Case Law Details
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.
Cases Discussed
- Real Innerspring Technologies (P.) Ltd. v. ACIT (ITAT Delhi), [2025] 174 com1130 (Delhi – Trib.) IT APPEAL NO.647 (DEL) OF 2023 [ASSESSMENT YEAR 2016-17]
- Principal Commissioner of Income-tax v. Merrygold Gems (P.) Ltd. (Gujarat High Court), [2024] 164 com764 (Gujarat) R/TAX APPEAL NO. 811 OF 2023+ JUNE 11, 2024
- Ravindra Madanlal Khandelwal v. Deputy Commissioner of Income-tax (ITAT Nagpur), [2024] 169 com457 (Nagpur – Trib.) IT APPEAL NO. 375 (NAG.) OF 2024 [ASSESSMENT YEAR 2018-19]
- Principal Commissioner of Income-tax v. Ambe Tradecorp (P.) Ltd. (Gujarat High Court), [2022] 145 com27 (Gujarat) R/TAX APPEAL NO. 306 OF 2022
- Rajhans Construction (P.) Ltd. v. ACIT (ITAT Surat), [2022] 140 com370 (Surat-Trib.) IT APPEAL NO. 1450 (AHD.) OF 2016 [ASSESSMENT YEAR 2007-08]
- Commissioner of Income-tax, Rajkot-I v. Ayachi Chandrashekhar Narsangji (Gujarat High Court), [2014] 42 com251 (Gujarat) TAX APPEAL NO. 992 OF 2013+ DECEMBER 2, 2013
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Both the appeals have been filed by the assessee against the respective orders of the learned CIT(A), NFAC, dated 01-Jan-1970 and 17-Dec-2025 for the Assessment Year 2023-24.
2. At the very outset, the Ld. AR appearing on behalf of the assessee stated at the Bar that he did not want to pursue the appeal in ITA No. 1761/MUM/2026 (AY: 2023-24), as the same was inadvertently filed by the assessee. Therefore, considering the statement of the Ld. AR made at the Bar, this appeal, i.e., ITA No. 1761/MUM/2026 (AY: 2023-24), stands dismissed as withdrawn.
3. Now, I proceed to decide ITA No. 3354/Mum/2026 on merits. The assessee has raised following grounds of appeal:
1) The learned CIT(A) has erred in confirming the addition of genuine loan of Rs. 6,50,000/- without appreciating the submissions made and judicial decisions.
2) The Learned CIT(A) erred in making the addition as unexplained u/s 69A the genuine loan on the basis of mere suspicion and surmises, and not based on facts or evidence. He failed to bring any evidence on record supporting his conclusions or controverting the evidence submitted by the appellant.
3) The Learned CIT(A) has ignored the fact that the assessment was made without providing the statements; relevant seized materials & opportunity to cross-examine the person(s) on whose statement the addition was made.
4. At the outset, I noticed that there is a delay of approximately 25 days in filing the present appeal Bench. Considering the entire factual position as explained before Bench and also keeping in view the principles laid down by the Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors. [1987 AIR 1353 (SC)], wherein it has been held that where substantial justice is pitted against the technicalities of a non-deliberate delay, substantial justice is to be preferred, I am of the view that the principle of advancing substantial justice is of prime importance. Hence, considering the explanation put forth by the assessee, who has justifiably and properly explained the delay that occurred in filing the appeal, and construing the expression “sufficient cause” liberally, I am inclined to condone the delay in filing the appeal before Bench. Consequently, the delay is condoned, and the appeal is admitted for hearing on merits.
5. All Grounds Nos. 1 to 3 raised by the assessee are interrelated and interconnected and relate to challenging the order of the Ld. CIT(A) in confirming the addition of Rs. 6,50,000 made by the AO under Section 68 of the Income Tax Act. Therefore, these grounds are adjudicated through the present consolidated order.
6. We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, it is noticed that the AO made the addition of Rs. 6,50,000 by treating the credit received by the assessee from Smt. Rinku Vinod Bhanushali as unexplained.
7. After having meticulously gone through the documents placed on record and appreciating the facts of the case, I noticed that the assessee had advanced a loan of Rs. 6,50,000 to Smt. Rinku Vinod Bhanushali through the banking channel on 28.09.2020, in respect of which interest was also being paid by the said Smt. Rinku Vinod Bhanushali, which was regularly reflected and accounted for by the assessee in Financial Years 2020-21, 2021-22, and 2022-23. Ultimately, the loan of Rs. 6,50,000 was repaid by Smt. Rinku Vinod Bhanushali to the assessee on 27.03.2023 through the banking channel. In this regard, the assessee has placed on record documents in the shape of the ledger account, confirmation, bank statements of both parties, PAN, ITR, and financial particulars of Smt. Rinku Vinod Bhanushali in order to substantiate its case.
8. I also notice that the addition in this case was solely made on the basis of information received by the AO from the proceedings conducted in the Bhanushali Group on the ground that the assessee was involved in providing accommodation entries. Whereas, during the assessment proceedings as well as the appellate proceedings, no document evidencing any cash payment by the assessee was placed on record. Even the Ld. AO failed to point out any statement wherein the name of the assessee as a beneficiary was recorded. The AO could not bring on record any evidence of cash transactions, although the assessee, from time to time, had requested copies of the statements relied upon by the AO and sought an opportunity to cross-examine Shri Parveen, Shri Vinod Bhanushali, and Smt. Rinku Vinod Bhanushali. However, the opportunity of cross-examination was denied, and ultimately the addition was made under Section 68 of the Act.
9. I further notice that during the year under consideration, no fresh credit was reflected in the account of the assessee, rather, only the repayment of the loan advanced by the assessee in Financial Year 2020-21 was reflected. The entire transaction was supported by documentary evidence spanning over three financial years, and even the interest on the said loan was regularly accounted for and accepted by the Department.
10. I also notice that since the entire loan advanced by the assessee to the said Smt. Rinku Vinod Bhanushali was repaid through the normal banking channel, the identity of Smt. Rinku Vinod Bhanushali stands established. Moreover, she is also a regular income-tax assessee, and no material was brought on record to show that the assessee had ever paid any cash to obtain the repayment. Thus, in the absence of any documentary evidence or relevant material brought on record by the AO, in my view, the addition was made without any basis. Even otherwise, the recovery of an existing loan cannot be treated as an unexplained cash credit under Section 68 of the Income Tax Act when there is no evidence of any cash movement involving the assessee.
11. Reliance in this regard is also being placed upon the following decisions:
- [2022] 145 com27 (Gujarat) HIGH COURT OF GUJARAT Principal Commissioner of Income-tax v. Ambe Tradecorp (P.) Ltd.* R/TAX APPEAL NO. 306 OF 2022
- [2014] 42 com251 (Gujarat) HIGH COURT OF GUJARAT Commissioner of Income-tax, Rajkot-I v. Ayachi Chandrashekhar Narsangji TAX APPEAL NO. 992 OF 2013+ DECEMBER 2, 2013
- [2024] 164 com764 (Gujarat) HIGH COURT OF GUJARAT Principal Commissioner of Income-tax v. Merrygold Gems (P.) Ltd. R/TAX APPEAL NO. 811 OF 2023+ JUNE 11, 2024
- [2025] 174 com1130 (Delhi – Trib.) IN THE ITAT DELHI BENCH ‘F’ Real Innerspring Technologies (P.) Ltd. v. ACIT IT APPEAL NO.647 (DEL) OF 2023 [ASSESSMENT YEAR 2016-17]
- [2024] 169 com457 (Nagpur – Trib.) IN THE ITAT NAGPUR BENCH Ravindra Madanlal Khandelwal v. Deputy Commissioner of Income-tax IT APPEAL NO. 375 (NAG.) OF 2024 [ASSESSMENT YEAR 2018-19]
- [2022] 140 com370 (Surat-Trib.) IN THE ITAT 4 SURAT BENCH Rajhans Construction (P.) Ltd. v. ACIT IT APPEAL NO. 1450 (AHD.) OF 2016 [ASSESSMENT YEAR 2007-08]
12. Therefore, considering the totality of the facts as discussed above and also keeping in view the above cited judicial precedents, I find that the addition made by the AO under Section 68 of the Act and confirmed by the Ld. CIT(A) is not sustainable in the eyes of law and is, accordingly, directed to be deleted. Hence, the grounds raised by the assessee stands allowed.
13. In the result, appeal filed by the Assessee stands allowed.
14. In the net result ITA No. 1761/MUM/2026 (AY: 2023-24) stands dismissed and the ITA No. 3354/Mum/2026 (AY: 2023-24) stands allowed.
Order pronounced in the open court on 21.07.2026.
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