DCIT Vs Shalimar Corp. Ltd. (ITAT Delhi)
₹2 Crore Loan Refunded Within Three Days: Delhi ITAT Upholds Deletion of Section 68 Addition
Background of the Dispute
The Delhi ITAT upheld deletion of an addition of ₹2 crore under section 68, attaching significance to the fact that the amount was received through banking channels and refunded within three days. On the facts accepted by the Tribunal, the assessee had neither benefited from nor utilised the funds, and there was no contrary material warranting interference with the appellate findings.
The assessee, Shalimar Corp. Ltd., originally filed its return declaring income of approximately ₹27.49 crore. A scrutiny assessment under section 143(3) was subsequently completed at approximately ₹124.41 crore.
Thereafter, information available on the Department’s Insight Portal indicated that the assessee was allegedly a beneficiary of bogus unsecured loan transactions involving shell companies controlled by Shri Girdhari Lal Goenka and his associates. Reassessment proceedings followed, culminating in an order dated 28 March 2025, making the disputed addition of ₹2 crore.
The transaction concerned funds received from Cloister Realtors Pvt. Ltd. The assessee challenged the addition before the CIT(A), who deleted it. The Revenue carried the matter to the Tribunal.
Revenue’s Allegation: An Accommodation Entry Through a Shell Company
The Revenue contended that the addition arose from information gathered during search proceedings in the case of the Raj Group and others, including Shri Girdhari Lal Goenka.
According to the Department, the material extended beyond statements recorded during the search and included seized digital records, ledgers and financial data corroborating accommodation entry transactions. It alleged that Cloister Realtors Pvt. Ltd. formed part of a network of shell companies controlled by the entry operator.
The Revenue also questioned the lender’s creditworthiness and argued that the assessee had not satisfactorily discharged its obligation to establish the identity of the creditor, financial capacity and genuineness of the transaction.
Thus, the Department’s case was that receipt and repayment through a bank did not adequately answer the adverse investigation material.
Assessee’s Explanation: Receipt and Refund Were Fully Traceable
The assessee relied on bank statements showing that the money was received on 27 May 2016 and refunded on 30 May 2016.
The CIT(A) recorded that the genuineness of the banking channel transaction was undisputed. The short interval between receipt and refund supported the finding that the assessee had derived no benefit from, or utilisation of, the money.
The appellate authority further noted the absence of evidence suggesting that the transaction represented the introduction of the assessee’s own unaccounted money. In this factual setting, reliance on a third-party statement and general investigation findings was considered insufficient to sustain the addition.
The assessee defended these findings before the Tribunal and relied on the Delhi ITAT’s decision in Real Innerspring Technologies Pvt. Ltd. v. ACIT.
Decisions Relied Upon
The CIT(A), whose reasoning was reproduced and upheld by the Tribunal, referred to Real Innerspring Technologies Pvt. Ltd. v. ACIT, ITA No. 647/Del/2023, order dated 27 March 2025.
As described in the impugned order, that decision supported deletion where amounts were received and refunded through verifiable banking channels and the Department failed to establish a nexus with unaccounted money. An addition could not rest merely on general investigation reports in those circumstances.
The CIT(A) also referred to Passion Realtech Pvt. Ltd. v. ACIT, ITA No. 1248/Del/2025, for the proposition that repayment within a short period through banking transactions reinforced the genuineness of the transaction.
These authorities were applied alongside the specific receipt and refund dates and the absence of evidence connecting the funds to the assessee’s unaccounted income.
Tribunal’s Findings and Decision
The Tribunal agreed with the CIT(A)’s appreciation of the transaction. It observed that the loan had remained with the assessee for approximately three days, during which no benefit or utilisation of the money was found.
In the absence of anything to the contrary, the Tribunal held that the CIT(A)’s findings were legally sustainable and rejected the Revenue’s grounds.
The Revenue’s delay of 71 days in filing the appeal was condoned. Nevertheless, its appeal was dismissed on merits, leaving the deletion of the ₹2 crore addition intact.
Author’s Comments
The decision highlights the importance of examining the actual transaction and the evidence connecting it with the assessee, even where the lender faces allegations of providing accommodation entries.
However, the ruling should be read within its factual limits. Refund within three days was a significant circumstance; the Tribunal did not formulate a universal rule that repayment automatically defeats section 68. Its conclusion rested on the combined findings of traceable banking transactions, immediate refund, absence of benefit or utilisation, and lack of contrary evidence.
For practical purposes, the decision supports a defence built around contemporaneous bank records, a clear chronology and specific answers to the investigation allegations. The strength of the case lies in the cumulative evidence accepted by the appellate authorities, rather than the repayment entry viewed in isolation.
Cases Discussed
- Real Innerspring Technologies Pvt. Ltd. Vs ACIT (ITAT Delhi); ITA No. 647/Del/2023; 27/03/2025; AY: Not established from the supplied order. Cited by the assessee and the CIT(A) for evaluating documented loan receipts and repayments on their own facts. Related TaxGuru judgment.
- Passion Realtech Pvt. Ltd. Vs ACIT (ITAT Delhi); ITA No. 1248/Del/2025; order date and AY not stated in the supplied order. Cited in the CIT(A)’s reasoning regarding prompt loan repayment through banking transactions.
FULL TEXT OF THE ORDER OF ITAT DELHI
The application for condonation of delay 71 days in filing appeal and appeal filed by the Revenue are against order dated 09.03.2026 of Ld. Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as “the CIT(A)”] under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) arising out of assessment order dated 28.03.2025 of Ld. Assessing Officer/ACIT, Central Circle- 30-Delhi, hereinafter referred to as ‘the AO’) u/s 147 read with Section 143(3) of the Act for A.Y. 2017-18.
2. Brief facts of the case are that, the Assessee filed return of income under Section 139(1) of Rs. 27,49,24,289/- on 30.10.2017. The return was processed under Section 143(1) of the Act on 29.03.2019 at income of Rs. 27,62,89,575/-. Assessment of assessee was completed on 30.12.2019 under Section 143(3) of the Act at Rs. 124,41,35,820/-.
2.1. The case was selected in high risk CRIU/URIS Information category. Information on Insight Portal showed that the Assessee was one of the beneficiaries entities and had made bogus unsecured loan transaction from shell companies directly controlled by Shri Ishwar Girdhari Lal Goenka and his Associates. The case was reopened upon notice under Section 148A(b) of the Act was issued in response to notice under Section 148 of the Act. The Assessee filed return of income on 05.12.2023 declaring income of Rs. 27,49,24,290/-. Notice under Section 143(2) dated 28.06.2024. Notices under Section 142(1) of the Act dated 21.08.2023, 08.12.2023 and 10.1.22024 were issued. The Assessee furnished reply. Show cause notice dated 13.03.2025 was issued. The Assessee filed reply. On completion of proceedings, Ld. AO vide order dated 28.03.2025 made addition of Rs. 2,00,00,000/-.
3. Against assessment order dated 28.03.2025, the Assessee filed appeal before the Ld. CIT(A) which was partly allowed vide order dated 09.03.2026.
4. Being aggrieved revenue preferred application for condonation of 71 days in filing appeal and appeal in application for condonation of delay, it is mentioned that due to process for filing appeal, the explanation does not smack of mala-fide, therefore, delay of 71 days in filing appeal is condoned.
5. The grounds of appeal are as follows:
“1. Whether on the facts and in the circumstances of the case and in 1 the provisions of law, the Ld. CIT(A) is correct in allowing the appeal of assessee without appreciating the facts of the case
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,00,00,000 made by the AO us 68 of the Income tax Act, 1961 without properly appreciating the facts and material brought on record during the assessment proceedings
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the incriminating material unearthed during the course of search and seizure 3 operation conducted u s 132 of the Act in the case of Raj Group and others, including Shri Girdhari Lal Goenka, which specifically identified the assessee as a beneficiary of accommodation entries
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the addition was based not merely on statements recorded during search but also on seized digital records, ledgers and financial data recovered during the search proceedings which corroborated the accommodation entry transactions
5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition without recording any finding regarding the creditworthiness of M s Cloister Realtors Pvt. Ltd., despite the Assessing Officer having brought on record material indicating that the said entity lacked the financial capacity to advance a sum of Rs.2,00,00,000
6. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that M s Cloister Realtors Pvt. Ltd. was one of the entities identified during the search proceedings as being controlled and managed by Shri Girdhari Lal Goenka through a network of shell companies engaged in providing accommodation entries
7. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the assessee did 7 not satisfactorily discharge the burden cast upon it under section 68 of the Act to establish the identity, creditworthiness and genuineness of the credit appearing in its books of account
8. Whether the Ld. CIT(A) is correct in not adjudicating the appeal without considering the merits of the case. The grounds of appeal are without prejudice to each other.”
6. The Ld. Departmental Representative submitted that Ld. CIT(A) erred in deleting addition of Rs. 2,00,00,000/- made by Ld. AO under Section 68C of the Act properly appreciating facts and material brought on record during assessment proceedings incriminating material in case of Raj Group and ors including Girdhari Lal Goenka. The Assessee was identified as beneficiary of accommodation entries. The addition was not merely based on statement recorded during search but also on seized digital records, ledgers and financial data.
7. The Ld. Representative for appellant/assessee relied on impugned order and placed reliance on order dated 27.03.2025 in ITA No. 647/Del/2023 Real Innerspring Technologies Pvt. Ltd. Vs. ACIT vide order dated 27.03.2025.
8. From examination of record, in light of aforesaid rival contention, it is crystal clear that the Ld. CIT(A) vide impugned order dated 09.03.2026 deleted addition of Rs. 2,00,00,000/- under Section 68 of the Act. The Ld. CIT(A) in Para 7 observed as under:-
“7. Ground No. 1: Addition of ₹2,00,00,000/- under Section 68.
The core issue in this case is whether the short-term receipt and refund of funds through recognized banking channels constitutes an unexplained cash credit within the meaning of section 68.
7.1 The AO has primarily relied upon statement of Sh. Girdhari Lal Goenka, recorded during a third-party search, to conclude that the donor company was an accommodation entry provider. The appellant, on the other hand, produced Bank statements evidencing receipt on 27.05.2016 and refund on 30.05.2016. The genuineness of the banking channel transaction is undisputed. The mere three-day retention of funds demonstrates that no benefit or utilization of the money was made by the appellant.
7.2 In Real Innerspring Technologies Pvt. Ltd. vs. ACIT(ITAT Delhi, order dated 27.03.2025), the Hon’ble Tribunal held that where the assessee has received and refunded the amounts through verifiable banking channels and the department fails to establish any nexus with unaccounted money, addition under section 68 cannot stand merely on the basis of general investigation reports.
7.3 Similarly, in Passion Realtech Pvt. Ltd. vs. ACIT (ITA No. 1248/Del/2025), it was held that repayment of loans within a short period through bank transactions reinforces the genuineness of the transaction.
7.4 Given that the funds were immediately refunded and no evidence suggests the appellant introduced its own unaccounted money, the addition under section 68 was unsustainable both in fact and law. Accordingly, Ground No. 1 is allowed.”
9. From perusal of above observation and discussion, it is apparent on record that the short term receipt of loan through banking channel showed that for near 3 days of retention of funds no benefit or utilization of money was made by the Assessee. In absence of anything to the contrary the findings of Ld. CIT(A) being legal are sustainable. The grounds of appeal are rejected. 10. In the result, the application for condonation of delay of 71 days in filing appeal is allowed and appeal filed by Revenue is dismissed.
Order pronounced in the open court on 12th November, 2026
