Bansi Fashion Private Limited Vs ITO (ITAT Mumbai)
No Enquiry With Bank, Yet ₹50 Lakh Treated as ‘Cash Loan’? ITAT Deletes Section 69A Addition
In a significant ruling, the Mumbai ITAT deleted a ₹50 lakh addition u/s 69A, holding that when loan transactions are fully supported by bank statements, ledger accounts and bank confirmations, the department cannot arbitrarily allege “cash loans” merely based on third-party search information.
The case arose from search proceedings conducted in the Surana Group, where certain materials allegedly indicated that Bhagwati Marketing Co. had received cash loans from various parties including the assessee company. Based on this information, the AO alleged that the assessee had advanced a cash loan of ₹50 lakh to Shri Narendra G. Somani.
However, the assessee consistently maintained that no cash loan was ever advanced and that the entire transaction of ₹1 crore was routed through proper banking channels. The assessee explained that out of the ₹1 crore advanced, ₹50 lakh was repaid during the same year and the balance ₹50 lakh remained outstanding, on which regular interest income was being earned and offered to tax.
To substantiate its case, the assessee produced ledger extracts, bank statements, transaction details, and even confirmations from the borrower. The ITAT noted that the bank statements clearly reflected two loan transfers of ₹50 lakh each through banking channels on 09.04.2014 and 10.04.2014, along with repayment entries.
The AO and CIT(A), however, rejected the evidence mainly on the ground that the bank statement did not expressly mention the borrower’s name against the entries.
The Tribunal strongly disapproved this approach and observed that if the AO genuinely had doubts regarding the bank entries, the minimum expected was to conduct enquiry with the concerned bank. Instead, the AO rejected the evidence without making any proper verification.
Importantly, the ITAT noted that Tamil Nadu Mercantile Bank itself had subsequently confirmed that the debit entries represented payments made to Bhagwati Marketing Co.. This confirmation completely fortified the assessee’s case that the transactions were through RTGS/cheque and not in cash.
Accordingly, the Tribunal held that the assessee had successfully established the source and genuineness of the loan transaction through documentary evidence and therefore the addition u/s 69A was unsustainable. The AO was directed to delete the ₹50 lakh addition.
On a separate issue regarding reversal of provision for interest income of about ₹9.47 lakh, the ITAT restored the matter back to the AO for factual verification regarding whether the interest had already been offered to tax in earlier years and whether it was actually received.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Captioned appeal by the assessee arises out of order dated 08.10.2025 passed by National Faceless Appeal Centre (‘NFAC’ for short), Delhi for the assessment year (A.Y. for short) 2023-24.
