Vainkuth Pathai Bhanushali Vs ITO (ITAT Mumbai)
Mumbai ITAT: Repayment of Earlier Loan Through Banking Channel Cannot Be Taxed as Unexplained Cash Credit Under Section 68
The Mumbai ITAT deleted the addition of ₹6.50 lakh under section 68, holding that the amount represented repayment of an existing loan advanced by the assessee in an earlier financial year and not a fresh unexplained credit. The Tribunal found that the assessee had advanced the loan to the borrower through banking channels in FY 2020-21, regularly accounted for the interest income over subsequent years, and received repayment through the banking channel during the relevant assessment year. The assessee had also produced loan confirmations, ledger accounts, bank statements, PAN, income-tax returns, and financial particulars of the borrower. The addition had been made solely on the basis of information gathered during search proceedings in another group alleging accommodation entries, without any independent evidence of cash movement, without furnishing the relied-upon statements, and without granting the assessee an opportunity to cross-examine the persons whose statements were relied upon. Holding that mere repayment of an earlier genuine loan cannot be treated as an unexplained cash credit, particularly in the absence of any evidence showing cash circulation or accommodation entries, the Tribunal deleted the addition under section 68 and allowed the appeal.
