DCIT Vs Priyas Impex Private Limited (ITAT Delhi Bench)
U/s 69A – Repayment Is Not a Fresh Receipt: ₹2.22 Crore Loan Repaid Before Search & Reopening Cannot Be Branded an Accommodation Entry Merely on Suspicion
Summary: The Delhi ITAT dealt with an interesting case where the AO made an addition of ₹2.21 crore u/s 69A not on receipt of loans during the year, but on repayment of loans taken in an earlier year, alleging that the lenders were entities controlled by accommodation-entry operators. The Tribunal upheld the CIT(A)’s deletion, holding that where the loans were old liabilities, received & subsequently repaid through banking channels, supported by documentary evidence & repayment itself had taken place even before the third-party search & much before reopening, the transactions could not be discarded merely on suspicion arising from subsequent Investigation Wing material.
Facts
The assessee-company was incorporated on 12.07.2016 & filed its return for AY 2018-19 declaring Nil income. The assessment was subsequently reopened by notice u/s 148 dated 22.03.2024. During reassessment, the AO alleged that the assessee was beneficiary of accommodation entries routed through M/s Sarvottam Securities Pvt. Ltd., M/s SW Consultants Pvt. Ltd. & M/s Upaj Leasing & Finance Company Pvt. Ltd.
The assessee explained that no loan had been received during the year under consideration. What happened during the year was exactly the opposite—the assessee repaid unsecured loans taken in earlier years. There had been a change in management, fresh capital was introduced & such funds were utilized for repayment of the earlier loans.
The AO nevertheless made an addition of ₹2,21,89,517 u/s 69A, disallowed interest of ₹2,23,359 u/s 36(1)(iii) & further added ₹6,72,386 u/s 69C towards alleged commission for procuring accommodation entries. The CIT(A) deleted all the additions by following the Delhi ITAT decision in Real Innerspring Technologies (P.) Ltd. v. ACIT [2025] 174 taxmann.com 1130 (Delhi-Trib.).
Revenue carried the matter to the ITAT.
Old loan, new year repayment
The assessee explained that the loans had actually been availed in AY 2017-18 for business requirements, including purchase of an industrial plot for a factory at Noida. During AY 2018-19, new management introduced funds of ₹4.67 crore, which constituted the source for repayment.
Significantly, the receipts as well as repayments were through banking channels. Interest was paid after deduction of TDS, which was deposited with the Government. The assessee further emphasized that the loans had been repaid before the search conducted in the third-party case.
The assessee had also furnished PAN, ITRs, financial statements, confirmations & bank statements in support of the lenders & transactions. Thus, according to the assessee, identity, creditworthiness & genuineness stood established.
ITAT – Ledger itself told the story
The Tribunal found that the ₹2,21,89,517 represented loans originally taken through banking channels from the three entities & that the entire repayment was also through banking channels.
More importantly, the ledger accounts reflected opening balances, clearly demonstrating that the transactions were continuing from earlier years rather than representing fresh receipts during AY 2018-19.
The Tribunal also noticed the chronology: the repayment had taken place before notice u/s 148 dated 22.03.2024 & even before the search conducted in the Galaxy Group.
This chronology became crucial because the Revenue was attempting to characterize an already completed repayment transaction as an accommodation entry on the basis of material emerging from a subsequent third-party search.
Repayment before reopening makes a difference
The ITAT found the controversy squarely covered by Real Innerspring Technologies Pvt. Ltd., involving substantially similar facts & the same alleged entry-provider group.
In that decision, the Tribunal had observed that accommodation entries ordinarily remain in the books & may eventually be written off. However, where an assessee had actually received unsecured loans through banking channels, paid interest & thereafter repaid the loans through banking channels even before reopening, that factual pattern could not simply be ignored.
The crucial principle stated was that merely because an alleged operator managed the affairs of a lender, every transaction involving such entity cannot automatically be labelled non-genuine. Each transaction has to be examined on its own merits rather than being condemned on the basis of suspicion.
Revenue’s “accommodation entry” label was not enough
Revenue argued that the lenders were shell/non-descript entities allegedly controlled by Shri Deepak Agarwal & Shri Himanshu Verma, who were stated to be accommodation-entry operators. Revenue also contended that mere movement of funds through banking channels & repayment could not establish genuineness.
But the difficulty was that the assessee’s own transaction had to be independently tested.
The fact that some person may be an alleged entry operator does not convert every transaction involving entities associated with him into an accommodation entry by legal fiction. Once the assessee places transaction-specific documentary material on record, the AO must bring material connecting that particular transaction with the alleged accommodation-entry mechanism.
Suspicion about the lender may justify investigation; it cannot by itself complete the assessment.
Consequential additions also fall
Once the principal addition of ₹2,21,89,517 u/s 69A was deleted, the consequential additions could not independently survive.
Accordingly, the disallowance of ₹2,23,359 towards interest u/s 36(1)(iii) & addition of ₹6,72,386 u/s 69C towards alleged commission were also deleted.
The Tribunal found no reason to interfere with the CIT(A)’s findings & Revenue’s appeal was dismissed.
Author’s Comment
The most striking feature of this case is simple: the AO taxed repayment as though it were receipt. The ledger showed an opening loan balance, meaning the borrowing belonged to an earlier year; AY 2018-19 merely witnessed its repayment. That distinction assumes considerable importance while invoking u/s 69A.
The chronology is even more compelling-the assessee had repaid the loans before the third-party search itself, leave alone the subsequent reopening notice. A transaction completed before the investigative event cannot automatically acquire the colour of an accommodation entry merely because later investigation casts suspicion upon persons connected with the lender.
The decision does not lay down that repayment through banking channels is conclusive proof of genuineness in every case. Rather, its real message is more balanced: where documentary evidence supports the transaction, interest is actually paid with TDS, the liability originates from an earlier year & the loan is genuinely repaid before search/reopening, Revenue needs transaction-specific evidence to dislodge those facts.
After all, an opening balance cannot become unexplained money merely because the AO opens an investigation years later.
Cases Discussed
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, DELHI BENCH
1. This appeal is filed by the Revenue against the order of ld. Commissioner of Income-tax (Appeals)-30, Delhi [“Ld. CIT(A)”, for short] dated 30.03.2025 for the Assessment Year 2018-19 raising the following grounds of appeal :-
“1. On the facts and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,21,89,517/- made by the Assessing Officer under section 69A, as well as the disallowance of interest ofRs.2,23,359/- made under section 36(1)(iii) of the Income-tax Act, 1961, without appreciating that the alleged unsecured loans taken and repaid by the assessee were in the nature of accommodation entries routed through shell/non-descript entities, namely M/s Sarvottam Securities (P) Ltd, M/s SW Consultants (P) Ltd, and M/s Upaj Leasing and Finance Company Pvt. Ltd. These entities were controlled and managed by Shri Deepak Agarwal and Shri Himanshu Verma, who are established accommodation entry operators as per Investigation Wing findings and supported by pastjudicial pronouncements.
2. Ld. CIT(A) erred in not considering the fact that assessee fail to furnish the source for the repayment to M/s Sarvottam Securities (P) Ltd, M/s SW Consultants (P) Ltd, and M/s Upaj Leasing and Finance Company Pvt. Ltd. which is non-descript company and assessee income isnon-commensurate for the repayment of such a huge amount of loan.
3. Ld. CIT(A) erred in not considering the fact that since payments & repayments to abovementioned non-descript company were in form of accommodation entries, accordingly, expenses of interest paid an amount of Rs.2,23,359/- during year under consideration to above mentioned non-descript company are also not allowable u/s 36( l)(iii) of the Act.
4. The Ld. CIT(A) erred in law and on facts by disregarding conclusive findings of the Investigation Wing, including non-existence of lender entities at declared addresses, absence of any genuine business activity, lack of creditworthiness to advance substantial loans, and confirmations from past search actions (2012 and 2014) wherein Shri Deepak Agarwal was judicially held to be an accommodation entry provider. The CIT(A) thereby misdirected himself by granting relief contrary to overwhelming documentary and field-level evidence.
5. The Ld. CIT(A) erred in holding that repayment of alleged loans prior to issuance of notice u/s 14 constituted evidence of genuineness of transactions, ignoring the settled law that mere routing through banking channels does not establish genuineness, particularly in cases of accommodation entries, where circular routing and repayment are common elements of the modus operandi.
6. The Ld. CIT(A.) erred in placing reliance on the decision of Real Innerspring Private Limited vs. ACIT, without appreciating that the factual matrix in that case is distinguishable, genuine business activity was demonstrated therein, no adverse investigation material existed against lenders and the present case involves entries proven to be conduits for laundering unaccounted money. The ratio of the said decision is therefore not applicable to the instant case.
7. The Ld. CIT(A) failed to apply the statutory mandate of Section 69A to furnish the source of repayment. Further, the assessee fail to prove genuineness and creditworthiness of the transactions. When the lenders are paper entities with no financial capacity, the deletion of addition is contrary to law laid down by the Supreme Court in PCIT v. NRA Iron & Steel Pvt. Ltd. (2019).
8. The Ld. CIT (A) erred in deleting the addition of Rs.6,72,386/- made u/s 69C towards commission paid for procuring accommodation entries without examining the modus operandi, the standard commission rate (3 per cent) established in Investigation Wing reports, and the judicial recognition of the same in cases of the group. Deletion of the primary addition u/s 69A being incorrect deletion of consequential addition u/s 69C is equally unsustainable.
9. The Ld. CIT (A)’s order is perverse, as it fails to address detailed adverse material, overlooks incriminating evidence from search proceedings, accepts lender confirmations at face value, does not apply settled judicial principles governing accommodation entries, and relies solely on repayment without examining the source of funds for repayment, which is a critical statutory requirement.
10. The Ld.CIT(A)shifted the burden of proof from the assessee to the Department contrary to the settled principle that the assessee must conclusively establish the source of credits. The CIT(A) thus erred in granting relief without a proper enquiry into the real source and capacity of the lenders.
11. The present case involves organized tax evasion and accommodation entries, falling squarely within Exception (h) of Para 3.1 of CBDT Circular No. 5/2024. TheLd.CIT(A) failed to appreciate the gravity of the case, requiring strict scrutiny rather than unwarranted relief. The Ld. CIT(A) deleted additions without refuting findings regarding sham entities, addressing lack of creditworthiness, countering the investigative evidence on entry operations, or examining surrounding circumstances as required under section 68.
12. The relief granted is therefore unsustainable in the eyes of law.
13. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
14. The grounds of appeal are without prejudice to each other.”
2. At the time of hearing, ld. AR of the assessee with the permission of the Bench brought to our notice relevant facts of the case and submitted his submissions as under. He submitted that the assessee is a Private Limited company incorporated on 12.07.2016 and regularly filing income tax return. The assessee company filed its original return electronically for the Assessment Year 2018-19 under consideration on 07.08.2018declaring NIL income and the same was processed under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’). He further submitted that the case of the assessee was reopened u/s 148 of the Act vide notice dated 22.03.2024 issued by ACIT, Circle 19(1), New Delhi. Thereafter intimation regarding completion of assessment in accordance with procedure of section 144B was served on 28.06.2024. Further, he submitted that notices u/s 143(2) and 142(1) were issued of the Act. Ld. AR further submitted that the assessee company filed the reply and also filed the ITR in response to notice u/s 148 of the Act and also sought copy of reasons and copy of approval and raised objections. Thereafter notices u/s 142(1) of the Act were issued. In reply, the assessee company filed the reply vide letter dated 24.01.2025 alongwith copy of ITR, computation, tax audit report and balance sheet for the year under consideration. Thereafter a notice u/s 142(1) of the Act dated 18.02.2025 was issued and the assessee company filed the detailed reply vide letter dated 20.02.2025 alongwith the copy of confirmation, bank statement, copy of ITR of Shri Vishal Jairath, Shri Vinod Kumar Goyal, Shri Vinay Kumar Goyal, and requested for an opportunity for Virtual Hearing. He submitted that thereafter a Show Cause Notice dated 04.03.2025 was issued stating that the assessee company is beneficiaries of the accommodation entries which was arranged through shell entity M/s. Sarvottam Securities Pvt Ltd, M/s Upaj Leasing and Finance Company Pvt Ltd and M/s. SW Consultants Pvt Ltd. He submitted that the virtual hearing was denied. However, the assessee company filed detailed reply vide letter dated 07.03.2025 informing that the assessee company has not received any loan or accommodation entry as alleged rather the assessee company has repaid loans taken in earlier years. During the year under consideration, there was change in management and fresh capital were introduced and the same was utilized for the repayment of unsecured loans taken in earlier years. The AO passed the assessment order on 30.03.2025 by making the additions u/s 69A of the Act of Rs.2,21,89,517/-, disallowance u/s 36(1)(iii) of the Act of Rs.2,23,359/- and addition u/s 69C of the Act of Rs. 6,72,386/-.
3. Aggrieved against the aforesaid order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. Ld. CIT (A), after going through the detailed submissions, deleted the additions by relying on the decision of ITAT, Delhi Bench in the case of Real Innerspring Technologies (P.) Ltd. vs. ACIT.
4. Aggrieved against the order of ld. CIT (A), the Revenue is in appeal before us.
5. In response, ld. DR of the Revenue submitted that the ld. CIT (A) erred in giving relief to the assessee and relied on the findings of the AO.
6. Further, ld. AR of the assessee submitted that the addition was made under section 69A of the Act on repayment of loans of earlier year to NBFCs of Rs.2,21,89,517/-. He submitted that the said loan was availed by the assessee in earlier year i.e. AY 2017-18 and the repayment of such loans were sourced through the new management and new management introduced funds amounting to Rs.4,67,60,000/-. He further submitted that Mr. Vishal Jairath and Prachi Jairath were appointed as directors in the current year. He submitted that the unsecured loan was availed in earlier year to meet the business requirements (purchase of industrial plot for factory in Noida) therefore the interest on the said loan is an allowable expenditure. He further brought to our notice that all transactions (receipts and repayments) are through banking channels and the TDS has been deducted and deposited in Government treasury. The said unsecured loan were taken for the purposes of business and the interest paid is also an legitimate business expenses and the same is allowable. He submitted that the assessee repaid the unsecured interest bearing loans in year under consideration through banking channels and paid interest thereon after deducting & depositing TDS, which further evidences the genuineness of the transaction. He further submitted that it is important to note that the date of repayment is prior to the date of search in the case of third party. He submitted that it is now a settled position of law that for making an addition, the assessee is required to prove: (i) identity of the creditor, (ii) creditworthiness of the creditor, and (iii) genuineness of the transaction. Once these three pillars are duly established, the burden shifts to the revenue to bring contrary evidence to disprove the assessee’s claim. He submitted that in the present case, the respondent has discharged the primary onus by furnishing PAN details, income-tax returns, financial statements, confirmation letters, bank statements. Furthermore, the loan along with interest, was fully repaid by the assessee before the date of the search operation that caused the proceedings, thereby negating the suspicion of any layering or retention of unexplained cash. The assessee has duly proved the identity and credit worthiness of the lender and the genuineness of the transactions. He further placed reliance on decision of ITAT, Delhi in the case of Real Innerspring Technologies (P.) Ltd. vs. ACIT [2025] 174 taxmann.com 1130 (Delhi-Trib.)[27-03-2025], on which ld. CIT (A) has also relied upon.
7. Considered the rival submissions and material placed on record. We observed that the AO has initiated reassessment proceedings on the basis of information received from the Investigation Wing and search proceedings on Galaxy Group, Shri Pradeep Indra Prasad Agrawalla and entry providers, Shri Deepak Agarwal and Shri Himanshu Verma. We observed that the loan of Rs.2,21,89,517/- was originally taken through banking channels from M/s. Sarvottam Securities Private Limited, M/s SW Consultants Pvt. Ltd. and M/s Upaj Leasing and Finance Company Pvt. Ltd., and the entire repayment was also effected through proper banking channels. We further observed that the ledger account, as reproduced in the assessment order, clearly shows an opening balance, reflecting the continuity of the transaction from prior years. We also observed that the ledger entries and the bank transaction evidence placed on record which show repayment prior to the issuance of notice u/s 148 on 22.03.2024 and in this case, repayment was made even before search conducted in Galaxy group. Further, we observed that the issue involved is squarely covered by the decision of the ITAT, Delhi Bench in the case of Real Innerspring Technologies Pvt. Ltd. vs. ACIT (supra), in which Accountant member is the author of the above decision, and, in our view, the ld. CIT (A) has rightly followed the findings of the aforesaid decision. For the sake of brevity, the findings of ld. CIT (A) which also contained the findings of the coordinate Bench decision in Real Innerspring Technologies Pvt. Ltd. are reproduced below :
“10. Ground nos.7 to 9 (addition u/s 69A/69C/36(l)(iii)): These grounds are inter-related and challenge the addition made by the AO under section 69A, 69C and 36(1)(iii) of the Act treating the loan repayment transaction as bogus accommodation entry. Hence, these grounds are taken up together for adjudication.
10.1 In this case, the loan of Rs.2,21,89,517/- was originally taken through banking channels from M/s. Sarvottam Securities Private Limited, M/s SW Consultants Pvt. Ltd. and M/s Upaj Leasing and Finance Company Pvt. Ltd., and the entire repayment was also effected through proper banking channels. The ledger account, as reproduced in the assessment order, clearly shows an opening balance, reflecting the continuity of the transaction from prior years. Appellant strongly argued that it repaid the loan before the reassessment notice dated 22.03.2024 whereas AO has held that though appellant has repaid the loan along with interest but it was repaid to non-descript company. The relevant part of the assessment order is scanned here for the sake of completeness as under:
“12.1 As per seized documents, the assessee company has repaid loan of Rs. 2,21,89.517 from Sarvottam Securities Private Limited, SW Consultants Pvt. Ltd. and Upaj Leasing and Finance Company Pvt. Ltd. which are one of the entities controlled and managed by Sh Deepak Agarwal and was being used to provide accommodation entry in lieu of cash @ 3%. The copy of ledger is reproduced herein under –
13.1 The above discussion shows that the assessee has repaid loan of Rs 2,21,89.517 to non-descript companies i.e. Sarvottam Securities Private Limited, SW Consultants Pvt. Ltd. and Upaj Leasing and Finance Company Pvt. Ltd. which have no genuine business and has no creditworthiness and thus, it is the beneficiary of the accommodation entry.”
10.2 For this purpose relevant and recent judgment of the jurisdictional ITAT in Real Innerspring Technologies Pvt. Ltd. vs. ACIT (dated 27.03.2025). Hon’ble ITAT considered the same question on substantially similar facts (Himanshu Verma / Deepak Agarwal group) and held in favour of the assessee: because the loans had been repaid before the date of issue of notice under section 148.
The ratio of same case is directly relevant and binding in the present appeal. A copy of the ITAT order is on file and has been examined. For sake of completeness, operating part of the said order is reproduced here as under:
“11. In our considered view, the additions were made only on the basis of alleging that the loan taken by the assessee from the above said two companies are only accommodation entries and assessee’s own money was routed through these companies with the help of accommodation entry providers. On careful note, the accommodation entries are taken which will remain in the books of account and they will ultimately written off over the period of time. These loans were normally not repaid. In the given case, it is brought to our notice that the assessee has received the unsecured loan through the banking channel and repaid thru the banking channel as under:-
| Name of the Lender | Amount of the Loan | Date on which loan taken | Date of interest payment | Date of repayment of loan |
|---|---|---|---|---|
| M/s. Citzy Infraheights Pvt. Ltd. | 50,00,000 | 09.07.2015 (Pg 38 of the PB) |
30.12.2017 (Pg 40 of the PB) | 06.12.2017 30.12.2017 (Pg 39 & 40 of the PB) |
| M/s. CEA Consultants Pvt. Ltd. | 50,00,000 | 18.03.2016 (Pg 81 of the PB) |
27.04.2016 28.03.2017 (Pg 81 of the PB) |
17.03.2017 18.03.2017 21.03.2017 (Pg 83 & 84 of the PB) |
12. From the above, it is clear that the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan and repaid along with the interest clearly shows that the transactions are genuine. By returning the loan, the assessee has only utilised the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs and all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee.
13. In the result, appeal filed by the assessee is allowed.”
10.3 Applying the above principle to the facts before me and on a careful scrutiny of the ledger entries and the bank transaction evidence placed on record which show repayment prior to the issuance of notice u/s 148 on 22.03.2024. In this case, repayment was made even before search in Galaxy group. Therefore, I find that the addition cannot survive and is hereby deleted. Consequent to deletion of addition under section 69A the consequential additions made under section 69C and 36(l)(iii) must also be deleted. Grounds are allowed.”
8. Respectfully following the aforesaid decision, we are inclined not to disturb the findings of the ld. CIT (A) and the grounds raised by the Revenue are dismissed.
9. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 2nd day of September, 2026.
