Golden Goenka Financial Advisors Private Limited Vs ITO (ITAT Kolkata)
Loans Repaid Within Same Financial Year: ITAT Deletes ₹52.43 Lakh Section 68 Addition
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) deleted an addition of ₹52,42,900 under Section 68 of the Income-tax Act, 1961 concerning unsecured loans fully repaid within the same financial year through banking channels. The Tribunal considered the lender confirmations, bank statements, audited accounts and income-tax records. It also noted the absence of evidence showing that the repaid funds returned to the assessee in cash or originated from its undisclosed funds.
The assessee, Golden Goenka Financial Advisors Private Limited, had filed its original return declaring total income of ₹38,100.
Based on information received from the Investigation Wing following a search on the Raj Group and others, the Assessing Officer initiated reassessment proceedings. The information alleged that the assessee had received accommodation entries through unsecured loans of ₹26 lakh from M/s Pandora Tie Up Private Limited and ₹26,42,900 from M/s Jajodia Finance Limited.
The Assessing Officer added the entire ₹52,42,900 under Section 68 and taxed it under Section 115BBE. The CIT(A) sustained the addition, holding that routing funds through banking channels and repaying them within the same year did not establish genuineness.
Assessee Furnished Repayment Trail and Lenders’ Financial Records
Before the Tribunal, the assessee submitted that both loans had been fully repaid during Financial Year 2018-19 through regular banking channels.
It furnished ledger confirmations, bank statements showing receipt and repayment, audited financial statements, income-tax return acknowledgements and details of the lender companies’ directors.
The assessee also argued that proceedings concerning the lenders for the same assessment year had resulted in acceptance or deletion of the disputed transactions, making the Department’s stand inconsistent.
The Revenue opposed the appeal, relying on investigation findings that described the lenders as paper or shell entities operated by entry providers. It maintained that repayment through banking channels did not automatically establish genuineness under Section 68.
Tribunal Considered Repayment and Lenders’ Financial Capacity
The Tribunal recorded that complete repayment of the loans within the same financial year through banking channels was undisputed.
It also noted that Jajodia Finance Limited and Pandora Tie Up had net worth of ₹59.79 crore and ₹9.82 crore respectively. Further, Jajodia Finance Limited’s income for Assessment Year 2019-20 had been assessed at ₹234.26 lakh.
Considering the supporting records and the complete movement of funds back to the lenders within the accounting period, the Tribunal accepted the assessee’s case against the addition.
No Evidence of Funds Returning to Assessee in Cash
The Tribunal further observed that the Assessing Officer had not established any nexus showing that the amounts repaid to the lenders flowed back to the assessee in cash.
There was also no positive material demonstrating that the funds originated from, or returned to, the assessee’s undisclosed resources. In these circumstances, the Tribunal held that the addition could not be sustained on third-party statements alone.
Accordingly, the Tribunal deleted the ₹52,42,900 addition under Section 68 and allowed the assessee’s appeal.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT KOLKATA
This appeal filed by the assessee is directed against the order dated 20.03.2026 of the Office of the National Faceless Appeal Centre (NFAC), Delhi passed under Section 147 of the Assessment Year 2019-20 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The brief facts of the case of the assessee is that the Assessee filed its original return of income for A.Y. 2019–20 declaring total income of ₹38,100/-. Subsequently, based on information received from the Investigation Wing regarding a search and seizure operation u/s 132 on the Raj Group and others, reassessment proceedings u/s 147 were initiated on the premise that the Assessee received accommodation entries totalling ₹52,42,900/- as unsecured loans of Rs 26,00,000/- from M/s Pandora Tie Up Pvt. Ltd. and Rs. 26,42,900/- from M/s Jajodia Finance Limited and added the entire amount of ₹52,42,900/- under Section 68 of the Act, taxing it under Section 115BBE.
Aggrieved by this order assessee preferred appeal before CIT(A) where in Ld. CIT(A) sustained the addition, observing that mere routing of funds through banking channels and repayment within the same financial year does not establish genuineness.
Being aggrieved by and dissatisfied with the order of the Ld. CIT(A), the Assessee preferred appeal before this Tribunal.
3. The Ld. AR challenges the addition there by submitting that the entire unsecured loan of ₹52,42,900/- taken during F.Y. 2018–19 was fully repaid by the Assessee to the lenders within the very same financial year itself through regular banking channels. It has further been contended that the complete repayment within the same financial year negates any inference of unexplained cash credits or rotation of unaccounted funds. The Assessee submitted bank statements, confirmations, audited accounts, and ITR acknowledgments of the lender companies, demonstrating the bona fide commercial nature of the transaction. The Ld. AR further pointed out that in the cases of the lender entities themselves (M/s Jajodia Finance Limited and M/s Pandora Tie Up Private Limited), proceedings under Section 147 for A.Y. 2019–20 resulted in the deletion/acceptance of their transactions by the Department, thereby proving inconsistency in the Department’s stand.
4. Contrary to that the Ld. DR strongly supported the orders of the lower authorities, submitting that investigation reports established the lenders as paper/shell entities operated by entry providers. He argued that repayment through banking channels does not automatically cure non-genuineness under Section 68.
5. Upon hearing the submission of the counsel of the respective parties and on perusal of the material available on record we find that the sole issue for adjudication is whether the addition of ₹52,42,900/- under Section 68 can be sustained where the entire unsecured loan raised during the year was fully refunded/repaid within the same financial year.
5.1. On perusal of the record, it is an undisputed fact that the loans received from M/s Pandora Tie Up Pvt. Ltd. and M/s Jajodia Finance Limited were completely refunded by the Assessee within F.Y. 2018–19 through proper banking channels. It reveals from the order of CIT(A) that net worth of creditor Jajodia Finance ltd. and Pandora Tie Up is Rs 59.79 crore and Rs. 9.82 crores. We further find that assessee had filed (i) ledger confirmation of the creditor, (ii) Bank statement evidencing receipt and repayment of loan, (iii) audited accounts and income tax return of the creditor, (iv) and list of Directors of the creditors company. Moreover, we find income of Jajodia Finance Ltd. was assessed at Rs 234.26 lakh for the AY 2019-20 (ITA No.1876/Kol/2026).
5.3. It is a well-settled judicial precedent as held by the Hon’ble Kolkata High court in a catena of decision that where unsecured loans received during the relevant financial year are refunded in full within the same year through account payee banking channels, no addition under Section 68 of the Act is warranted. When funds flow into the account and flow back to the lender within the same financial year, the transaction neutralizes itself within the accounting period, establishing the bona fide commercial nature of the transaction.
5.4. Furthermore, the AO failed to establish any nexus or evidence showing that the funds refunded to the lenders flowed back to the Assessee in cash. In the absence of positive material proving that the source of funds originated from or returned to the Assessee’s undisclosed coffers, an addition under Section 68 cannot be sustained on third-party statements alone.
5.5. Consequently, since the entire loan amount of ₹52,42,900/- was fully refunded within the same financial year, the addition made by the AO u/s 68 and confirmed by the Ld. CIT(A) is deleted.
In the result, the appeal filed by the Assessee is allowed.
