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.
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.
