Retracted Statement Alone Cannot Justify Section 68 Addition: ITAT Deletes Accommodation Loan Additions

ITO Vs Rubberwala Shelter (ITAT Mumbai)

Retracted Statement Alone Cannot Justify Section 68 Addition; ITAT Deletes Alleged Accommodation Loan Additions

In a significant ruling, the Mumbai ITAT upheld the deletion of additions made under section 68 in respect of alleged accommodation loans received from entities linked to the Bhanwarlal Jain group. The Assessing Officer had treated unsecured loans of ₹1.45 crore as unexplained cash credits and also disallowed related interest expenditure of ₹10.28 lakh, primarily relying on the statement of a partner/director recorded during survey proceedings wherein he had allegedly admitted that certain loans were accommodation entries.

The Tribunal noted that the assessee had furnished extensive documentary evidence including loan confirmations, lender PAN details, income-tax returns, audited financial statements, bank statements, ledger accounts, and TDS certificates evidencing deduction of tax on interest payments. The assessee had also demonstrated that the loans were received and repaid through banking channels. Further, the statement relied upon by the Revenue had subsequently been retracted through a sworn affidavit, wherein it was explained that the admission was made under stress and without proper understanding of the facts.

Relying on Gujarat High Court decisions, the Tribunal held that once the assessee establishes the identity of the lender, creditworthiness, and genuineness of the transaction, and the loans have been repaid through banking channels, additions under section 68 cannot be sustained merely on suspicion or on the basis of a statement that stands retracted. The Tribunal emphasized that no incriminating material directly disproving the loan transactions had been brought on record by the Revenue.

Accordingly, the Tribunal held that the assessee had successfully discharged the burden cast under section 68 and that the Assessing Officer was not justified in treating the loans as bogus accommodation entries. The deletion of the ₹1.45 crore loan addition and the corresponding interest disallowance was therefore upheld, and all the Revenue’s appeals were dismissed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These appeals have been preferred by the Revenue against the orders dated 15.09.2025 & 17.09.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2012-13 & 2013-14.