Section 68 Addition Sent Back for Reconsideration Due to Incomplete Examination of Loan Evidence

Divya Enterprises Vs ITO (ITAT Delhi)

The Income Tax Appellate Tribunal Delhi restored to the Assessing Officer the issue relating to unsecured loans of ₹1.60 crore received from Odisha Finlease Pvt. Ltd. and related interest disallowances after finding that the assessee had furnished some supporting documents and deserved another opportunity to establish the genuineness of the transaction under Section 68 of the Income Tax Act.

The appeals arose from reassessment proceedings for Assessment Years 2018-19 and 2019-20. The reassessment was initiated after a search in the case of KK Spun India Limited, during which the Investigation Wing alleged that Aditya Jain operated accommodation entry entities and provided bogus unsecured loans through dummy companies. Odisha Finlease Pvt. Ltd. was identified as one such entity allegedly controlled by him. The Assessing Officer noted that the assessee had received unsecured loans of ₹1.60 crore from Odisha Finlease Pvt. Ltd. during FY 2017-18.

The assessee contended that it was a partnership firm engaged in trading stainless steel sheets and utensils and that the loans were genuine transactions received through banking channels. It submitted that the loans were reflected in audited books, interest was paid after deduction of TDS, and the entire loan was repaid in the subsequent financial year. The assessee also challenged the reassessment proceedings on the ground that complete material relied upon by the Assessing Officer was not supplied and no opportunity for cross-examination of Aditya Jain was provided despite specific requests.

The Assessing Officer observed that summons issued to Odisha Finlease Pvt. Ltd. and its directors were unsuccessful because the addresses were invalid and the entity was non-functional. Notices issued under Section 133(6) seeking financial statements, loan agreements, bank details, and other information also remained unanswered. The Assessing Officer concluded that the assessee failed to establish the identity, creditworthiness, and genuineness of the creditor and accordingly treated ₹1.60 crore as unexplained cash credit under Section 68. Interest expenditure of ₹1,90,603 for AY 2018-19 and ₹10,29,307 for AY 2019-20 was also disallowed.

The CIT(A) upheld the additions, holding that merely routing transactions through banking channels did not establish genuineness. Reliance was placed on the statement of Aditya Jain and the fact that the assessee failed to produce loan agreements, confirmations, and financials of Odisha Finlease Pvt. Ltd.

Before the Tribunal, the assessee argued that only selected pages of Aditya Jain’s statement were supplied, no cross-examination was permitted, and neither the statement nor the investigation report specifically referred to the assessee. The assessee also pointed out that Odisha Finlease Pvt. Ltd.’s MCA details, ledger accounts, and bank statements had been submitted before the Assessing Officer.

The Tribunal held that repayment of the loan by itself could not establish genuineness if the requirements of Section 68 regarding identity, creditworthiness, and genuineness were not satisfied. At the same time, the Tribunal noted that the assessee had furnished certain basic documents, including MCA records of Odisha Finlease Pvt. Ltd., ledger accounts, and bank statements showing receipt of funds through banking channels.

Considering these facts, the Tribunal found it appropriate, in the interest of justice, to grant one more opportunity to the assessee to establish the genuineness of the transactions. The orders of the CIT(A) were therefore set aside, and the matter was restored to the Assessing Officer for fresh adjudication after providing reasonable opportunity of hearing. The assessee was also permitted to file additional evidence in support of its claim. Since the issue of interest disallowance was consequential to the Section 68 addition, those issues were also remanded back to the Assessing Officer for fresh consideration.

FULL TEXT OF THE ORDER OF ITAT DELHI

These two appeals by the assessee are directed against the two separate orders of National Faceless Appeal Centre (NFAC) [hereinafter referred to as the ‘Ld. CIT(A)] both dated 30.07.2025 arising out of the two separate Assessment Orders both dated 21.03.2024 passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the Assessment Unit, Income Tax Department, (hereinafter referred to as the ‘AO’) pertaining to Assessment Years (A.Y.) 2018-19 and 2019-20 respectively. Since common issues are involved in these two appeals, the same is being disposed of by way of this common order for the sake of convenient and brevity. The ITA No.-4994/Del/2025 for A.Y. 2018-19 is taken as the lead case.

2. Brief facts of the case: During the course of assessment proceeding, a search and seizure operation was conducted in the case of M/s KK Spun India Limited. As per the findings of the search, Investigation Unit, New Delhi, it was communicated to the AO that during the course of search proceedings, various incriminating evidences were gathered and examined and it was found that Shri Aditya Jain was an accommodation entry operator and had provided accommodation entries to M/s KK Spun Group. During the course of post search proceedings, summons was issued to Shri Aditya Jain and his statement was recorded on oath. The AO noted that during the course of post search proceedings, Shri Aditya Jain had admitted on oath that he had provided accommodation entries through various dummy companies, proprietary concerns and firms to various beneficiary parties in reverse of cash and had received commission on the same. It was also noted by the AO that during the search proceedings in the case of M/s KK Spun India Limited various incriminating evidences were gathered and examined and further investigation by Investigation Wing corroborated the statement of Shri Aditya Jain.

2.1 Further, the AO noted that M/s Odisha Finlease Pvt. Ltd. (hereinafter referred to as the ‘OFPL’ ) at Srl. no. 7 of the table on page 2 of the assessment order was a dummy company controlled by Shri Aditya Jain and the said company was having cross holdings of the shares of various other dummy concerns controlled by Shri Aditya Jain which were also admitted to be bogus by Shri Aditya Jain. It was further noted by the AO that the cross holdings were created only for the purpose of creating artificial creditworthiness (Premium or Reserves) of various companies and further created assets in the form of loans to various beneficiary companies. Further, on examination of the bank account and other details, the AO noted that the assessee was one of such a beneficiary who had taken unsecured loans amounting to Rs. 1,60,00,000/- from M/s Odisha Finlease Pvt. Ltd. during the relevant assessment year. The AO issued notice u/s 148(b) of the Act informing the assessee about the escapement of income and asking as to why notice u/s 148 of the Act should not be issued in the case of the assessee. According to the AO, no reply was received from the assessee and further the AO noted that the attempt to summons the Principal Officers and Directors of M/s OFPL were futile, as addresses were invalid and entity was non-functional. On the basis of the said information, the AO issued notice u/s 148 of the Act dated 04.04.2022.

2.2 During the course of assessment proceedings, the assessee was issued notice under sec. 142(1) dated 30.10.2023 calling for details regarding the financial transactions undertaken with M/s. Odisha Finlease Pvt Ltd. The assessee submitted its reply on 29.11.2023 and filed its objection against the proceeding u/s 148 of the Income Tax Act, 1961. The AO notes that the objection of the assessee was duly addressed and disposed of and communicated to the assessee on 25.01.2024.

2.3 Further, the AO noted that the assessee had submitted that it was a partnership firm formed on 26.12.2017 and was engaged in the trading of stainless-steel sheets and utensils. In respect of unsecured loan of Rs. 1,60,00,000/- it was submitted by the assessee that the unsecured loan was taken from Odisha Finlease Pvt. Ltd. by cheque only which were duly recorded in the audited books of accounts. It was further submitted that as per the copy of the ledger account attached the loan of Rs. 1,60,00,000/- had been taken on different dates, on which the interest of Rs. 1,71,543/- had been paid excluding TDS and TDS has also been deducted and deposited with the department and the amount of loan outstanding as on 31.03.2018 as per the audited account was Rs. 1,61,71,543/-, which was repaid during the year 2018-19. The assessee also submitted that all the transactions of amount received through banking channel recorded in the bank statement attached which shows that the transactions were genuine.

2.3 However, the AO noted that on perusal of TDS Database as per Insight Portal, it was observed that various dummy companies have provided loans and have received interest on which TDS was deducted under Section 194A of the Act by the beneficiary parties. The AO noted that such an arrangement was made only to provide legitimacy to accommodation entries and the assessee was one such entity, which had received loan during the F.Y. 2017-18 relevant to the A.Y. 2018-19. The AO further observed that from the MCA database, it was seen that Sri Aditya Jain was one of the Director of this company during the period of 04.01.2016 to 20.02.2018, when the loan was extended to the assessee. The AO also noted that during the course of assessment proceedings, the assessee submitted that there was no such loan agreement and further failed to provide the financials of the company Odisha Finlease Private Limited. Further, notice u/s 133(6) was issued by the AO to Odisha Finlease Private Limited on 11.01.2024 requesting it to furnish the details of the financials of the company, copy of loan agreement with Divya Enterprises, details of loans sanctioning authority, copy of bank account, with other details pertaining to the loan transaction. According to the AO, the company Odisha Finlease Private Limited did not furnish any details in this regard. The AO noted that the assessee accepted the transactions but contended that the unsecured loan was repaid and the said transaction cannot be treated as entry, but the AO rejected the above claim of the assessee on the ground that as the books of the assessee have the credit entries as ‘unsecured loans’ for which no credible explanation is offered by the assessee, the addition is made under ‘Unexplained Cash Credits. Thereafter, the AO observed that as the creditworthiness of the company for the magnitude of the sum involved has not been proved and as the genuineness of the transactions remained dubious, the said transactions was proposed to be disallowed. Accordingly, a show cause Notice dated 07.03.24 was issued to the assessee company proposing to make addition as above and calling for its objections, if any, to the same on or before 13.03.2024. The AO further noted that the assessee did not respond to the Show-Cause Notice dated 07.03.2024. Accordingly, the AO added the sum of Rs. 1,60,00,000/- under section 68 of the Act and also disallowed a sum of Rs. 1,90,603/- being the interest paid on the said loans. The relevant extract of the said order is reproduced as under:

“Investigations revealed discrepancies in the functioning and credibility of Odisha Finlease Private Limited and other related entities. These companies were found to be mere conduits for routing funds and providing accommodation entries, lacking genuine business activity or substantial assets. Directors frequently changed, and the company exhibited poor financial profiles and dubious expenses.

Proceedings has been initiated against the beneficiaries of these transactions. including the assessee, who had received an unsecured loan of Rs. 1,60,00,000/-from Odisha Finlease Private Limited. The assessee claimed that the loan was legitimate, supported by audited books of accounts, TDS deductions, and repayment records. However, subsequent, notices were issued to the assessee demanding further documentation to prove the creditworthiness of Odisha Finlease Private Limited. The assessee failed to prove the creditworthiness of the company.

As the creditworthiness of the company for the magnitude of the sum involved has not been proved and as the genuineness of the transactions remained dubious, the said transactions are proposed to be disallowed

As the books of the assessee have the credit entries of Rs. 1,60,00,000/- as ‘unsecured loans for which no credible explanation is offered by the assessee, the addition is made under ‘Unexplained Cash Credits’. Therefore, the amount of Rs. 1,60,00,000/- is proposed to be treated as ‘Unexplained cash credit’ under sec.68 of the IT Act, 1961. It is further observed that against the claimed unsecured loan, the assessee has claimed interest expenses of Rs. 1,90,603/-, hence this amount is proposed to be disallowed and added to the total income of the assessee.

A show cause Notice dated 07.03.2024 was issued to the assessee proposing to make addition as above and calling for its objections, if any, to the same on or before 13.03.2024.

3.5. Synopsis of the reply of the assessee to SCN and additional SCN (If any): The assessee has not responded to the Show-Cause Notice dated 07.03.2024. 3.6. Summary of information evidence collected after SCN (if any):

NA

3.7. Point-wise rebuttal of reply of the assessee including analysis of any case law relied upon:

3.8. Conclusion drawn:

3.8.1. From the facts narrated above, it could be seen that the assessee has failed in furnishing the full details called for. As discussed in para 3.4.1 above, the claimed interest expenses of Rs. 1,90,603/-, is disallowed & added to the total income of the assessee and the amount of Rs.1,60,00,000/- is treated as ‘Unexplained cash credit’ under sec.68 of the IT Act, 1961.

This unit is satisfied that the assessee has under reported its income for the AY-2018-19, hence, penalty proceeding u/s 270A of the Act, is initiated, separately, for under reporting of income in consequence of misreporting. Further, Penalty proceedings under sec.271AAC is initiated for income determined under sec.68 of the Income Tax Act, 1961.”

3. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee and confirmed the addition of Rs. 1,60,000/- u/s 68 of the Act and the disallowance of interest on the said loan amounting to Rs. 1,90,603/-. The relevant extract of the order of the Ld. CIT(A) is reproduced as under:

“ 6.16 The appellant has not disputed that it availed ‘unsecured loan’from Odisha Finlease Ltd. As per the books of the appellant, the appellant received loan of Rs. 1,60,00,000 from Odisha Finlease (P) Ltd between January 2018 and March 2018. On March 31st 2018, the appellant has credited interest of Rs. 1,71,543 in the account. The appellant argues that the transactions were genuine and was under taken through banking channels. According to the appellant, payment of interest is additional proof for the genuineness of the transaction.

6.17 It is trite law that the assessee has to prove the identity and creditworthiness of the creditor as well as the genuineness of the transaction when a credit entry is disputed. In this case during assessment, the appellant failed to produce the loan agreement and financials of Odisha Finlease (P) Ltd. The appellant did not file confirmation from Odisha Finlease (P) Ltd. During appeal also the appellant did not produce these documents. Further the AO issued notice u/s 133(6) to Odisha Finlease (P) Ltd during assessment and this went unanswered. Further, Aditya Jain, who was a past director of the company admitted under oath that this entity was involved in accommodation entry.

6.18 Merely because transactions took place through banking channels do not make them genuine. After all, the purpose of “accommodation entry” is to give bogus transaction the colour of legitimacy by routing then through legitimate channels. In P. Mohanakala vs CIT [2007] 161 Taxman 169 (SC), the Hon Supreme Court held as under:

The findings of fact arrived at by the authorities below were based on proper appreciation of the facts, the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessees had been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. [Para 23]

6.19 In the light of the foregoing discussion, it established that the transactions with Odisha Finlease (P) Ltd is not genuine. It follows that the interest paid is also not genuine. The same was correctly disallowed. I uphold the disallowance made. Ground 3 is dismissed.

Disallowance of Interest

6.20 The appellant has failed to prove the genuineness of the Loan availed from Odisha Finlease Ltd, it follows that interest credited in the account of the Odisha Finlay Limited is also bogus. Therefore the disallowance of interest is upheld. ground 4 is dismissed.

6.21 Grounds 1, 6 and 7 are general/consequential. These grounds are not separately adjudicated.

4. Aggrieved with the said order, the assessee is in appeal before us on the following grounds of appeal:

“ 1. The Ld. CTT(A) has erred in confirming the assessment Order passed by the Ld. AO.

2. The Ld. CIT(A) has erred in confirming the 148 proceedings initiated by the Ld AO without considering the submissions of the Appellant that no material is provided or any cross examination of the person whose statement is relied upon is provided.

3. The Ld. CIT(A) has erred in confirming the addition of Rs. 1,60,00,000 under section 68 treating the said mount as unexplained cash credits from Odisha Finlease Private Limited as bogus without any corroborative evidence on record and not considering the submissions

4. The Ld. CIT(A) has erred in confirming the disallowance of expenses of Rs 1,90.603 as claimed by the Appellant for interest paid on loan of Rs 1,60,00,000 to Odisha Finlease Private Limited after deduction of TDS

5. The order of Ld. CIT is against law, facts and circumstances of the case

6. The appellant craves leave to add alter, amend, modify or delete all or any of the Grounds of appeal on or before the date of hearing of appeal.”

5. The Ld. AR filed a written submission common for both the A.Ys. i.e. 2018­19 and 2019-20 and relied upon the same. The relevant extract of the written submission of the Ld. AR is reproduced as under:

“1. The appellant is a partnership firm engaged in the business of stainless steel sheets and utensils. The firm came into existence on 26.12.2017 and the business is closed on 31.3.2019 on account of disputes among the partners.

2. The above cases are reopened u/s 148 on account of search carried on unrelated third party K.K.Spun India Limited, during post search statement of Mr. Aditya Jain was recorded who admitted that he is a entry operator and provide unsecured loans through certain group of companies During the Fin. year 2017-18 the appellant had taken loan of Rs. 1,60,00,000 from M/s Odisha Finlease Private Ltd. which is allegedly controlled by Aditya Jain, hence notice u/s 148 is issued dated 4.4.2022 .The appellant has paid interest on loan and also repaid the entire loan in the next year itself i.e F.Y. 2018-19 and also deducted TDS as per law. (PB 104 and 253)

3. As the business was closed on 31.3.19 and the rented premises was vacated, hence no notice u/s 148 was received and the compliance is made on receipt of phone call from AO and replies were filed, which are not considered and the following additions are made in Α.Υ. 2018-19

4. No material relied upon by the AO has been provided to the appellant either on initiation of proceedings with notice u/s 148A(b) or with the notice u/s 148. The request has been made vide reply dated 29.11.23 to a) Provide the statements of Aditya Jain (PB 91) and b) To provide the cross examination of Aditya Jain (PB 96)

5. The AO provided the following with the disposal of objections vide letter dated 27.1.24

a. Statement of Aditya Jain (only some selected pages) PB 301-312

b. Investigation report undated (PB 313-327)

and No cross examination of Aditya Jain is allowed till date.

6. The reassessment proceedings was initiated by JAO ward 34(1) New Delhi and the assessment is completed by NFAC, which is contrary to section 151A introduced for Faceless Assessment (wef 1.11.2020). Section 151A mandates that all notices u/s 148 and proceedings can be conducted through Faceless assessment system only. The e-Assessment of Income Escaping Assessment Scheme 2022 is notified vide notification no. 18/2022 wef. 29.3.2022 PB 103 (PB118-122) ne Notice u/s 148 is issued on 4.4.2022 by JAO and the notification no. 18/2022 came into existence wef. 29.3.2022, (prior to the issue of notice by JAO) hence the proceedings are illegal.

Hexaware Technologies Ltd. VS. ACIT (2024) 162 taxmann.com 225/464 ITR 430 and Kankanala Ravindra Reddy Vs. ITO (2023)156 taxmann.com 178/295Taxmann 652 (Telangana).

7. Submissions before AO and CIT(A)

a. No notice u/s 148 received.

b. No material for the reopening provided with the show cause notice in view of the judgement in the case of Ashish Agarwal

c. The statement of Aditya Jain (selected) was given on 27.1.24 and there is no mention of the name of the appellant

d. No cross examination provided inspite of specific request during the assessment stage.

e. In the statement copy of Aditya Jain provided to us, there is no mention of Odessa Finlease Pvt. Ltd. From which the appellant has taken the loan except its bank account number

f. The investigation report by the ADI provided to us is UNDATED and nothing adverse is mentioned about the Odessha Finlease Pvt. Ltd and showing the Equity and reserves for Rs. 90 crores and only the list of shareholders is given.

g. No finding or investigation for holding it as a entry operator is given

h. The loan was taken through banking channel and also repaid in next year itself with interest and TDS deducted. The balance amount as on 31.3.2019 Rs. 947919 was also paid on 16.8.2019 by cheque.

i. The proceedings are illegal and void in view of the notification no. 18/2022 dated 29.3.22 being notice dated 4.4.2022 is issued by JAO and not by NFAC and the judgements on the issue.

Case Law Relied upon

Copy of statement relied and cross examination.

1.Krishna Chand Chela Ram Vs CIT 125ITR 713(SC) Held that cross examination is must where AO relles upon the statement of the Third party unconnected with the appellant.

2. Andaman Timber Industries Vs. Commissioner of Central Excise. Appeal NO. 4228 of 2006 dated 2.9.15

Held: If there was no material with the Department on the basis of which it could justify its action and if the statement of two witnesses who were unknown to the appellant was the only basis of issuing show cause notice, right to cross examination has to be given and held that we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the department on the basis of which it could justify its action.

3. CIT v. Odean bullders Private Limited 418 ITR 315(SC) Disallowed the appeal of the revenue as disallowance was based solely on the third-party information statement and cross examination is also not provided.

4. PCIT Vs Ace Technologies Ltd (2023)154 taxmann.com45 SC

Where no incriminating material had been found during search and brought on record by Assessing Officer and Investor companies had ample funds to make investment in share capital of assessee, addition made under section 68 on account of share application money was to be deleted

4. Principal Commissioner of Income-tax v. Kishore Kumar Mohapatra*[2024] 162 taxmann.com 5 (SC) SLP dismissed against order of High Court that where Assessing Officer denied exemption claimed by assessee under section 10(38) on long-term capital gain on sale of shares on basis of statement of entry operators recorded on various dates in some other proceedings not connected with assessee and no opportunity to cross-examine so-called entry providers was given to assessee thereby violating principles of natural justice, Tribunal was justified in deleting addition made by Assessing Officer

5. Dazzling Corporation Pvt. Ltd. VS. ITO ITA 3771/D/2023 dated 26.3.25 it is held that” Besides, the loan itself having been repaid, the assesse does not ultimately stand to gain any spurious benefit from the alleged unexplained cash credit. such fact justify the plea of the assesse towards existence of bonafides in the transactions.”

6. ITO VS. AJ energy Pvt. Ltd. ITA 6338/D/2017 dated 27.3.2025.” (emphasis supplied by us)

5.1 The Ld. AR also filed a written submission on 11.03.2026 summarizing its submissions during the course of hearing and the relevant extract of the same is reproduced as under:

“4. It is allegedly that Odisha Finlease Ltd. is controlled by Aditya Jain. As per the extracted copy of statement of Adity Jain provided and placed at PB 301-312

a. At PB 307 answer to Q.no. 65 he has named some other persons Mohit Khandelwal who manage the other companies and his involvement is only upto the entries provided to K.K.Spun Ltd.

This shows that he is not involved with Odisha finlease Ltd.

b. The only reference of this company is at page 310 where the name and bank details of this company are given.

c. There is no mention of Appellant Divya Enterprsies in the statement provided and also in the report of the Investigation wing.

d. No cross examination of Aditya Jain is given which is requested as per PB 96.

e. In the Investigation report PB 313-327, no finding that the Odisha finlease is doing work of accommodation entry. The financials of this company are given at PB 314 for 7.88 cr as Reserves and 8.01 cr. As equity. The report gives direction to the AO to reopen the cases and make the addition of loans and disallow the expenses. Which shows that the reopening is on the third party satisfaction.

5. In the Asst. year 2019-20, the entire loan is repaid with interest and TDS deducted PB 253 and 300-A.

6. The proceedings are illegal and void in view of the notification no. 18/2022 dated 29.3.22 being notice dated 4.4.2022 is issued by JAO and not by NFAC and the judgements on the issue. PB 252.

Hexaware Technologies Ltd. VS. ACIT (2024) 162 taxmann.com 225/464 ITR 430 and Kankanala Ravindra Reddy Vs. ITO (2023)156 taxmann.com 178/295Taxmann 652 (Telangana).

7. The notice u/s 148 is issued dated 4.4.2022. The appellant has paid interest on loan and also repaid the entire loan in the next year itself i.e F.Y. 2018-19 and also deducted TDS as per law. The last payment being made on 16.8.2019 much before the notice issued u/s 148. (PB 104 and 253, 300 A). The entire loan with interest is repaid Dazzling Corporation Pvt. Ltd. Vs. ITO ITA 3771/D/2023 dated 26.3.25 Pare 8.5 page 6 (copy filed)

it is held that “Besides, the loan itself having been repaid, the assesse does not ultimately stand to gain any spurious benefit from the alleged unexplained cash credit. such fact justify the plea of the assesse towards existence of bonafides in the transactions.”

6. The ld. Sr. DR relied upon the order of the authorities below.

7. We have heard both the parties and perused the material available on record. In this case the assessee had taken an unsecured loan of Rs. 1,60,00,000/- during the year from M/s OFPL and had also paid an interest of Rs. 1,71,543/- in its books of accounts to M/s OFPL. On perusal of the assessment order, it is seen that the AO added the unsecured loan of Rs. 1,60,00,000/- on two counts firstly on the basis of information from the investigation wing which stated that M/s OFPL was not found at the given address and summons issued to the Principal Officers and Directors of M/s OFPL were futile, as the addresses were invalid and entity was non-functional and that it was a dummy company of Shri Aditya Jain as admitted by him. Further, the AO has relied upon various other information as received from the investigation wing and discussed in the assessment order and also summarised by us earlier in this order. In this regard, the main grievance of the assessee was that it was not provided with the full copy of the statement of Shri Aditya Jain and was also denied to cross examine Shri Aditya Jain and also the fact that the said loan was repaid in the next financial year i.e. FY 2018-19 and therefore, the unsecured loan of Rs. 1,60,00,000/-taken by the assessee cannot be an accommodation entry. The above submission of the assessee has been carefully considered. The plea of the assessee that the fact that the said loan was repaid in the next financial year i.e. FY 2018-19 and therefore, the unsecured loan of Rs. 1,60,00,000/- taken by the assessee cannot be an accommodation entry is not acceptable in view of the fact that the provisions of section 68 of the Act gets attracted when the any of the three conditions for establishing an entry in the books of account i.e. identity, creditworthiness of the creditor or the genuineness of the transaction is not established and in such a situation the subsequent repayment of the said unsecured loan cannot be a ground for accepting as a genuine loan. In this case, as noted by the AO during the post search investigation by the investigation wing M/s OFPL was not found at the given address and summons issued to the Principal Officers and Directors of M/s OFPL were futile, as the addresses were invalid. Further, the AO during the course of assessment proceedings also the AO issued notice u/s 133 (6) of the Act to Odisha Finlease Private Limited on 11.01.2024 requesting it to furnish the details of the financial of the company, copy of loan agreement with Divya Enterprises, details of loans sanctioning authority, copy of bank account, with other details pertaining to the loan transaction. According to the AO, the company Odisha Finlease Private Limited did not furnish any details in this regard. Therefore, as discussed above, the identity, creditworthiness of the creditor i.e. OFPL and the genuineness of the transaction is not established by the assessee in terms of requirements of section 68 of the Act. However, it is seen that the assessee had furnished the following details before the AO which are also placed at the paperbook as per the following details;

7.1 Thus, it is seen that the assessee has furnished some basic details about the identity of M/s OFPL by furnishing its MCA details and the ledger account of OFPL for financial year 2017-18 and 2018-19 and the copy of bank statement showing that the receipt of the unsecured loan was through banking channels. Therefore, in the interest of justice and to give one more opportunity to the assessee to establish the genuineness of the transaction in terms of section 68 of the Act as discussed above, we set aside the order of the Ld. CIT (A) and restore the matter to the file of the AO for deciding the issue afresh keeping in view above observations after giving reasonable opportunity of being heard to the assessee and in accordance with law. In the result ground no. 1 to 3 of the appeal are allowed for statistical purposes.

7.2 Further, the assessee will also be at liberty to furnish any details/evidence in support of its claim.

8. Ground no 4 of the appeal is against the disallowance of expenses of Rs 1,90.603/- as claimed by the assessee for interest paid on loan of Rs 1,60,00,000/- to Odisha Finlease Private Limited after deduction of TDS. This ground being consequential in nature to the ground no. 1 to 3 of the appeal, this ground of appeal is also restored to the file of the AO for deciding the issue afresh after giving reasonable opportunity of being heard to the assessee and in accordance with law.

8.1 In the result, appeal of the assessee in ITA No. 4994/Del/2025 is allowed for statistical purpose.

ITA No.- 4995/Del/2025 for A.Y. 2019-20

9. The relevant extract of the order of the AO is reproduced as under:

“The assessee has taken unsecured loan of Rs. 1,60,00,000/- during the F.Y 2017-18 relevant to A.Y 2018-19 and for which no credible explanation is offered by the assessee. During the year under consideration i.e. AY 2019-20, the assessee has claimed interest expenses of Rs. 10,29,307/-

From the facts narrated above, it could be seen that the assessee has failed in furnishing the full details called for. As discussed in para 3.4.1 above, the expenses incurred towards interest payment of Rs. 10,29,307/- during the A.Y 2019-20 is disallowed and added to the total income of the assessee.”

9.1. The same was confirmed by the Ld. CIT(A) following its reasoning for A.Y. 2018-19. Aggrieved with the said order the assessee is in appeal before us on the following grounds of appeal :

“ 1. The Ld. CTT(A) has erred in confirming the assessment Order passed by the Ld. AO.

2. The Ld. CIT(A) has erred in confirming the 148 proceedings initiated by the Ld AO without considering the submissions of the Appellant that no material is provided or any cross examination of the person whose statement is relied upon is provided.

3. The Ld. CIT(A) has erred in confirming the disallowance of expenses of Rs 10,29,307/- as claimed by the Appellant for interest paid on loan of Rs 1,60,00,000 to Odisha Finlease Private Limited after deduction of TDS

4. The order of Ld. CIT is against law, facts and circumstances of the case

5. The appellant craves leave to add alter, amend, modify or delete all or any of the Grounds of appeal on or before the date of hearing of appeal.”

10. The Ld. AR also admitted that the facts are same and submitted as under:

“Asst. year 2019-20.

The facts are same.

During the yar No fresh loan is taken and only there is repayment of entire loan and

payment of interest after TDS PB 253, 300A_

The addition is made for the interest paid amounting to Rs. 10,29,307”

11. The ld. Sr. DR supported the orders of the authorities below.

12. We have heard both the parties and perused the material available on record. Ground no 3 of the appeal is against the disallowance of expenses of Rs 10,29,307/-as claimed by the assessee for interest paid on loan of Rs 1,60,00,000/- to Odisha Finlease Private Limited after deduction of TDS. Since, the disallowance of Rs. 1,60,00,000/- has been set aside in assessee’s own case for 2018-19 as discussed above, we, therefore, restore the disallowance of Rs. 10,29,307/- to the file of the AO for deciding the issue afresh after giving reasonable opportunity of being heard to the assessee and in accordance with law. In the result ground no. 1 to 4 of the appeal are allowed for statistical purposes.

12.1 In the result, appeal of the assessee in ITA No. 4995/Del/2025 is allowed for statistical purposes.

13. To sum of both the appeal of assessee in ITA No. 4994 & 4995/Del/2025 are allowed for statistical purposes.

Order pronounced in the open Court on 21 .05.2026.