Case Law Details
DCIT Vs Shomit Finance Limited (ITAT Delhi)
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) dated 23.10.2025 for Assessment Year 2020-21, challenging the deletion of additions under Sections 68 and 69C of the Income Tax Act, 1961. The Assessing Officer had treated loans of ₹1,49,50,000 received from two companies as accommodation entries and made further additions towards alleged commission and unexplained interest expenditure. The Revenue contended that the lenders were connected with alleged entry operators and that the transactions were non-genuine.
The CIT(A) examined the assessment order, the assessee’s submissions and the documentary evidence. The assessee had produced confirmations, PAN details, income tax returns, loan agreements, bank statements, TDS certificates, audited financial statements of the lenders, and evidence showing that the loans were received and subsequently repaid through banking channels with interest after deduction of TDS. The assessee also contended that the Assessing Officer had not demonstrated any specific cash deposits linked to the impugned loans and had relied on third-party statements without providing an opportunity for cross-examination.
The CIT(A) held that the assessee had established the identity of the creditors, their creditworthiness and the genuineness of the transactions. It observed that the loans, interest payments and repayments were made through banking channels and that the Assessing Officer had not produced credible evidence directly linking the impugned loans with accommodation entries. Accordingly, the CIT(A) deleted the addition of ₹1,49,50,000 under Section 68, the addition of ₹2,65,488 under Section 69C relating to interest expenditure, and the addition of ₹4,48,500 under Section 69C towards alleged commission.
The ITAT found that the CIT(A) had properly considered the evidence regarding receipt and repayment of the loans through banking channels. It observed that the Assessing Officer had proceeded mainly on suspicion arising from statements of alleged entry operators without independently establishing any connection between the assessee and the alleged shell companies in the impugned transactions. The Tribunal held that the CIT(A) had rightly examined the material evidence and concluded that the loans were not mere accommodation entries. Finding no reason to interfere with the CIT(A)’s conclusions, the Tribunal rejected the Revenue’s grounds and dismissed the appeal.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the revenue against the order dated 23.10.2025 of the Ld. Commissioner of Income Tax (Appeals)-29 (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No.: CIT(A), Delhi-29, 10767/2019-20 arising out of the assessment order dated 27.02.2025 u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, Central Circle-27, New Delhi for AY: 2020-21 and the following grounds are raised;
“1 Whether Ld. CIT erred in deleting the addition u/s 68 of the IT Act being accommodation entry in form of loan to the tune of Rs.1,49,50,000/ in lieu of cash and 3 percent commission of Rs.7,13,988/- being added as per section 69C.
2. The Ld. CIT failed to appreciate that Shri Himanshu Verma and Shri Deepak Agarwal are known entry operators and have been actively engaged in providing organized accommodation entries through their associated entities for a long period, despite multiple search and investigation proceedings conducted against them. These entities have consistently participated in such activities without any regard to the law.
3. The Ld. CIT did not consider the fact that the non-descript entities connected with Shri Himanshu Verma are merely conduits for non-genuine transactions in the nature of accommodation entries such as bogus loans/purchases/sales. These transactions were executed in a sophisticated manner by using a network of bank accounts and manipulated books of accounts to give a color of genuineness.
4. The Ld. CIT failed to appreciate that the existence of such entities at the stated addressescould not be verified, indicating their sham and non-functional nature.
5. The Ld. CIT as well as the Hon’ble ITAT have already confirmed that these entities are accommodation entry providers, which clearly establishes their dubious and non-genuine nature.
2. Ld. DR has relied the impugned assessment order and has further submitted that Himanshu Verma is an established entry operator and numerous decisions have come from Tribunal wherein this fact has not been disputed.
3. We find that material is extensively dealt by the ld. CIT(A) and for convenience we reproduce the relevant part of impugned order here in below;
“2. Ground No. 2: is regarding addition of Rs. 1,49,50,000/- u/s 68 of the Act made by the AO. During the year under consideration, the appellant received loan of Rs. 99,50,000/- from M/s LVS Financial Services Pvt. Ltd. and Rs. 50,00,000/- from M/s CEA Consultant Pvt. Ltd.The loans received by the appellant were treated as cash credit u/s 68 of the Act.
3. I have carefully considered assessment order and relevant submissions filed by appellant along with paper book. The loan of Rs. 99,50,000/- from M/s LVS Financial Services Pvt. Ltd. and Rs. 50,00,000/ – from M/s CEA Consultant Pvt. Ltd. received by appellant, were treated as cash credit. The findings made by AO, submissions made by appellant, counter argument of appellant on evidences relied upon by AO while making additions, other relevant facts and relevant decisions are discussed herein above while adjudicating above addition made in case of appellant.
4. A search and seizure operation was conducted on Galaxy Group entities on 17.11.2021 and on SMC Group on 20.07.2022. Information in respect of appellant was received by AO through CRIU/VRU module. While making impugned addition, AO in the assessment order has discussed the information received, various materials found during the course of search, statements of various persons recorded during the course of search and financial analysis of various companies owned and managed by Sh. Himanshu Verma and Others (alleged entry providers). The AO has contended that appellant has taken loan from shell companies owned and managed by Sh. Himanshu Verma.
5. The appellant submitted detailed submission. Summary of written submissions filed by the appellant and the documents placed on record is as under: –
i. The loans from the above-mentioned entities were received by appellant through banking channels i.e. account payee cheque/NEFT/RTGS.
ii. Confirmations, PAN, ITs, copy of relevant loan agreements, copy of bank statements highlighting the transactions, TDS Certificate for interest payments and audited financials of the lenders were furnished.
iii. The payment of interest was made during the year after deducting relevant TDS and repayment of these loans were made in the subsequent year i.e. A.Y. 2021-22, that too by banking channels, which. further evidences the genuineness of the transactions.
iv. The AO has not demonstrated any specific cash deposit linked to the appellant or lenders to support the allegation of accommodation entry.
v. Reliance was placed by AO on statements of third parties which were either vague, obtained under duress, or unrelated to the appellant. No opportunity for cross-examination was afforded, violating principles of natural justice.
6. I have carefully considered the facts of the case, the contentions of the appellant, the findings recorded by the AO, and the judicial precedents relied upon. The central issue is whether the loans of Rs. 99,50,000/ – from M/s LVS Financial Services Pvt. Ltd. and Rs. 50,00,000/- from M/s CEAConsultant Pvt. Ltd. received by the appellant, can be treated as unexplained u/s 68 of the Act, despite the fact that the loans were subsequently repaid through banking channels and were supported by confirmations, ITRs, financials and other documentary evidences.
7. It is now a settled position of law that for making an addition u/s 68, the assesseeis required to prove: (i) identity of the creditor, (i) creditworthiness of the creditor, and (iii) genuineness of the transaction. Once these three pillars are duly established, the burden shifts to the revenue to bring contrary evidence to disprove the assessee’s claim. In the present case, the appellant has discharged the primary onus by furnishing PAN details, income-tax returns, financial statements, confirmation letters, bank statements. Furthermore, the loans were repaid in full during the subsequent year, thereby negating the suspicion of any layering or retention of unexplained cash.
8. It is pertinent to refer here to the judgment of the Hon’ble Gujarat High Court in the case of CIT v. Rohini Builders [2002] 256 ITR 360 (Guj), wherein it was held that where the loans are received by account payee cheque, confirmations are filed, and repayments are also made, no addition u/s 68 can be sustained, even if the creditworthiness of the lender is not conclusively established. The court emphasized that mere non-enquiry into the affairs of the creditor cannot be the sole basis for treating the loan as unexplained.
9. Similarly, in CIT v. Green Infra Ltd. [2014] 367 ITR 102 (Bom), the Hon’ble Bombay High Court held that once a loan is repaid and the genuineness of the transaction is shown through banking channels, no addition can be made u/s 68 solely based on suspicion. In that case, the department had raised doubts on the source of the creditor’s funds, but the court rejected the revenue’s stand and held in favour of the assessee.
10. The Hon’ble Delhi High Court, in the case of CIT v. Kamdhenu Steel & Alloys Ltd. [2012] 361 ITR 220 (Del), observed that the department cannot merely reject the explanation of the assessee without conducting proper investigation. The court emphasized that where identity and transaction are supported by documentary evidence and repayment is made, no addition can be made u/s 68.
11. Moreover, the Hon’ble Delhi High Court in CIT v. Vrindavan Farms Pvt. Ltd. (2015] 63 Com.3 Del), held that where the assessee has discharged the primary onus by submitting PAN, bank details, confirmation, and proof of repayment, then the burden shifts to the AO to disprove the claim. In absence of such evidence from revenue’s side, addition u/s 68 cannot be sustained.
12. In the present case, the appellant has gone beyond the ordinary threshold. Not only has the identity and creditworthiness of the lenders been substantiated through financials, tax returns and confirmations, but also the transactions have been conclusively proved by way of repayment of loans with interest through banking channels. This fact has not been denied or disputed by the AO in the assessment order.
13. Reliance is also placed on the judgment of Hon’ble ITAT Ahmedabad in ACIT v. Bhavya Construction [2012] 139 ITD 90 (Ahd), where it was held that once the loan is repaid and all necessary documents are filed, the transaction is deemed genuine and cannot be rejected based on mere suspicion or absence of fixed repayment terms.
14. Further, in CIT v. P. Mohankala [2007] 291 ITR 278 (SC), the Hon’ble Supreme Court laid down that where the explanation offered by the assessee is reasonable and supported by evidence, and where no material has been found to suggest otherwise, then the addition cannot be sustained u/s 68.
15. Further the Hon’ble Delhi ITAT in case of Real Innerspring Technologies (P.) Ltd. v. ACIT (ITAT Delhi) vide its order dated 27-03-2025 held that 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 utilized the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs, all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. In the instant case, the assessee has submitted all the documents in support of the transaction before the Assessing Officer and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion.
16. Similar view has been taken by Hon’ble Delhi ITAT in its recent pronouncement in the case of Dazzling Construction Pvt. Ltd. Va ITO Ward-7(2), New Delhi bearing ITA No. 3771/Del/2023 and it is held that the factum of repayment quells the apprehension entertained by the Revenue.
The overriding factum of repayment of loan itself repels any form of disguise on the part of the assessee and dispels the perception of any sordid or extraneous affairs. The clinching evidences towards loan procurement discharge the primary onus which lay upon the assessee under s. 68 of the Act. Besides, the loan itself having been repaid, the assessee does not ultimately stand to gain any spurious benefit from such alleged unexplained cash credit. Such fact justifies the plea of the assessee towards existence of bonafides in the transactions. In the totality of facts, where the trail for obtaining of loan and repayment thereof is proved and the lender has duly filed its return of income encompassing the transaction carried with the assessee, the action of the Revenue cannot be countenanced in law.
17. To conclude, I find that the appellant has conclusively proved all three ingredients required u/s 68. The identity and tax status of the lenders are not in doubt. The loans were received and relevant interest payments as well as repayment of loan was made through proper banking channels. The AO has not brought any credible evidence to establish that the said loans were accommodation entry. The additions are based on general observations without any direct linkage to the appellant’s transaction.
18. In view of the above facts, evidences on record, and judicial precedents cited, I am of the considered opinion that the addition of Rs. 1,49,50,000/-made u/s 68 of the Act is unsustainable in law and on merits in this case.
The same are accordingly directed to be deleted. This ground of appeal is allowed.
19. Ground No. 3: Under this ground of appeal the appellant challenged the addition of Rs. 2,65,488/- made by AO on account of treating the interest payments on the loan availed by appellant as unexplained expenditure u/s 69C of the Act. In view of the adjudication above in para no. 5.16, where it has already been held by me that ingredients to explain the transactions of loan and genuineness of interest payment is proved by appellant, the additions of Rs. 2,65,488/- made by AO is not sustainable on merits and is directed to be deleted.
20. Further, appellant contended regarding addition of Rs. 4,48,500/-made u/s 69C of the Act. The AO has held that the appellant must have paid 3% as commission for availing accommodation entries in the form of unsecured loans of Rs. 1,49,50,000/- during the year. Such commission must have been paid in cash, therefore, the AO made additions u/s 69C of the Act.
In view of the above stated decision in para no. 5.16, wherein it has been held that there were no bogus entries taken, the addition of Rs. 4,48,500/ – does not survive. Accordingly, ground no. 3 of appeal is allowed.
4. After giving thoughtful consideration to the material on record, we find that ld. CIT(A) has taken into account the evidence filed by the assesse or receipts of the loan through banking channel and the repayment of the loans in the subsequent years as a material fact to conclude that the loan received by the assesse were genuine. We find no reason to interfere in the conclusions drawn by the ld. CIT(A) as merely on suspicion of a transaction having some connection with Himanshu Verma all transaction do not get tainted and assessing officer has merely on the broad discussion with regard to statements of Himanshu Verma & Deepak Aggarwal considered the impugned transactions of assesse to be tainted. Assessing Officer observes that the source of loan provided is from non-descript entities whose financials do not justify huge amount transferred to shell companies but how the assesse is connected to shell companies independently in the impugned transactions is not alleged. Assessing Officer has merely relied the oral statement of Himanshu Verma and others including Shailendra Kumar and thereafter drawing suspicion of assesse also being a beneficiary had made the additions and ld. CIT(A) has rightly examined all the material evidences to conclude on facts that the loans were not mere accommodation entries to be justified as addition u/s 68 of the Act. The findings of ld. CIT(A) require no interference. Grounds are rejected. The appeal of the revenue is dismissed.
Order pronounced in the open court on 05.06.2026
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