Group,” reassessment proceedings were initiated.
During reassessment, the assessee explained that it had received an unsecured loan of ₹30 lakh from M/s. Ahuja Properties & Associates and had repaid the same within a short span during the very same year. The assessee produced substantial supporting evidence including income tax returns, bank statements, ledger accounts, loan confirmations and lender details.
However, the AO relied heavily on a statement allegedly given by one of the persons connected with the Ahuja Group admitting to providing accommodation entries and treated the loan as unexplained cash credit u/s 68.
The ITAT noted that not only had the assessee furnished complete documentary evidence, but even in response to summons u/s 131, the principal officer of the lender entity had confirmed the transaction. Further, during remand proceedings before the CIT(A), the lender again filed an affidavit confirming the genuineness of the loan.
The Tribunal held that the assessee had successfully proved all three essential ingredients required under section 68 – identity of the creditor, creditworthiness and genuineness of the transaction.
Importantly, the Bench observed that merely because the lender did not personally appear in response to summons or because allegations existed against the lender group, the transaction could not automatically be branded bogus, especially when the loan had been fully repaid through banking channels within the same year.
The Tribunal also remarked that the original scrutiny assessment had already accepted the loan transaction and reopening based solely on third-party search information could not justify addition when documentary evidence clearly supported the assessee’s case.
Accordingly, the ITAT directed deletion of the entire ₹30 lakh addition u/s 68 and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal by the assessee against order dated 17.11.2025 of National Faceless Appeal Centre (‘NFAC’ for short), Delhi for the assessment year (A.Y. for short) 2009-10.
