Umakant Agrawal Vs DCIT (ITAT Mumbai)
ITAT Mumbai Deletes ₹1 Crore Section 68 Addition – Loan from Alleged “Hawala Operator” Found Genuine-
Hawala Tag Alone Insufficient – Generic Investigation Report Not Enough- Loan with Banking Trail & TDS Found Genuine
Facts
- Assessee engaged in trading & commission business. ROI filed (30.09.2011) declaring income ₹2.09 Cr.
- Case reopened u/s 147 based on Investigation Wing report that creditor Rajendra Drolia (M/s Sai Traders) was a hawala operator giving accommodation entries.
- AO held ₹1 Cr unsecured loan received (March 2011) was assessee’s own unaccounted money routed back. Added u/s 68 & initiated penalty u/s 271(1)(c).
- CIT(A) confirmed addition, citing non-production of creditor, failed 133(6) enquiry & cancellation of creditor’s VAT TIN
Assessee’s Defence
- Produced PAN, ITRs, bank statements, confirmations, loan ledger.
- Loan advanced in 3 tranches (12–15 March 2011) via account-payee cheques.
- Interest @18% regularly paid with TDS deducted & reported in quarterly returns.
- Entire principal repaid in April 2012, long before reopening in 2018.
- No cash deposits or circular fund flows linked to assessee.
Tribunal’s Observations/ Decision
- Section 68 requires assessee to prove identity, creditworthiness & genuineness.
- Assessee discharged burden:
- Identity – creditor’s PAN & ITRs on record.
- Creditworthiness – lender’s bank account had adequate balances before each transfer, not cash-funded.
- Genuineness – loan through banking channel, commercial interest with TDS, repayment in 2012.
- AO relied only on generic label “hawala operator” & creditor’s non-traceability years later. That may justify reopening, but not conclusive to sustain addition if primary documents remain unchallenged.
- No evidence of cash trail, round-tripping, or artificial fund layering shown by Revenue.
- Later cancellation of VAT TIN cannot retroactively taint genuine loan transaction duly documented & repaid
- Addition of ₹1 Cr u/s 68 deleted in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Paid content
Become a Basic or Premium Member, or log in if you are already a Basic or Premium member.
