ITAT Delhi Deletes Section 69A Addition on Loan Repaid Through Banking Channels

ACIT Vs Rajiv Sharma (ITAT Delhi)

Summary: The Delhi Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal against the order of the CIT(A)/NFAC deleting an addition of Rs.1,55,91,879/- made under section 69A of the Income-tax Act, 1961 in Assessment Year 2019-20. The Revenue contended that the assessee had facilitated an accommodation entry involving M/s Aarohi Creations LLP and relied upon the alleged modus operandi of Shri Lokesh Kumar Khabya and Shri Sourabh Sethi, whose statements under section 132(4) were stated to have admitted providing bogus accommodation entries through various bank accounts. The Revenue also relied upon certain alleged suspicious movements in the bank account of the assessee’s father. The assessee, however, submitted that the reopening was based on an incorrect assumption that a fresh loan had been received during the year under consideration, whereas the Rs.1,50,00,000/- loan from Aarohi Creations LLP had actually been received during AY 2018-19 and was repaid during the current assessment year. The Tribunal accepted this distinction and found that the facts relied upon by the Assessing Officer were not supported by proper material. It therefore held that the Assessing Officer lacked jurisdiction to reopen the assessment. The Tribunal noted the reliance placed by the CIT(A) on Kelvinator India VS CIT, 320 ITR 569, concerning the requirement of tangible material having a live link with the facts of the case to establish escapement of income. The Tribunal further noted that the loan was received in AY 2018-19 and repayments aggregating to Rs.1,50,00,000/- were made during the relevant year through the assessee’s Standard Chartered Bank account. Interest at 9% per annum was also paid, including Rs.5,91,679/- on 29.06.2019. According to the Tribunal, the loan was obtained and repaid through banking channels and the transactions were reflected in the assessee’s books/returns. The Assessing Officer had also failed to bring corroborative material establishing that the loan was fictitious or that the amount represented unexplained money. Accordingly, the Tribunal declined to disturb the CIT(A)’s findings, upheld the deletion of the section 69A addition and dismissed the Revenue’s appeal. The Tribunal thus held that an amount representing a loan received in an earlier assessment year and subsequently repaid through banking channels could not, on the facts of the case, be treated as unexplained money merely on the basis of an incorrect assumption regarding the year of receipt and without adequate corroborative material.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. This appeal is filed by the Revenue against the order passed by the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 19.11.2025 for the Assessment Years 2019-20 raising following grounds of appeal :-

2. On the facts and circumstances of the case, the Ld.CIT(A) has erred in deleting the addition amounting to Rs.1,55,91,879/- made on account of unexplained money u/s69A of the Act by ignoring the fact that this was a search related case and main person Shri Lokesh Kumar Khabya and Shri Sourabh Sethi in their statement recorded u/s 132(4) of the Income Tax Act, 1961 has admitted the modus operandi of their working of providing the bogus accommodation entries to various entities through various bank accounts. M/s Aarohi creations LLP is one of the beneficiary entities of the same, which was provided accommodation entry through the assessee.

3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that assessee has not provided complete bank statement of his father and in this part statement certain suspicious transactions were noted. For instance, as on 17.05.2018 the available balance was Rs.5,23,759/- and after this on 31.07.2018 the available balance was Rs.1,02,43,567/- which was very high increase from the previous balance. Same, as on 03.08.2018, the available balance was Rs.71,76,459/- and on 3l.09.2018 the available balance was Rs.33,47,286/-. Further, as on 10.10.20218, the available balance wasRs.2,18,506/- and on 05.11.2018 the available balance was Rs.43,55,877/-, which indicates that assessee has provided the accommodation entries to 447s. Aarohi Creations LLP sourced from unexplained credits.

4. At the time of hearing, Ld DR submitted that Ld CIT(A) had given relief to the assessee without appreciating the detailed findings of AO. He submitted that the addition was made on the basis of modus operandi of Shri Lokesh Kumar Khabya and Shri Sourabh Sethi and their working of providing bogus accommodation entries to various entities through various bank accounts. M/s Aarohi creations LLP is one of the beneficiary entities of the same, which was provided accommodation entry through the assessee. Therefore, he relied on the detailed findings in the assessment order.

5. On the other hand, ld. AR of the assessee submitted that AO has reopened assessment on the basis of fresh loan taken by the assessee in the year under consideration whereas the loan was outstanding during the year under consideration and the loan was taken in the earlier years. In this regard, he brought to our notice detailed findings of the ld. CIT (A) at page 8 of the appellate order and he heavily relied on the above detailed findings.

6. In the rejoinder, ld. DR objected to the above submissions made by the ld. AR and submitted that the issue under consideration may be remitted back to the AO to appreciate the facts on record. In this regard he relied on the decision of Aarohi Creations LLP, Surat vs. DCIT order dated 19.11.2025.

7. Considered the rival submissions and material placed on record. We observed that the assessee received loan from Aarohi Creations LLP of Rs.1,50,00,000/- not during the year under consideration. But the above loan was received during the A.Y 2018-19 but not in the current A.Y. under consideration and the assessee also filed details of repayment of the above loan during the current A.Y. Therefore, we observed that the facts stated by the AO are not supported by proper material, hence, the AO lacks jurisdiction to reopen the case. In this regard, we observed that ld. CIT (A) relied on the decision of Hon’ble Supreme Court in the case of Kelvinator India VS CIT(320 ITR 569) wherein it is held that “tangible material should be needed which should have live link with the facts of the case to establish that there was escapement of income”.

8. Further we observed from the findings of the ld. CIT (A) that the assessee had taken loan during A.Y 2018-19 from Aarohi Creations LLP and the same was repaid during the current A.Y as under:

7. We observed that these repayments were made through the assessee’s bank account held with Standard Chartered Bank, Ac No. 52610808539. Thus, as per the assessee’s submissions the loan was taken during the A.Y 2018-19 and repaid during the current A.Y. We further observed that the assessee had paid interest rate @ 9% p.a on the above loan and last interest also paid of Rs.5,91,679/- on 29.06.2019. Thus, from the facts and circumstances of the case, it is seen that the AO misdirected himself in coming to a conclusion that the above loan is a fictitious loan whereas facts and circumstances clearly indicate that the above loan was taken from banking channels and the same was repaid through the banking channels. Further, we observed that all these transactions were routed through banking channels and reflected in the assessee’s books/returns. Therefore, treating the same as unexplained money is incorrect. We also observed that the AO also did not bring any corroborative material to substantiate the addition. In view of the above, we are inclined not to disturb the findings of the ld. CIT (A) and upheld the same and dismissed the grounds raised by the Revenue.

8. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open court on this 24th day of August, 2026.