Section 68 Addition Deleted; Property Advance Received and Refunded via Banking Channels: Mumbai ITAT

JCIT Vs Aakash Projects & Infrastructure Private Limited (ITAT Mumbai)

Mumbai ITAT: Section 68 Addition Deleted as Property Advance Was Received & Refunded Through Banking Channels

The Mumbai ITAT upheld the deletion of an addition of ₹1.74 crore under section 68, holding that the assessee had satisfactorily explained the nature and source of the credit. The amount represented an advance received under a Memorandum of Understanding (MOU) for the proposed sale of immovable property, which was subsequently cancelled when the purchaser failed to pay the balance consideration. The entire advance was thereafter refunded through banking channels, and the assessee substantiated the transaction with the MOU, cancellation agreement, bank statements, ledger accounts and audited financial statements.

The Tribunal held that once the assessee had established the identity of the payer, its creditworthiness and the genuineness of the transaction through documentary evidence, the burden shifted to the Revenue. Merely relying on an adverse Investigation Wing report or the purchaser’s non-compliance with notices under sections 131 and 133(6) could not justify an addition under section 68, particularly when the Revenue failed to bring any material to disprove the assessee’s evidence.

Following its earlier decision in Akash Films Pvt. Ltd. involving identical allegations against the same party, M/s Fastline Multitrade Pvt. Ltd., the Tribunal held that receipt and subsequent repayment of the advance through banking channels, supported by contemporaneous documentary evidence, established the genuineness of the transaction. Accordingly, the Revenue’s appeal was dismissed.

Cases Discussed

• Income Tax Officer 41(3)(1) vs Mr. Bhagwati Prasad N. Rungta (ITAT Mumbai), ITA No.1574/M/2024, order dated 22.01.2025
• Commissioner of Income Tax, Central Vs. Bhupendra Champaklal Dalal (Bombay HC), (2024) 160 taxmann.com 645 (Bom.)
• PCIT vs. Ojas Tarmake Pvt. Ltd. (Gujarat HC), (2023) taxmann.com 75 (Guj.)
• M/s Akash Films Pvt. Ltd. vs ITO (ITAT Mumbai), ITA No.1762 & 1763/Mum/2011, date of pronouncement 22.11.2022
• CIT vs. Mahaveer Crimpers (Gujarat HC), 95 taxmann.com 323 (Guj. HC)
• CIT vs M/s. Skylark Build (Bombay HC), ITA No. 616 of 2016
• CIT vs. Ayachi Chandrashekhar Narsangji (Gujarat HC), 42 taxmann.com 251 (Guj.)
• DCIT vs. Rohini Builders (Gujarat HC), (2002) 256 ITR 360 (Guj.)

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The instant appeal of the revenue filed against the order of the Ld. Commissioner of Income Tax-(Appeals)-50, Mumbai [for brevity “Ld. CIT(A)], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’) for Assessment Year 2013-14, date of order 30.12.2025. The impugned order emanated from the order of the Ld. Deputy Commissioner of Income Tax Central Circle-8(3), Mumbai (for brevity ‘Ld. AO’), order passed under Section 143(3) r.w.s. 148 of the Act, date of order 29.11.2019.

2. The brief facts of the case are that the assessee filed its return of income declaring Nil total income, which was processed under section 143(1) of the Act. Subsequently, based on information received from the DDIT (Inv.), Unit 2(3), Mumbai, the case of the assessee was reopened under section 147 of the Act. During the reassessment proceedings, the Ld. AO observed that the assessee had entered into a transaction with M/s Fastline Multitrade Pvt. Ltd. (FMPL) involving an amount of Rs.1.74 crore. The assessee explained that it had executed a Memorandum of Understanding (MOU) for the sale of land to FMPL and that the said amount represented an advance received pursuant to the said MOU. However, the Ld. AO treated the assessee as a beneficiary of a bogus transaction with FMPL and, accordingly, added the amount of Rs.1.74 crore to the total income of the assessee under section 68 of the Act. Aggrieved by the reassessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the material on record, allowed the appeal and deleted the addition. Being aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before us.

3. The Ld. DR argued and stand in favor of the orders of Ld. AO. The Ld. DR contended that the assessee is the beneficiary of the bogus transaction with FMPL. So, the addition made by the Ld. AO is justified.

4. The Ld. AR argued and filed the written note. The relevant part of the written note related to his argument is reproduced as below:-

“1. The present appeal has been preferred by the Revenue against the order dated 30.12.2025 passed by the Learned Commissioner of Income Tax Appeals NFAC Delhi whereby the addition of Rs.1,74,00,000 made under section 68 of the Income Tax Act was deleted.

2. The respondent assessee company is engaged in the business of real estate development and had filed its return of income for A.Y. 2013-14 declaring Nil income. Subsequently, reassessment proceedings were initiated on the basis of information received from the Investigation Wing alleging that the assessee had received accommodation entries from entities allegedly controlled by Shri Praveen Kumar Jain.

3. During the reassessment proceedings, the Learned Assessing Officer observed that the assessee had received an amount of Rs. 1,74,00,000 from M/s FastlineMultitrade Pvt. Ltd. The assessee explained that the said amount represented advance received against sale of immovable property pursuant to Memorandum of Understanding dated 05.11.2012 for sale of property known as “Ameer Mansion” situated at Goregaon East Mumbai for total consideration of Rs.5,00,00,000.

4. The assessee further submitted that since the purchaser failed to pay the balance consideration, the Memorandum of Understanding was cancelled vide cancellation agreement dated 29.03.2013 and the entire amount of Rs.1,74,00,000 received earlier was repaid through banking channels during the same financial year itself without any interest.

5. The bank statement highlighting the transaction of receiving the money in as follows

6. Further the repayment has been done in the following manner:

7. During the assessment proceedings, the assessee furnished complete documentary evidences including copy of Memorandum of Understanding, cancellation deed, ledger accounts, bank statements, audited financial statements and PAN details of the party. The entire transaction was routed through proper banking channels and duly reflected in the books of account.

8. However, the Learned Assessing Officer treated the amount as unexplained cash credit under section 68 mainly on the ground that notices issued under section 133(6) and summons issued under section 131 to M/s Fastline Multitrade Pvt. Ltd. were returned unserved and relying upon the information received from the Investigation Wing.

9. Aggrieved by the reassessment order, the assessee preferred appeal before the Learned CIT(A). After considering the submissions and documentary evidences on record, the Learned CIT(A) deleted the addition and held that the assessee had adequately explained the nature and source of the transaction. The Learned CIT(A) also observed that repayment of the amount during the same year itself established the genuineness of the transaction.”

5. The Ld. AR further argued and contended that the Ld. CIT(A) had considered the assessee’s submission, and adjudicated the appeal in favor of the assessee as a result has deleted the addition. The Ld. AR respectfully relied on the order of Ld. CIT(A). The relevant part of the impugned order is reproduced as below:

“6.2.2. With regard to this ground, I have carefully perused the assessment order, the submissions made by the appellant, the documentary evidence placed on record, and the relevant provisions of law. Section 68 of the Act mandates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory in the opinion of the AO, then such sum may be deemed to be the income of the assessee for that previous year. The provision places a primary onus on the assessee to explain the credit to the satisfaction of the AO. Herein, it is seen that the main evidence upon which the Ld. AO has made the alleged addition is on account of enquiry / Survey Report received from DDIT (Inv.), Mumbai and non-production of the lender party for verification / non-compliance by the third party to notice u/s 133(6) of the Act. On the other side, there are direct documentary evidences furnished by the appellant to prove the genuineness of the alleged transactions. In view of such factum of the case, I do not countenance the impugned action of the AO for the simple reason that the appellant has discharged the burden to prove the “nature and source” of the loan transactions of Rs.1,74,00,000/- by adducing primary/relevant documents/material as discussed supra; and the AO has not been able to find fault with the primary/relevant documents filed by the assessee to prove the “nature and source” of the credit entries. Most importantly, the assessee has shown to have re-paid the amounts in question (supra). Thus, the whole factum of the case remain that the appellant has adduced the evidences to establish prima facie -the identity of the creditors; creditworthiness i.e. the capacity of the creditor to advance money; genuineness of the transaction; and that the MOU for property purchase was subsequently cancelled which was supported by cancellation agreement; repayments of such advance were made through RTGS/account payee cheques, so addition made u/s 68 of the Act, cannot be sustained.

The fact of repayment of advance amount to the aforesaid party during the year itself, lend credence regarding the nature and source of transactions carried out by the appellant with the said party. In respect of the party, M/s Fastline Multitrade Pvt. Ltd., it is seen from perusal of ledger account that the alleged sum of Rs.1,74,00,000/- was repaid during the same year itself on 29th March, 2013. On the issue of repayments, I am inclined to place reliance on certain judicial pronouncements as under:

a. Income Tax Officer 41(3)(1) vs Mr. Bhagwati Prasad N Rungta. ITA No.1574/M/2024 – Mumbai Tribunal order dated 22.01.2025.

6.1 The Ld. Commissioner while deleting the addition in hand, not only considered the filing of the relevant documents for discharging the onus cast upon the Assessee u/s 68 of the Act but also considered the fact that the Assessee has duly provided the phone number and other details of Shri Manoj Tibrewal to the AO during the assessment proceedings and also claimed that Shri Manoj Tibrewal has been his business associate since long, who had good standing in the market and therefore arranged the unsecured loans, however, the AO did not carry out further enquiry to substantiate his view that the loans taken by the Assessee are not genuine. Further, merely saying Kolkata based companies does not mean that these are bogus companies. The loan transactions were carried out and repaid through proper banking channel in the subsequent years and therefore the question of getting accommodation entries does not survive anymore in view of the judgment passed by the Hon’ble Gujarat High Court in the case of PCIT vs. Ojas Tarmake Pvt. Ltd. (2023) taxmann.com 75 (Guj.) wherein it was held as under:

“Where appellant showed unsecured loans received during relevant assessment year and AO made addition on ground that appellant failed to discharge onus of liability as laid down under section 68, since amount of loan received by appellant was returned to loan party during year itself and all transactions were carried out through banking channels impugned addition was to be deleted”.

6.2 We have again given thoughtful considerations to the peculiar facts and circumstances of the case and the determinations made by the authorities below and the relevant documents filed by the Assessee and raising the factual and legal issues and the plausible explanation and are of the considered view that the decision of the Ld. Commissioner as observed above, is not only based on the relevant documents which have been produced by the Assessee to establish identity and creditworthiness of the parties from whom the Assessee had taken the loans and genuineness of the transactions but also based on the legal precedents and the fact that the Assessee has taken the unsecured loan through banking channel and repaid the loan amount along with interest after deducting TDS thereon, through banking channel itself and then only deleted the addition under consideration. We observe, as demonstrated by the Ld. Counsel of the Assessee that the Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Central Vs. Bhupendra ChmpaklalDalal (2024) 160 taxmann.com 645 (Bom.) (6th March 2024) has also dealt with the fact that where major portion of the credit has been repaid during the year and the AO has accepted the debit entries of trading transactions as genuine and the creditor was having an opening balance and has paid the interest regularly and credit is continuing from the earlier years. The Hon’ble court on the said facts ultimately affirmed the decision of the Tribunal in deleting the addition.

6.3 On the aforesaid analyzations, decision of the Ld. Commissioner in deleting the addition in hand does not require any interference, as the same is neither suffered from any perversity or impropriety and nor illegality.

7. In the result, the appeal filed by the Revenue Department is dismissed.

b. CIT vs. Ayachi Chandrashekhar Narsangji reported in 42 taxmann.com251 (Guj.), wherein it is decided that once the subsequent repayment of loan had been accepted by the A.O., then the addition of such loan received by the appellant cannot be made u/s. 68 of the Act.

“…. 6. Having heard Shri Pranav Desai, learned Counsel appearing on behalf of the revenue and on perusal of the order passed by the CIT(A) confirmed by the ITAT, it appears that CIT(A) was satisfied with respect to the genuineness of the transaction and creditworthiness of Shri Ishwar Adwani and, therefore, deleted the addition of Rs.1,45,00,000/- made by the Assessing Officer. It is required to be noted that as such an amount of Rs.1,00,00,000/- vide cheque no. 102110 and an amount of Rs.60 lakh vide cheque no. 102111 was given to the assessee and out of the total loan of Rs.1.60 crore, Rs.15 lakh vide cheque no. 196107 was repaid and, therefore, an amount of Rs.1,45,00,000/- remained outstanding to be paid to Shri Ishwar Adwani. It has also come on record that the said loan amount s been repaid by the assessee to Shri Ishwar Adwani in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the ITAT has held that the matter is not required to be remanded as no other view would be possible, we see no reason to interfere with the impugned order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.

c. CIT vs M/s. Skylark Build – ITA No. 616 of 2016 (Bom-HC):

“6 In addition, there is a subsequent development and namely that each of these creditors from whom the assessee borrowed moneys or who advanced it the moneys, were repaid the sums borrowed. This would establish that there were indeed real creditors; that they had indeed the funds available with them and that the transactions were genuine. In the circumstances, the finding of fact by the Commissioner was endorsed by the Tribunal. Instead of endorsing it fully and dismissing the Revenue’s appeal in its entirety, the Tribunal, in paragraph 7, deems it fit and proper to send the matter back to the Assessing Officer so as to verify and examine whether indeed there is any repayment ……………………………………………………………………………………………. 

9………………….. It is not only that the moneys came by way of cheques and through proper
banking channels, but even the repayment has been verified and the Assessing Officer, while giving effect to the Tribunal’s order records that this is not a transaction which can be said to be hit by the principles relied upon.

10. In the above circumstances, the question as proposed by the Revenue is really academic. Still, Mr. Mohanty says it is not so and that is why we examined the matter in its entirety and after having examined it in this manner, we do not see any reason to entertain this appeal. It is dismissed but without any order as to costs.”

d. CIT vs. Mahaveer Crimpers 95 com323 (Guj HC)

“There is further no quarrel that the Assessing Officer does not dispute the fact that the assessee has not availed any cash loan from the said entity. His only case is that the assessee has not been able to prove source alongwith genuineness and creditworthiness of the above stated entity. It emanates from above extracted portion that the assessee has filed all relevant details alongwith assessment records of the said entity explaining source of the loans to the above entity’s balance sheet indicating sufficient reserves, surplus and share premium as followed by repayment in succeeding assessment year. Learned Departmental Representative fails to rebut CIT(A)’s conclusion that the assessee has been having regular loan transactions with the said entity. We notice in this backdrop that hon’ble jurisdictional high court’s decision in DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj) upholding tribunal’s conclusion deleting Section 68 addition in view of identical details; squarely applies here. So is their lordships’ latter decision in CIT vs. Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj) confirming this tribunal’s another decision reversing Section 68 addition wherein the department head accepted repayment of loan in subsequent year to be correct. We take into account all these facts and judicial precedents to affirm CIT(A)’s findings under challenge deleting the impugned addition.”

Thus, I, after considering the facts, circumstances and respectfully following the ratio of judicial decisions referred above, am satisfied that the appellant has adequately explained the nature and source of the credit of Rs. 1,74,00,000/- in its books of account for the year under consideration; so I direct the Assessing officer to delete the addition of unsecured loans of Rs. 1,74,00,000/- made u/s 68 of the Act. Accordingly, this ground of appeal raised by the appellant is hereby allowed.”

6. The Ld. AR further contended that the identical issue is duly adjudicated by the Coordinate Bench of ITAT Mumbai, in the case of M/s .Akash Films Pvt. Ltd. vs ITO, ITA No.1762 & 1763/Mum/2011 date of pronouncement 22.11.2022. the relevant observations of the Bench contended in paragraph no.13 to 17 are reproduced as below:

“13. Considered the rival submissions and material placed on record, weobserve that during survey conducted by DDIT(INV), Unit – 2(3), Mumbai in the case of M/s. Aakash Universal Limited and as per the survey report of that company it was observed that assessee has received an amount of ₹.1.71 Crores from FMPL an entity controlled by PKJ. In order to verify the above transactions, the case of the assessee was reopened and in the reopened assessment assessee has filed relevant documents relating to the receipt of an amount of ₹.1.71 crores. As per the details submitted by the assessee, assessee has submitted that assessee has received .1.71 crores from FMPL through RTGS dated 01.11.2012 and 02.11.2012. However, the MOU filed by the assessee in support of the above transactions which is dated 01.11.2012 and it was also notarized on the same date as 01.11.2012. However, assessee has received two payments in 02.11.2012 through RTGS of ₹.50 lacs and ₹.71 lacs respectively. The revenue is doubting the whole transactions merely on the fact that the date of MOU is 01.11.2022 and assessee has received two payments on 02.11.2012. Further, assessee has submitted cancellation agreement dated 29.03.2012 and the same was notarized on the same date 29.03.2013. However, assessee has submitted acknowledgement of receipt of payment by FMPL in various dates starting from 23.03.2013 to 30.03.2013 all these payments are also routed through bank transfers.

14. The only issue raised by Ld.CIT(A) that the cancellation of MOU is dated 29.03.2013 which is also notarized on the same date. However, the acknowledgement of payments shows that one of the payment is settled through RTGS on 30.03.2013. After observing the above, we are of the view that the transactions entered by the assessee and subsequently settled by the assessee all are routed through banking channels only and all the documents were notarized. It shows that documents submitted by the assessee are notarized documents that means it is a genuine document. However, the Ld.CIT(A) has observed that there is mismatch in the date of settlement and the date of notarization.

15. It is not peculiar that sometimes the documents are entered and certain settlements may happen after the agreement. In the given case no doubt the notarization was taken on the date of entering the documents. However, the actual receipt and settlement of the dates are after the above said date of MOU. This itself does not make the transactions non-genuine considering the fact that all these transactions are carried out through banking channels and also assessee has filed the bank statement in the Paper Book to show that the assessee has received the advances as per the MOU and also the settlement made by the assessee through bank. Therefore, merely because there is some mismatch and the date of settlement and the date of notarized document does not make the transaction non-genuine.

16. Further, we observe that Assessing Officer has merely rejected the submissions of the assessee on the fact that assessee has not brought the other party before the Assessing Officer and we observe that assessee has given complete details of the purchaser i.e., FMPL and its Director. Further, we observe that the survey was conducted in the case of M/s. Aakash Universal Limited on 22.01.2015 whereas all these notarized documents were entered by the assessee prior to the survey i.e., the cancellation of MOU was made on 29.03.2013 much before the date of survey.

17. The Assessing Officer has not denied the fact that assessee has received the payment as well as of cancellation settlement of the above amounts through banking channels only. It clearly shows that the transaction is genuine and taken place prior to the date of survey. Since the assessee has already brought on record various informations in support of the genuineness of the transactions and the onus is on Assessing Officer to bring on record the contrary evidences on non-genuineness of the transactions. Therefore, the Assessing Officer also has not carried on the verification properly. Considering the above discussions and fact on record we hold that assessee has proved the genuineness of transactions, creditworthiness and identity of the other party. Therefore, the addition made u/s. 68 of the Act is hereby deleted. In the result, Ground No. 2 raised by the assessee is allowed.”

7. We have heard the rival submissions and carefully considered the material available on record. We find that the reassessment was primarily based on information received from the Investigation Wing alleging that the assessee had received an accommodation entry of Rs.1.74 crore from M/s Fastline Multitrade Pvt. Ltd. However, the assessee has consistently explained that the said amount represented advance received pursuant to a MOU dated 05.11.2012 for the proposed sale of immovable property, and that, upon failure of the purchaser to pay the balance consideration, the said MoU was cancelled and the entire advance was refunded through banking channels. The assessee has placed on record the MOU, cancellation agreement, ledger accounts, bank statements and other supporting documents evidencing both the receipt and repayment of the amount through regular banking channels. We further find that the Ld. CIT(A), after examining the documentary evidence, recorded a categorical finding that the assessee had satisfactorily established the identity of the payer, its creditworthiness and the genuineness of the transaction. The Ld. CIT(A) also rightly attached significance to the undisputed fact that the entire amount was repaid through banking channels, thereby lending substantial credibility to the assessee’s explanation. While arriving at such conclusion, the Ld. CIT(A) placed reliance on various judicial precedents, including the decisions in Skylark Build (supra) Ayachi Chandrashekhar Narsangji (supra) and the order of the Coordinate Bench in. Bhagwati Prasad N. Rungta (supra), which support the proposition that where the transaction is duly evidenced and the amount has been repaid through banking channels, an addition under section 68 is not warranted merely on the basis of adverse investigation reports or non-compliance by a third party. We also find that the facts of the present case are substantially similar to those considered by the Coordinate Bench of the Tribunal in M/s Akash Films Pvt. Ltd. (supra), wherein, on identical allegations involving M/s Fastline Multitrade Pvt. Ltd., the Tribunal held that the transactions were genuine as the receipt and subsequent repayment were effected through banking channels and supported by contemporaneous documentary evidence. The revenue has not brought any cogent material on record to controvert the documentary evidence furnished by the assessee or to establish that the impugned transaction represented an accommodation entry. In these circumstances, we find no infirmity in the well-reasoned order of the Ld. CIT(A) deleting the addition made under section 68 of the Act. Accordingly, we uphold the impugned order of the Ld. CIT(A), and the grounds raised by the revenue are dismissed.

8. In the result, the appeal of the revenue bearing ITA 2119/Mum/2026 is dismissed.

Order pronounced in the open court on 31^th day of July 2026