DCIT Vs Subh Raipur Vyapar Vihar Developers LLP (ITAT Raipur)
A Loan Repaid Before Reopening Cannot Be Branded Fictitious on Mere Suspicion-Credit & Debit Entries Must Be Read Together
The Raipur Bench of the ITAT has upheld the deletion of an addition u/s 68 where the unsecured loan was received and repaid through banking channels, interest was regularly credited, and the repayment had taken place almost one year before initiation of reassessment proceedings. Once the Revenue fairly conceded that the loan had been repaid and its genuineness was not doubted, the transaction could not be isolated at the credit stage and treated as a fictitious accommodation entry.
The assessee, Subh Raipur Vyapar Vihar Developers LLP, had obtained an interest-bearing unsecured loan from Pawan Motor and General Finance Limited during AY 2019-20. According to the assessee, the amount was not received during AY 2020-21, which was the year under appeal. The loan account was merely carried forward, and interest was credited during AYs 2019-20 & 2020-21.
The assessee subsequently repaid the loan along with interest on 13.03.2023, relevant to AY 2023-24. Both receipt and repayment were made through regular banking channels.
A notice u/s 148A(b) was issued on 29.02.2024, almost one year after the loan had already been repaid. During the proceedings, the AO characterised the loan as fictitious and made an addition u/s 68. The extracted appellate order records the amount deleted by the CIT(A) at ₹11,38,056.
Before the CIT(A)/NFAC, the assessee furnished documentary material to establish the transaction. This included the ledger account of the lender, relevant bank statements showing receipt of the loan, the interest entries and the subsequent banking trail evidencing repayment.
The assessee contended that the AO had not properly appreciated these documents or undertaken any meaningful enquiry. It was emphasised that the loan had originally been obtained in AY 2019-20 and was repaid with interest in AY 2023-24, whereas the addition was sought to be made in AY 2020-21.
The assessee further argued that repayment before issuance of the reopening notice materially contradicted the allegation that the loan was fictitious. It was not the ultimate beneficiary of the funds, and the account had been settled in the ordinary course much before the tax proceedings commenced.
The CIT(A) accepted the explanation and relied upon a series of judicial decisions recognising the evidentiary significance of subsequent repayment. Particular reliance was placed upon ACIT v. SRKM Steel (P.) Ltd., where the Guwahati ITAT held that when the assessee furnished the lender’s particulars, audited financial statements, confirmations and bank statements, and the loan was subsequently repaid, the credit could not be treated as unexplained without the AO identifying defects in the evidence.
The CIT(A) also referred to the Gujarat High Court’s decision in Ambe Tradecorp (P.) Ltd., 145 taxmann.com 27. In that case, the loan creditors responded to notices u/s 133(6), the transactions were conducted through account-payee cheques and the accounts were ultimately settled by repayment. The High Court approved the finding that the assessee was not the beneficiary of a sham arrangement and that the credit entries could not be examined in isolation while ignoring the corresponding debit entries reflecting repayment.
Several decisions of the Calcutta High Court were also noticed, including PCIT v. Rahul Premier India Agency Pvt. Ltd., PCIT v. Narayan Tradecom Pvt. Ltd., PCIT v. Atom Extrusions Ltd., PCIT v. Edmond Finvest Pvt. Ltd. & PCIT v. Parwati Lakh Udyog. These decisions were relied upon for the proposition that where documentary evidence concerning the lenders is furnished and the loans are subsequently repaid, an addition u/s 68 cannot be sustained merely on the allegation that the transactions were accommodation entries.
On that reasoning, the CIT(A) deleted the addition of ₹11,38,056.
When the Revenue carried the matter to the ITAT, the Senior Departmental Representative fairly conceded that the loan had been repaid in a subsequent financial year and that its genuineness was not doubted.
The Tribunal examined the record and the CIT(A)’s findings, including the judicial precedents relied upon. In light of the admitted repayment and absence of any surviving dispute regarding genuineness, it found no infirmity in the appellate relief.
The CIT(A)’s order deleting the addition was therefore confirmed, and the Revenue’s appeal was dismissed.
An additional factual aspect favoured the assessee. Its consistent case was that the unsecured loan had been received in AY 2019-20 and not in the year under appeal. Section 68 ordinarily operates in the year in which a sum is found credited in the assessee’s books. A brought-forward loan balance cannot be treated as a fresh cash credit in a later year merely because it continues to appear in the balance sheet. However, the short ITAT order primarily sustains relief on the accepted genuineness and subsequent repayment rather than separately adjudicating this year-of-taxability proposition.
Author’s Comments
The ruling recognises that a loan transaction must be viewed as a complete financial cycle. Receipt through banking channels, regular interest recognition and subsequent repayment through banking channels are mutually corroborative facts. An AO cannot examine only the incoming credit while pretending that the later repayment does not exist.
Nevertheless, the proposition that “once a loan is repaid, s.68 can never apply” should be used cautiously. Repayment is strong evidence of genuineness, but it is not invariably conclusive. Accommodation entries can theoretically be received and returned. Identity of the creditor, its creditworthiness, genuineness of the transaction, bank trail and surrounding circumstances remain relevant.
The decisions relied upon by the CIT(A) involved more than repayment alone. They also involved confirmations, bank statements, financial records and, in certain cases, direct responses to notices u/s 133(6). The safer proposition is that repayment, when supported by cogent contemporaneous evidence and not rebutted through enquiry, materially strengthens the genuineness of the loan.
The timing is especially significant here. Repayment occurred on 13.03.2023, whereas notice u/s 148A(b) was issued only on 29.02.2024. Thus, the repayment was not an afterthought designed in response to investigation.
Practitioners should also verify the year of the original credit. If the amount was received in AY 2019-20 and only remained outstanding during AY 2020-21, an addition u/s 68 in AY 2020-21 would face a separate temporal objection.
The enduring principle is balanced: a credit entry cannot be judged in isolation from its repayment. When the loan entered and exited through disclosed banking channels before the enquiry even began, suspicion needs strong evidence before it can become taxable income.
Cases Discussed
- DCIT Vs Subh Raipur Vyapar Vihar Developers LLP (ITAT Raipur) — The supplied order concerns AY 2020-21 and addresses an addition under section 68 in respect of an unsecured loan. The Tribunal relied upon the CIT(A)/NFAC’s consideration of judicial precedents concerning subsequent repayment of loans.
- ACIT Vs SRKM Steel (P) Ltd. (ITAT Guwahati) — The CIT(A)/NFAC relied upon the decision concerning unsecured loans subsequently repaid, where documentary evidence including lender particulars, confirmations, audited financial statements and bank statements had been furnished.
- PCIT Vs Ambe Tradecorp Private Limited (Gujarat High Court) — The decision was relied upon for the proposition that once repayment of a loan is established through documentary evidence, credit entries cannot be examined in isolation by ignoring corresponding debit entries in later years.
- PCIT v. Rahul Premier India Agency Pvt. Ltd. — Cited in the supplied appellate order in support of the proposition concerning repayment of loans and section 68.
- PCIT v. Narayan Tradecom Pvt. Ltd. — Cited in the supplied appellate order in support of the proposition concerning repayment of loans and section 68.
- PCIT v. Atom Extrusions Ltd. — Cited in the supplied appellate order in support of the proposition concerning repayment of loans and section 68.
- PCIT v. Edmond Finvest Pvt. Ltd. — Cited in the supplied appellate order in support of the proposition concerning repayment of loans and section 68.
- PCIT v. Parwati Lakh Udyog — Cited in the supplied appellate order in support of the proposition concerning repayment of loans and section 68.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal preferred by the Revenue emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 24.06.2026 for the assessment year 2020-21 as per the grounds of appeal on record.
2. The relevant facts as emanated from the order of the Ld.CIT(Appeals)/NFAC are extracted as follows:
“5. OBSERVATION AND DECISION:
I have considered the submissions of the appellant. Appellant stated “In this regard, vide written submission dated 09.08.2024, the appellant has furnished various details in order to prove the identity, creditworthiness and genuineness of the transactions and also to prove that amount of unsecured loan were not received during the year under consideration. Copy of written submission dated 09.08.2024 and is enclosed herewith. Kindly refer Annexure-
5. Further it was also submitted that the assesse has repaid the said loan along with interest in AY 2023-24.
The appellant vehemently objects to the addition made by the AO. The AO has not appreciated the facts of the case in the proper manner and has erred in making the addition without conducting any enquiry on the documents furnished by the appellant. The appellant has taken the interest bearing unsecured loan from Pawan Motor and general Finance Limited during A.Y. 2019-20. Copy of Ledger account and relevant bank statement is enclosed herewith to evidencing the same. Kindly refer Annexure 6. The said loan was repaid on 13.03.2023 i.e. AY 2023-24 along with interest. The assesse has received loan in the nature of unsecured loan and also credited interest for the AY 2019-20 and AY 2020-21. Copy of Ledger account and relevant bank statement of repayment of loan is enclosed herewith. Kindly refer Annexure 7.
Further it is also to bring in notice of your honour that the notice under section 148A (b) was issued on 29.02.2024 whereas the appellant has repaid the said loan on 13.03.2023 i.e. almost one year prior to the present assessment proceeding. The said loan was received through banking channel and repaid through banking channel. Where the entire loan has been repaid back and the assessee is not the final beneficiary, treating the said loan as fictitious is not correct.”
AO in his order has mentioned that-the loans taken were fictitious. However, he has not mentioren5f any action taken in the relevant year of acceptance of loan.
It is beyond doubt that the loans were repaid subsequently. There are many decisions of Hon’ble ITATs where it is held that once the money is repaid, the addition u/s 68 cannot be sustained. Some of the decisions are
In a recent case of ACIT Vs SRKM Steel (P) Ltd. (ITAT Guwahati) in ITA 168/2020, the following was held:
“2.2 The Id. AO noted that the lender company has no creditworthiness to advance such loans as they have very meagre turnover and no credentials. The Id. AO concluded that the assessee has failed to establish the identity, creditworthiness of the lenders and genuineness of the transactions and added u/s 68 of the Act by treating the same as unexplained cash credit. Besides, the Id. AO added Rs.4,21,750/- on account of interest paid on these unsecured loans.
2.3. In the appellate proceedings, the Id. CIT (A) allowed the appeal of the assessee after recording a finding of fact that the assessee has repaid the loans in the subsequent assessment years.
2.4. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has undisputedly raised unsecured loans from seven parties aggregating to 2,82,00,000/-. The Id. AO during the course of assessment proceedings called upon the assessee to furnish the evidences qua with these loans to prove the identity and creditworthiness of the lenders and genuineness of the transactions. Accordingly, the assessee furnished the details qua the loan creditors comprising names, addresses, audited balance sheets, confirmations and bank statements etc. However, the Id. AO treated these loans as accommodation entries and added the same u/s 68 of the Act as unexplained cash credit without pointing out any defect or deficiencies in the evidences furnished by the assessee. Besides, the Id. AO added the interest on the above loans of 4,21,750/-. We note that the Id. CIT (A) has allowed the appeal after recording a finding of fact that these loans were repaid by the assessee in the subsequent financial years. In our opinion, once the assessee has established that loans were repaid in the subsequent assessment years with cogent evidences then the addition u/s 68 of the Act cannot be made. We have also gone through the written submission filed by the Id. DR however, in view of the decision of the Hon’ble Jurisdictional High Court, we are inclined to respectfully follow the decision of Hon’ble Jurisdictional High Court that the assessee 17.a repaid the loan then section 68 of the Act cannot be invoked. The case of assessee is squarely covered by the decisions of the Hon’ble Calcutta High court in number of cases namely PCIT-2, Kolkata Vs. Rahul Premier India Agency Private Limited in ITAT/133/2025, IA No.GA/2/2025 vide order dated 05.08.2025, PCIT Vs. M/s Narayan Tradecom Pvt. ltd. in ITAT/76/2025, IA No. GA/1/2025 dated 10.06.2025, PCIT Vs. Atom Extrusions Ltd. ITAT/268/2024, IA no. GA/1/2024, GA/2/2024 dated17.12.2024, PCIT Vs. M/s Edmond Finvest Pvt. ltd., in ITAT/28/2024, GA/2/2024 dated 26.02.2024, PCIT Vs. Parwati Lakh Udyong, ITAT/2/2024, IA No.GA/1/2024 dated 19.02.2024. In all the above decisions the Hon’ble court has held that where the assessee has filed all the evidences qua the loan creditors before the Id. AO and loans are also repaid then the same cannot be added us/ 68 of the Act. Similarly, the case of assessee is squarely covered by the decision of the Hon’ble Gujarat High Court in the case of Ambe Tradecorp (P.) Ltd., reported in [2022] 145 taxmann.com 27 (Gujarat), wherein it has been held as under:-
“3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A lnfracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthines etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act.
3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A lnfracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions.
3.2 The appellate authority observed that, “In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I. T. Act and in compliance thereto both the companies have submitted the requisite information.”
3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, much less in doubt. The accounts were finally settled with the repayment of the loan to the lender companies.
3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of Durga Prasad More (82) ITR 540 and also in Sumati Dayal (214) ITR 801, to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under Section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness.
3.5 While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine.
4. Learned advocate for the appellant attempted to emphasize that for the purpose of application of Section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied creditworthiness and genuineness of transaction were well satisfied.
5. As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied.
6. The Tribunal rightly recorded in para 29 of the judgment, “Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld.CIT-A. “
7. For the reasons recorded above, no question of law much less substantial questions arises in this appeal. It stands meritless and accordingly dismissed.
2.5. Considering the facts of the case before us in the light of the above decisions, we are inclined to uphold the appellate order on this issue by dismissing the revenue appeal. In the result, the appeal of the Revenue is dismissed”
In view of the above and relying on the decisions of Hon’ble Courts, the addition amounting to 1138056/- is deleted. Therefore, all the substantial grounds taken by the appellant are allowed.”
3. The Ld. Sr. DR fairly conceded that loans were repaid by the assessee in the subsequent financial year. Therefore, genuineness of the loans is not doubted.
4. That on a careful consideration of the documents on records and on analyzing the findings of the Ld. CIT(Appeals)/NFAC placing reliance on various judicial pronouncements as contained therein, I do not find any infirmity with the findings of the Ld. CIT(Appeals)/NFAC and relief provided to the assessee is hereby sustained.
5. In the result, appeal of the Revenue is dismissed.
Order pronounced in open court on 10th day of September, 2026.
