Delhi ITAT: Unpaid Loan Not Taxable as Unexplained Money Under Section 69A

Vikash Gupta Vs ITO (ITAT Delhi)

Delhi ITAT: Unpaid Loan Cannot Be Taxed as Unexplained Money Under Section 69A Merely Because It Was Not Repaid

The Delhi ITAT partly allowed the assessee’s appeal by deleting an addition of ₹30 lakh made under Section 69A, holding that a genuine loan does not become the borrower’s unexplained income merely because it remains unpaid for a long period.

The reassessment was initiated based on information received from the Vigilance Department of ESIC alleging that the assessee had received illegal gratification. The Assessing Officer treated ₹30 lakh received from Goel Medicos as unexplained money under Section 69A, despite the assessee’s contention that it represented an unsecured loan received through normal banking channels. The Tribunal upheld the validity of the reassessment, finding that the Assessing Officer had independently examined the information, recorded valid reasons to believe, and that the reassessment proceedings suffered from no jurisdictional defect. It also rejected the challenge to the notices issued by the NFAC, following the Delhi High Court’s decision in T.K.S. Builders (P.) Ltd. recognising concurrent jurisdiction of the Jurisdictional AO and the Faceless AO.

On merits, however, the Tribunal found that the identity of the lender, genuineness of the transaction and creditworthiness were never disputed. The lender had consistently reflected the amount as a loan in its audited books of account, and even lodged a police complaint seeking recovery of the money, thereby acknowledging that the payment was a loan and not income of the assessee. The mere fact that the assessee failed to repay the balance amount for several years could not convert the borrowing into taxable income.

The Tribunal held that Section 69A applies only where the assessee is the owner of unexplained money and fails to satisfactorily explain its source. Since the source of the funds, the lender’s identity and the nature of the transaction stood established, the assessee could not be regarded as the owner of unexplained money. Accordingly, the addition of ₹30 lakh under Section 69A was deleted, though the reassessment itself was upheld.

Cases Discussed

• K.S. Builders (P.) Ltd. v. Income-tax Officer (Delhi HC), (2024) 469 ITR 657 (Delhi)
• G & G Pharma, 384 ITR 147

FULL TEXT OF THE ORDER OF ITAT DELHI

This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi [‘CIT(A)’ in short] dated 29.08.2025 arising from the assessment order dated 30.03.2022 passed by the Income Tax Officer, National e-Assessment Centre, Delhi under section 143(3) read with section 147 of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year (A.Y.) 2017-18.

2. There is a delay of 28 days in filing the appeal. The assessee filed a condonation application. Considering the reasons enumerated in the application, we condone the delay and admit the appeal.

3. The brief fact of the case is that the assessee is an individual earning from salary, House property and income from other sources. The assessee filed his return of income for A.Y. 2017-18 on 31.07.2017 declaring total income of Rs.18,45,010/-. The case was reopened under section 147 of the Act on the basis of information that assessee has received Rs.1 crore as bribe (Rs.48 lakh RTGS and out of Rs.48 lakh in the account of his wife Geeta Gera has received Rs.10 lakh). During F.Y. 2016-17, the assessee has received total amount of Rs.40 lakh either in his name or in his wife name Dr. Geeta Gera.

4. The AO issued and served a notice u/s 148 dated 30.03.2021 in response to which the assessee filed a return on 27.04.2021 declaring income of Rs 18,45,010/-. Thereafter a notice u/s 143(2) dated 01.12.2021 was issued. A notice u/s 142(1) was issued to the assessee in response of which assessee filed his reply which was duly considered but was not found acceptable. Hence, the AO added an amount of Rs.30 lakh as income u/s 69A of the Act and also initiated proceedings u/s 271(1)(c) for concealment of income. Upon appeal, the CIT(A) upheld the additions.

5. Aggrieved, assessee is in appeal before the Tribunal with the following grounds:

“Notice u/s 148: Void-ab-initio

1. That on the facts and in the circumstances of the case and in law, the ld. AO has issued notice u/s 148 without authority of law:

a. Reasons not based on sound belief, independent application of mind.

b. Reasons does not contain how the assessee not disclosed material facts as per explanation 2(b) of section 147 of the Act.

c. The approval u/s 151 from higher authority is mechanical and without signature.

d. No back material provided in spite of request from the assessee. The third-party information is vague and hollow.

e. No “pre-decisional” hearing given while disposing the objection.

Objections not disposed legally

2. That on the facts and in the circumstances of the case ‘and in law, Ld. AO did not allow personal hearing and passed non-speaking order. Hon’ble Delhi High Court decision in case of G & G Pharma (384 ITR 147) not considered.

Natural Justice Violation

3. That on the facts and in the circumstances of the case and in law, Ld. AO does not provide opportunity to cross examine/confront the back material given.

The NFAC had no jurisdiction to issued notice u/s 142(1) before 28.03.2022

4. The scheme of Faceless assessment of income escaping assessment came to be notified only on 29.03.2022 u/s 151A of the Act. The Faceless Jurisdiction of income tax authorities notified only on 28.03.2022 u/s 130 of the Act, whereas the notice u/s 142(1) were issued by the NFAC on 22.12.2021 and 20.01.2022.

Addition of Rs. 30,00,000/-

5. That on the facts and in the circumstances of the case and in law, the entire addition of Rs. 30,00,000/- made by an Ld. AO is figment of imagination.

6. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in making addition of Rs. 30,00,000/- u/s 69A without appreciating the fact:

a. The transaction of Rs. 30,00,000/- is unsecured loan taken from Smt. Usha Goel through banking channels account to account transfer.

b. The said transaction is appearing in the audited account of Smt. Usha Goel from the A.Y. 2018-19 to 2019-20 as loans and advances in the assets side of the Balance Sheet.

c. Out of the total loan taken Rs. 38,00,000/-, Rs. 6,00,000/- was repaid from time to time by the assessee which is not disputed by the lender.

d. The burden of proving identity, genuineness and creditworthiness of the transaction was duly discharged by the assessee.

e. The section 69A of the Act which deals with unexplained money etc no recorded in books of accounts is inapplicable to the facts of the case.

7. That the appellant craves to leave to amend, delete, add, substitute, modify, or alter any one or more of the grounds of appeal at the time of hearing.

6. At the outset, learned Counsel of the assessee reiterated the jurisdictional objections taken in the grounds of appeal. The ld AR further submitted that the assessee had taken loan from Goel Medicos which is evidenced by the lender, Goel Medicos, itself by way of the confirmation and Audited balance sheet.

7. Per contra, the learned DR stated that the assessee had received an amount of Rs.38 lakh from Smt Usha Goel as bribe, for the purpose of exercising assessee’s influence to expand the business of Smt. Usha Goel by getting appointed as a liaisoning agent with some pharmaceutical manufacturing companies, which was represented to participate in tender process pertaining to DGESIC Rate Contract (RC) No.140 for supply of drugs and dressing. The ld DR pointed out that the funds were received in FY 2016-17 and till FY 2022-23, the same was not returned, hence it cannot be considered as loan.

8. We have heard the rival submissions and perused the material available on record. It is an admitted fact that the notice u/s 148 was dated 30.03.2021 was issued for reopening the AY 2017-18 and that the original return was not scrutinised/assessment was made u/s 143(3). In order to adjudicate the various legal grounds, it would be prudent to reproduce the reasons recorded by the AO as below:

“As per information received from Dy. Director (Vig) of Employees State Insurance Corporation New Delhi vide No. C-12/111/14/2019-vig/330 dated 18.03.2019, it has been found that Dr. Vikas Gupta is involved in high valued transaction of movable/immovable assets and also accepting bribe. Further, it has been also seen that the assessee has travelled abroad several times. In above letter it has been requested to carry out necessary action against Dr. Vikas Gupta. To verify the genuineness of the information the ITR of the assessee has been perused and found that the assessee has filed his ITR for A.Y. 2017-18 on 31.07.2017 and declared taxable income of Rs. 18,45,010/- from Salary as well as interest income from Income from Other Sources. Further, it has been seen that the assessee is receiving Rs. 1,00,00,000/- as bribe (Rs. 48 Lakh RTGS and out of Rs. 48 Lakh in the account of his wife Geeta Gera has received Rs. 10lakh). Further, it has been also perused that the assessee has kept unaccounted and undisclosed immovable and movable property. The assessee has also visited foreign country in several times. Therefore, on the basis of information passed by Dy. Director (Vig.) and bank statement of M/s Goel Medicos,

To conclude, I have independently examined the entire gamut of the facts and circumstances as also the material available on record after due application of mind on the same as brought out above. During F.Y. 2016-17 the assessee has received total amount of Rs. 40,00,000/- either in his name or in his wife name Dr. Geeta Gera. The transactions done are detailed below as reflected in the bank account of M/s Goel Medicos which are as under:

I therefore, have reasons to believe that income of more than Rs. 40,00,000/- in the case of the assessee that was chargeable to the tax under the provision of Income Tax Act, 1961, has escaped the assessment during the A.Y. 2017-18 by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. Hence it is a fit case for initiation of proceedings in terms of explanation 2(b) of section 147 of the I.T.Act, 1961, so as to bring to tax the income emanating of Rs. 40,00,000/- and any other income which comes to my notice subsequently during the course of assessment proceedings.

Accordingly, necessary approval u/s 151(1) of the Income Tax Act, 1961 is solicited to issue notice u/s 148 of the Income Tax Act, 1961 to re-open the assessment u/s 147 of the Income Tax Act, 1961, so as to bring to tax the income escaping assessment.”

9. From the perusal of the ‘reasons recorded’, we are of the opinion that the AO was in possession of the information received from Dy. Director (Vig.) of Employee State Insurance Corporation, New Delhi that the assessee had received an amount of Rs.30 lakh as loan from Smt. Usha Goel (proprietor of M/s. Goel Medicos) against the assessee’s promise to extend commercial benefit to Smt. Usha Goel. We find that this information was independently examined and verified by the AO with the return filed by the assessee. The content of the information and its verification with the return filed, establishes the link between the material and belief formed by the AO. We also find that the AO has invoked the Explanation 2(b) of section 147 of the Act. In view of such invocation coupled with fact that the original return filed was not subjected to scrutiny u/s 143(3), even though the AO records the fact of failure of the assessee to disclose fully and truly all material facts, in accordance with 1^st proviso of section 147 of the Act, there was no such requirement. We further note that information is neither vague nor hollow as it contains details of transaction. The approval granted u/s 151 records the proper satisfaction of the specified authority and cannot be considered as mechanical. The AO has given opportunity to file objection to the notice u/s 148 wherein the assessee filed a detailed reply. Thereafter, the AO has disposed the objection vide a detailed order dated 02.03.2022. We therefore find no substance in the assessee Ground no 1 to 3 and the same is accordingly dismissed.

10. With regard to assessee objection that the NFAC had no jurisdiction to issue notice u/s 142(1) before 28.03.2022 as the scheme of Faceless assessment of income escaping assessment came to be notified only on 29.03.2022 u/s 151A of the Act, is concerned, the facts are that the Notice u/s 148 and notice u/s 143(2) was issued by JAO. Only notice u/s 142(1) were issued by the NFAC on 22.12.2021 and 20.01.2022. Ultimately, the assessment order u/s 147 r.w. 144B was passed by the NFAC on 30.03.2022. We find no jurisdictional error as the Faceless Jurisdiction of income tax authorities was notified on 28.03.2022 u/s 130 of the Act, and the impugned order was passed on 30.03.2022, after the scheme was notified. Besides the law on this matter is resolved by the hon’ble Delhi High Court in the T.K.S. Builders (P.) Ltd. v. Income-tax Officer, (2024) 469 ITR 657 (Delhi) wherein it was held that Jurisdictional Assessing Officers (JAO) and Faceless Assessing Officers (FAO) possess concurrent jurisdiction to issue reassessment notices under Section 148. Accordingly, the notice u/s 142(1) issued by the NFAC on 22.12.2021 and 20.01.2022, is neither illegal nor fatal to the reassessment order framed by the FAO as the jurisdiction is concurrently held by both the JAO and the FAO. Moreover, such notices u/s 142(1) have not created any prejudice to the assessee. Ground 4 is accordingly dismissed.

11. On merits, we find that the assessee claims that he received Rs.30 lakh as unsecured loan from Goel Medicos through banking channel and there is no application of section 69A. The fact of the matter is that Goel Medicos had filed a complaint with SHO, Economic Offence Wing, New Delhi wherein Goel Medicos had complained that the aforesaid amount of Rs 30 lakh was given as loan in good faith by taking loan from Banks and relatives. From the complaint, we find that an amount of Rs 6 lakh was returned by the assessee in the same financial year but the assessee has not returned the balance amount despite several reminders. The AO further sought response from the lender vide issue of notice u/s 133(6), wherein Usha Goel stated that the said amount was given as an advance to the assessee for seeking favour from him in getting Goel Medicos appointed as a liaisoning agent with some pharmaceutical companies. In such facts and circumstances, the AO has treated the assessee as owner of the said amount. We are of the considered view that merely because the assessee has not returned the said amount for a long period of time, the nature of said amount, given as loan, cannot be treated as income in the hands of the assessee. Such conclusion is corroborated with the fact that the lender has treated the said amount as loan in its audited books of account. The lender’s complaint before the police authorities for cheating and for the amount to be returned by the assessee, do not by itself make the assessee the owner of the said money or convert the loan into an income of the assessee.

12. We further find that the additions have been made under section 69A of the Act which requires the AO to show that the assessee is owner of the money and has no satisfactory explanation for the source of the said money. In the instant case, the explanation of the assessee shows that the lender is identified, genuineness of transaction and creditworthiness is also not questioned. The only factor that the assessee has not returned the loan, has made the AO/CIT(A) to consider the assessee as the owner of the said money. We are therefore of the considered view that the assessee is not the owner of the money received from Goel Medicos and accordingly, the provisions of section 69A is not applicable in the instant case. The grounds on merits is allowed.

13. In the result, appeal of the assessee is ITA No. 7702/DEL/2025 is partly allowed.

Order pronounced in the open court on 06.08.2026