Isha Mehta Vs ITO (ITAT Delhi)
Summary: The appeal filed by Isha Mehta before the Income Tax Appellate Tribunal, Delhi Bench “A”, arose from the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi dated 01.12.2025 for Assessment Year 2021-22. The CIT(A) had upheld the assessment order dated 28.12.2022 passed under section 143(3) read with section 144B of the Income Tax Act, 1961, whereby an addition of Rs. 1,91,60,000 was made under Section 68 read with section 115BBE on account of unsecured loans.
The assessee had filed her return of income for AY 2021-22 on 23.03.2022 declaring taxable income of Rs. 17,20,870. Her case was selected for scrutiny because the lenders from whom unsecured loans had been received had not filed their income tax returns. The Assessing Officer had identified five persons from whom unsecured loans were received and accepted the loans from three parties as genuine. The disputed loans were Rs. 21,60,000 received from Rishi Mehta and Rs. 1,70,00,000 received from Stellar Leisure World LLP.
In respect of Stellar Leisure World LLP, the Assessing Officer noted the returns of income for Assessment Years 2019-20, 2020-21 and 2021-22 and also considered the status of annual returns and balance sheets filed with the Registrar of Companies. Since the LLP had not filed its annual returns and financial statements before the ROC, the Assessing Officer doubted the genuineness of the transactions and creditworthiness of the lender.
Regarding Rishi Mehta, the Assessing Officer noted an opening balance of Rs. 2,00,000 which had not been repaid during financial year 2020-21 and observed that a further loan of Rs. 21,60,000 had been advanced despite the lender’s returned income being Rs. 17,12,380. On this basis, the Assessing Officer doubted the creditworthiness of the lender and genuineness of the transactions.
The Tribunal, however, found that the assessee had furnished the income tax returns of Stellar Leisure World LLP for the preceding three years. The lender had earned income of Rs. 83,58,400 in AY 2021-22, which was set off against brought-forward loss, resulting in taxable income of Nil. The Tribunal held that the creditworthiness of the lender was proved beyond doubt. It also considered the series of advances and repayments between the assessee and the LLP, including advances of Rs. 50 lakhs, Rs. 40 lakhs and Rs. 10 lakhs which were received back, followed by the assessee receiving Rs. 70 lakhs from the same party. Out of the Rs. 1,70,00,000 received during the year, Rs. 1 crore had been repaid during the year and Rs. 70 lakhs remained outstanding at year-end.
The Tribunal further noted that Stellar Leisure World LLP was duly assessed to income tax, that the transactions were routed through regular banking channels, and that the assessee had maintained current-account transactions with the lender. The lender had received and repaid monies during the year and had disclosed the amounts advanced to the assessee in its balance sheet. The assessee had also furnished the loan confirmation and audited balance sheet before the Assessing Officer.
The Tribunal held that merely because the lender had not filed its annual returns with the Registrar of Companies, the transactions could not be treated as ingenuine. In its considered opinion, all three ingredients of Section 68 had been duly complied with.
With regard to Rishi Mehta, the assessee had furnished a detailed reply to the show cause notice, stating that the lender was duly assessed to income tax and that his identity was established through the ITR furnished before the Assessing Officer. The assessee also submitted that the lender had sufficient declared income to establish his creditworthiness, and furnished the lender’s confirmation and audited balance sheet. The transactions were routed through regular banking channels and the loan was reflected in the lender’s audited balance sheet. The Tribunal also noted that Rishi Mehta was the husband of the assessee.
The Tribunal observed that after the assessee furnished all the requisite documents before the Assessing Officer, the onus shifted to the Revenue. The Assessing Officer had not undertaken any verification to examine the veracity of the documents furnished by the assessee. The Tribunal held that when the onus cast on the Assessing Officer had not been discharged, there was no reason for the lower authorities to doubt the veracity of the loans received by the assessee.
The Tribunal accordingly concluded that the three ingredients of Section 68 had been duly explained and complied with by the assessee before the lower authorities. Consequently, no part of the credits could be treated as unexplained warranting an addition under Section 68. The Tribunal allowed the grounds raised by the assessee and, consequently, allowed the appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF INCOME TAX APPELLATE TRIBUNAL
This appeal of the assessee arises out of the order passed by the Commissioner of Income Tax (Appeals) NFAC, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 592/Del/2026 for A.Y. 2021-22 dated 01.12.2025 which in turn arises out of the order passed by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’) passed u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.12.2022.
2. Though the assessee has raised several grounds of appeal before us, the only effective issue to be decided in this appeal is as to whether the Learned CITA was justified in confirming the addition of Rs 1,91,60,000 made by the Learned AO under section 68 read with section 115BBE of the Act on account of receipt of unsecured loans, in the facts and circumstances of the instant case.
3. We have heard the rival submissions and perused the materials available on record. The assessee filed her return of income for the Assessment Year 2021-22 on 23-3-2022 declaring taxable income of Rs 17,20,870. The case of the assessee was selected for scrutiny for the reason that lenders from whom unsecured loans were received by the assessee, had not filed their income tax returns. The Learned AO tabulated the list of five persons from whom unsecured loans were received by the assessee in page 3 of the assessment order . Out of this, the Learned AO accepted the loans received from three parties as genuine. The two parties from whom unsecured loans were received by the assessee which were disputed by the Learned AO are as under:-
Rishi Mehta (PAN AAPPM9148L) – Rs 21,60,000
Stellar Leisure World LLP (PAN ACXFS3679Q) – Rs 1,70,00,000
4. The Learned AO noted that the returns of income for the aforesaid lenders for the Assessment Years 2019-20, 2020-21 and 2021-22. The Learned AO also recorded the status of compliance of annual returns and Balance Sheets filed with Registrar of Companies in respect of Stellar Leisure World LLP and observed that the said concern had not filed its annual returns and financial statements before the Registrar of Companies (ROC). By this process, the Learned AO doubted the genuineness of transactions and creditworthiness of the lender.
5. With regard to Rishi Mehta, the Learned AO noted that there is an opening balance of Rs. 2,00,000 and assessee did not repay that amount during financial year 2020-21 and yet further loan of Rs. 21,60,000 was advanced by Rishi Mehta to the assessee even though his returned income was Rs. 17,12,380. Accordingly, the Learned AO doubted the creditworthiness of the lender and the genuineness of the transactions.
6. By the aforesaid observations, an addition of Rs. 1,91,60,000 was made in the assessment by the Learned AO under section 68 read with section 115BBE of the Act. This action of the Learned AO was upheld by the Learned CIT
7. At the outset, we find that assessee had furnished the income tax returns of Stellar Leisure World LLP for the last 3 years. The said lender had earned income of Rs. 83,58,400 in assessment year 2021-22 which was set off against brought forward loss of previous year, thereby resulting in the taxable income at Rs. Nil. The credit worthiness of the lender is also proved beyond doubt. Further, the assessee had advanced Rs. 50 lakhs to the said party and received back the same. Next advance of Rs. 40 lakhs was paid to that party and the same was received back. Again, the assessee had paid Rs.10 lakhs as advance to that party and received back. After all the squaring up of these transactions, the assessee received Rs. 70 lakhs from the same party. This sum of Rs. 70 lakhs was outstanding as at the end of the previous year relevant to assessment year 2021-22. Out of the total sum received during the year in the sum of Rs. 1,70,00,000, Rs. 1 crore has already been repaid by the assessee during the year itself and only a sum of Rs. 70 lakhs was outstanding. The lender is duly assessed to income tax which proves the identity of the lender. All the transactions are routed through regular banking channels and assessee has been having transactions with the same party during the year in the form of a current account. The assessee had received as well as repaid the monies from/to the said lender during the year. The said lender had also disclosed the amounts advanced to the assessee in its balance sheet. All these transactions prove the genuineness of the transactions. Merely because the said lender had not filed its annual returns with the registrar of companies, the transactions had with the said party could not be treated as ingenuine. In our considered opinion, all the three ingredients of section 68 of the Act had been duly complied with. The assessee had even stated all these facts in response to the show cause notice filed before the Learned AO. The confirmation of loan from the lender was also duly provided to the Learned AO together with the audited balance sheet.
8. With regard to Rishi Mehta, the assessee filed a detailed reply in response to the show cause notice before the Learned AO stating that the said lender is duly assessed to income tax and the identity of the lender is proved by the copy of the ITR filed before the Learned AO. The said party is having sufficient declared income in the income tax returns which itself goes to prove that he had sufficient credit worthiness to advance the loans to the assessee. The assessee also furnished the confirmation from the said lender before the Learned AO together with the copy of the audited balance sheet of the lender. The transactions were routed through regular banking channels and the loan advanced by the said lender to the assessee had been duly reflected in the audited balance sheet thereby proving the genuineness of the transactions. Further, Rishi Mehta is the husband of the assessee.
9. It is pertinent to note that after the furnishing of all the requisite documents by the assessee before the Learned AO, the onus gets shifted to the revenue. The Learned AO in the instant case had not resorted to make any verification to examine the veracity of the documents furnished by the assessee. When the onus cast on the Learned AO has not been discharged, there is no reason for the lower authorities to doubt the veracity of the loan received by the assessee. In our considered opinion, the three ingredients of Section 68 of the Act had been duly explained and complied by the assessee in the instant case before the lower authorities. Hence, no part of such credit could be treated as unexplained warranting any addition under Section 68 of the Act. Accordingly, the grounds raised by the assessee are allowed.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 19/08/2026
