Its My Name Private Limited Vs CIT(A) (ITAT Delhi)
Directors’ Funds Were Explained: ITAT Deletes ₹17.46 Crore Addition Under Section 68
Evidence of Source Could Not Be Ignored
The Delhi Bench of the Income Tax Appellate Tribunal deleted an addition of ₹17,45,82,102 under section 68, comprising unsecured loans and share capital introduced by the assessee company’s existing directors.
The Tribunal found that the directors had proved their sources through detailed evidence, which the lower authorities had not specifically rebutted.
The assessee also explained that one component of the disputed amount represented a journal entry involving assignment of a loan, without an actual flow of money.
On the cumulative facts and evidence, the Tribunal held that the unsecured loans and share capital could not be treated as unexplained cash credits and allowed the appeal.
Three Transactions Formed the Disputed Addition
The assessee company was engaged in manufacturing, trading and exporting gold and jewellery articles. It filed its return for AY 2016-17 declaring income of ₹57,62,840.
The return was selected for complete scrutiny. The dispute concerned three transactions reflected in its books.
The first was an unsecured loan entry of ₹5,44,82,102 involving director Rahul Gupta and PP Charitable Trust.
The second was an unsecured loan of ₹7,02,00,000 from director Purnima Gupta.
The third was ₹4,99,00,000 introduced as share capital by Purnima Gupta.
Together, these amounts constituted the addition of ₹17,45,82,102. The CIT(A), by an order dated 30 July 2025, upheld the Assessing Officer’s action, leading to the appeal before the Tribunal.
The ₹5.45 Crore Entry Involved Loan Assignment
The assessee explained that Rahul Gupta had advanced a loan to PP Charitable Trust and that the loan was subsequently assigned to the company through a book entry during FY 2015-16.
Its case was that this transaction involved no actual movement of money to or from the company.
The assessee therefore challenged the treatment of the entry as unexplained income and argued that the authorities had wrongly applied reasoning concerning other receipts to this distinct transaction.
The Tribunal specifically noticed this explanation while examining the disputed additions. However, its ultimate deletion rested on the overall factual record and the unrebutted evidence concerning the directors’ sources.
The order should consequently not be read as laying down that every journal credit automatically falls outside section 68.
Purnima Gupta’s Funding Was Traced to Her NRI Sister
For the loan and share capital introduced by Purnima Gupta, the assessee explained that she had obtained funds from her sister, Shweta Aggarwal, an NRI residing in Dubai.
According to the assessee, the funds moved through recognised banking channels, including transfers from an NRE account.
It relied on documents concerning the identity and financial capacity of the persons involved, as well as the movement of funds.
The assessee also pointed to the share certificates issued to Purnima Gupta in respect of her investment.
Its submission was that the material established identity, creditworthiness and genuineness, and that the authorities had failed to rebut the explanation through appropriate enquiry.
A Detailed Paper Book Supported the Transactions
Before the Tribunal, the assessee referred to a 72-page paper book containing confirmations, ledgers, bank statements, income-tax return acknowledgements and details of investments and loans.
The Tribunal noted that the disputed funds came from existing directors and related parties assessed in the same jurisdiction.
More importantly, it expressly found that those directors had duly proved their sources through detailed evidence and that the lower authorities had nowhere specifically rebutted that evidence.
Thus, the decision did not rest merely on the relationship between the company and its directors. The evidentiary support and the absence of a specific rebuttal were central to the conclusion.
Gyscoal Alloys Decision Followed
The Tribunal relied on DCIT v. Gyscoal Alloys Ltd., ITA No. 102/Ahd/2014, dated 6 April 2018, as involving identical circumstances in which an addition under section 68 could not be sustained.
It further noted that the Gujarat High Court had upheld that order in PCIT v. Gyscoal Alloys Ltd., Tax Appeal No. 1180 of 2018, dated 1 October 2018.
Applying that reasoning to the facts before it, the Tribunal held that both lower authorities had erred in treating the directors’ unsecured loans and share capital as unexplained.
The entire ₹17,45,82,102 addition was deleted.
Author’s Comments
The judgment reinforces the importance of examining the actual evidence supporting a credit rather than treating a large related-party receipt as inherently unexplained.
A director’s identity alone does not prove the transaction; a documented source and fund trail make the substantive difference. Here, the Tribunal recorded that the sources had been established and the evidence remained specifically unrebutted.
Where funding originates from an NRI relative, records should connect the overseas fund provider, the immediate investor or lender, and the recipient company. Likewise, a loan assignment requires documents explaining the original debt and the basis of the journal entry.
The assessee also raised procedural objections concerning additional evidence and the assessment hearing. The Tribunal granted relief on the substantive evidence without separately deciding each procedural allegation.
Section 68 scrutiny must engage with the explanation furnished. An unrebutted documentary record cannot be displaced merely by treating the credits as unexplained.
Cases Discussed
- DCIT Vs Gyscoal Alloys Ltd., ITA No. 102/Ahd/2014, dated 06.04.2018 (ITAT Ahmedabad) — Followed in identical circumstances for holding that Section 68 addition could not be sustained where the relevant evidentiary requirements stood established.
- PCIT Vs Gyscoal Alloys Ltd., Tax Appeal No. 1180 of 2018, dated 01.10.2018 (Gujarat High Court) — Noted as having upheld the Tribunal’s order in Gyscoal Alloys Ltd.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for assessment year 2016-17 is directed against the Commissioner of Income Tax (Appeal) (for short, “CIT(A)”), Delhi’s DIN & order No. ITBA/NFAC/S/250/2025-26/1079060892(1), dated 30.07.2025, involving proceedings u/s 143(3) of the Income Tax Act, 1961; hereinafter referred to a, “the Act”.
Heard both the parties. Case file perused.
2. The assessee raises the following substantive grounds in the instant appeal:
1) Legal Error: The impugned order of the CIT(A) confirming additions of ₹17,45,82,102/- u/s 68 of the Income-tax Act, 1961 is bad in law, against principles of natural justice, and deserves to be quashed. Conflation of issues and mis-directed reasoning: BECAUSE the Ld. CIT(A) wrongfully cross-applied the rationale of rejection of explanations pertaining to loans and share capital from Mrs. Purnima Gupta to that of the book journal entry of Mr. Rahul Gupta and PP Charitable Trust, resulting in a misdirected reason for rejection of the Assessee’s submissions. Affirmation of Vitiated Judgment BECAUSE the Ld. CIT(A) overlooked and affirmed the following defects and errors of the order of the Ld. AO:
2) 3.1 Improper Rejection of Evidence: That the AO’s remand report refused to admit and consider relevant evidences (bank statements, confirmations, passport copies, net worth proof of Mrs. Shweta Aggarwal) despite these being crucial and having been filed within the given time, thereby violating Rule 46A and Section 250(4) of the Income-tax Act, 1961.
3.2 Bare Assertions: That the Ld. AO has miserably failed to prove its bare assertions beyond the apprehensions against the transaction between the creditor and sub-creditor, which contradicts the legal principle of law of evidence.
3.3 Perversity of Findings and Conclusion: That the Ld. AO rendered the addition in ignorance of the material facts and circumstances of the case.
3) 3.4 Unsecured Loan – Rahul Gupta (₹5,44,82,102): That the Ld. AO had taxed the novation of loan as income in the hands of the appellant assessee, which does neither involve flow of cash nor has any impact on statement of the income and is reflected by way of journal entry in its books of accounts.
3.5 Unsecured Loan & Share Capital – Purnima Gupta (₹12,01,00,000): That the Ld. CIT(A) erred in ignoring the evidence showing that funds were sourced from her NRI sister, Mrs. Shweta Aggarwal (Dubai resident, Bikanerwala Group), through NRE bank account transfers. Identity and creditworthiness were sufficiently established. Failure of AO to make enquiries despite having confirmations and statements cannot be held against the assessee.
4) 3.6 Violation of Natural Justice : That on 29.12.2018, Rahul Gupta, Director company, attended the hearing and specifically sought one day’s time to furnish the financial position of Mrs. Shweta Aggarwal. The AO accordingly fixed the case for 30.12.2018. However, without granting a fair opportunity and before considering the evidence, the AO proceeded to pass the assessment order on Sunday, 30.12.2018 at 7:37 PM. The relevant documents, including the net worth statement of Mrs. Shweta Aggarwal, were duly emailed by the appellant the same evening at 8:12 PM, i.e., within the time allowed. Passing the order even prior to consideration of such evidence amounts to clear denial of natural justice and renders the assessment order legally unsustainable.
3.7 Violation of doctrine of Legitimate Expectation That while the director Shri Rahul Gupta was in the process of collecting the information about Mrs. Shweta Aggarwal, the CIT(A) suddenly passed the order on a non working day
5) 3.8 Contravention of the tenets of Companies Act, 2013. That the AO had charged to tax the share capital amount of Mrs. Purnima Gupta by wrongfully treating it as the income into the hands of the Assessee, whereas, share certificate clearly establishes her right over the said amount in her capacity as a shareholder.
3.9 Mis-Characterisation of transaction That the AO had wrongfully characterized the capital receipt as a revenue receipt, which ultra-vires the power of the AO.
6) Erroneous Findings: BECAUSE the Ld. CIT(A) failed to appreciate that the appellant discharged the onus u/s 68 by proving
(i) identity of creditors/shareholders, (ii) genuineness of transactions through banking channels, and (iii) creditworthiness through supporting documents and family background and the burden had shifted to the department to rebut, which it failed discharge. Unlawful initiation of penalty proceedings BECAUSE the Ld. CIT(A) did not consider the merits of initiation of levy of penalty by the Ld. AO under section 271(1)(c) of the Income Tax Act, 1962. Undue Haste: BECAUSE the CIT(A) passed the judgment under haste and without proper deliberation and perusal of facts and circumstances of the case. General: The appellant craves leave to add, alter, amend OR withdraw any ground of appeal at the time of hearing.
7) 3. Statement of Facts That the appellant is a private limited company incorporated on 08.10.2012 under the provisions of the Companies Act, 1956, and is engaged in the business of manufacturing, trading and export of articles of gold & jewellery; That the appellant e-filed its return of income for AY 2016-17 on 15.10.2016 vide Acknowledgment No.501753091151016 declaring income of Rs.57,62,840/-; That return of the appellant was selected for complete scrutiny u/s 143(3) of IT Act under CASS and thereafter, notices u/s 143(2)/142(1) of the Act were issued along with detailed questionnaire and same were complied with; That three transactions were comprehensively inquired into by the Ld. AO viz. a Transfer Journal Entry in respect of a loan by the director Mr. Rahul Gupta to another person ‘PP Charitable Trust’; a loan receipt from the director Mrs. Purnima Gupta; and receipt of share capital from Mrs. Purnima Gupta.
8) That the transfer journal entry does not involve any flow of money to OR from the assessee. That during the Financial Year 2015-16, Mrs. Purnima Gupta has obtained a loan from her sister Mrs. Shweta Aggarwal during a phase of hardship via recognised banking channel, who is a non-resident Indian. That Mrs. Purnima Gupta had invested an amount of Rs. 4,99,00,000 as share capital in the appellant company during the Financial Year 2015-16. That Mrs. Purnima Gupta holds the share certificates in respect of the share capital invested by her, and is the rightful shareholder in the appellant company as per the Companies Act, 2013. That Mrs. Purnima Gupta had advanced a loan of Rs. 7,02,00,000 to the appellant company during the Financial Year 2015-16.
9) That Mr. Rahul Gupta has advanced loan to PP Charitable Trust amounting to Rs. 5,44,82,102, which was assigned to the appellant assessee during the Financial Year 2015-16 merely by way of book entry sans any actual cash flow. That the Ld. CIT(A) remanded the matter to AO for examination of the additional evidence on 24.09.2019, and thereafter the Ld. AO issued its report on 11.10.2019, rejecting the additional evidence under Rule 46A of the Income Tax Rules, 1962. That Ld. CIT(A) affirmed the order of the Ld. AO which was devoid of merits and proper reasoning. Hence the present appeal.
10) 4. Prayer In view of the above, it is most respectfully prayed that the Hon’ble Tribunal may be pleased to: delete the addition of ₹17,45,82,102/- made u/s 68 of Income tax Act,1961, which is wholly arbitrary, unlawful and without any legal basis; Quash the penalty proceedings initiated by the Ld. AO; and Pass such other orders as may be deemed fit in the facts and circumstances of the case.
2. We next notice with the able assistance coming from both the parties that the learned CIT(A)/NFAC ‘s impugned lower appellate discussion upholding the Assessing Officer’s action making section 68 unexplained cash credits addition of Rs. 17,45,82,102/-; reading as under:
6. Decision: I have considered the facts of the case, written submission and case laws relied upon by the appellant as against the observations and findings of the AO in the assessment order. The submissions and contentions of the appellant are discussed and decided as under:
6.1 Ground No.1 to 4: In these grounds the appellant has challenged the addition worth Rs. 17,45,82,102/- as unexplained cash credit. The appellant has shown unsecured loans and share capital worth Rs.17,45,82,102/- from Mr. Rahul Gupta and Mrs. Purnima Gupta. Despite various opportunities, the appellant did not file evidences to prove the creditworthiness and genuineness of the transactions, hence the AO made the addition. The appellant filed additional evidences under Rule 46A of the Income Tax Rule, which was sent for the remand proceedings before the AO. The AO provided various opportunities to the appellant in the remand proceedings but the appellant failed to prove the creditworthiness of Mrs. Shweta Agarwal, who has given loan to Mrs. Purnima Gupta. The appellant also failed to prove the genuineness of the transaction with respect to investment in loan as well as share capital, made by Mrs. Purnima Gupta. The identity and the creditworthiness of Shri Pankaj Agarwal, the nature of transaction with Mrs. Shweta Agarwal was also not proved before the AO as no evidence was filed regarding that before the AO. The AO analyzed the bank statement from Mrs. Purnima Gupta and Mrs. Shweta Agarwal and has pointed out various discrepancies in the remand proceedings. No ITR, balance sheet, the computation of income of Mrs. Shweta Agrawal or Mrs. Shweta Gupta were filed before the AO in the remand proceedings.
6.1.1 Now before me in the appellate proceedings,the appellant has filed written submission.The appellant has mentioned that Mrs. Shweta Agarwal is sister of Mrs. Purnima Gupta and has filed NRE bank statement of her. The appellant has also mentioned that Mrs. Shweta Agarwal and her husband are resident of Dubai. It has been submitted that these are sufficient to prove the genuineness of the transaction and the creditworthiness. I don’t agree with the submission of the appellant as despite various opportunities given by the AO in the assessment as well as in the remand proceedings, no evidences have been filed to prove the genuineness of the transaction and the creditworthiness of Mrs. Shweta Agarwal and Mr. Pankaj Agarwal. The vague replies and the bank statement of Mrs. Shweta Agarwal were filed before the AO in the remand proceedings and before me in the appellate proceedings. The appellant was provided the copy of the remand report for the rejoinder. Even in the rejoinder no effort has been made to prove the genuineness of the transaction and the creditworthiness of Mrs. Shweta Agarwal. Without any reason and without any basis, the appellant has relied upon various judgement of various courts in the rejoinder. Since the power of CIT(A) is coterminous with the power of the AO as per Section 250 (4) of the Income Tax Act, the appellant should have relied upon the source of the capital and the funds of Mrs. Shweta Agarwal and Mr. Pankaj Agarwal and should have correlated with the loans and the share capital to the appellant company. Since no evidences to support the contention have been filed before me, the addition of the AO is confirmed and appeal of the appellant is dismissed.
This is what leaves the assessee aggrieved who has filed its instant appeal before the tribunal.
3. Both the parties vehemently reiterate their respective stands against and in support of the impugned addition. Learned counsel first of all seeks to clarify that the impugned addition of Rs. 17,45,85,102/- comprises of the twin heads of the assessee’s unsecured loans and share capital; involving varying sums. And that the former head of unsecured laons had the twin items of Rs. 5,44,82,102/- & 7,02,00,000/- coming from as many directors only namely, Shri Rahul Gupta and Smt. Purnima Gupta. And that Smt. Purnima Gupta had also introduced the latter head of share capital of Rs. 4,99,00,000/- in the assessee/company’s books. Our attention is further invited to the assessee’s detailed paperbook running into 72 pages inter alia comprising of confirmations, ledgers, bank statements, ITR Acknowledgement as well as details of investments and loans; as the case may be. The same sufficiently indicate that the impugned sum of Rs. 17.45 crores has come from the assessee’s related parties/directors only who are assessed in the very jurisdiction. This is indeed coupled with the fact that the learned counsel’s case before us is that the assessee’s former loan amount of Rs. 5,44,82,102/- represents a book entry not involving any actual flow of cash credits in the books of accounts.
4. We have given our thoughtful consideration to the assessee’s and the Revenue’s foregoing vehement stands. We see no reason to sustain the impugned section 68 addition of unexplained cash credits. We wish to emphasize here at the cost of repetition that both these heads of unsecured loan and the share capital of the assessee have come from its existing directors who have duly proved their source along with all the detailed evidence(s) which have nowhere been specifically rebutted at the learned lower authorities behest. We further note that this tribunal in ITA No. 102/Ahd/2014 in DCIT vs Gyscoal Alloys Ltd dated 06.04.2018 holds identical circumstances that section 68 unexplained cash credits addition could not be simply invoked as is the case herein; as follows:
5. We have given our thoughtful consideration to rival submissions. There is no dispute that the sole issue between the parties is about correctness of the impugned Section 68 addition of Rs.9,99,99,900/- as made in the course of assessment and deleted in the lower appellate proceedings. The Revenue’s case is that the Assessing Officer had rightly disputed the genuineness / creditworthiness element in the said sum which is contested at the assessee’s behest. We proceed in this backdrop of facts to notice first of all that the identity of the investor entity M/s. General Capital and Holding Company Pvt. Ltd. (supra) is not in dispute. And also that both the assessee and the said investor entity are group concerns having common Directors. The first component of identity therefore vis-à-vis Section 68 of the Act duly stands satisfied. It is evident thereafter that the assessee’s relevant paper books forming part of record before us contain all necessary details of its copy of certificate of incorporation alongwith listing notification/circular of National Stock Exchange and Bombay Stock Exchange, its return and computation for the impugned assessment year with tax audit report, Auditor’s report, audited accounts, its replies to the Assessing Officer during the course of assessment proceedings, copy of ledger account of the investor entity in its books alongwith bank statement indicating the money in question to have come through banking channel, reply to Assessing Officer’s notice issued u/s.133(6) of the Act dated 09.01.2013 alongwith necessary consequential correspondence dated 18.01.2013 at pages 94 & 95, its ledger maintained in investor entity’s books page 96, bank statement page 97, summons issued u/s.131(1A) to investor entity as well as its details of PAN card, audited accounts, income tax returns, confirmation, share holders’ details, Demat statements of the investor entity, Inspector’s inquiry report, Mr. Viral Shah’s statement (supra) recorded during scrutiny in support of the impugned investment; respectively, sufficiently indicate that the assessee has been able to support its case of having received the investment in question from the group entity only. The Revenue’s case is that all the said details failed to prove genuineness and creditworthiness element. We see no reason to concur with this argument. More particularly in view of the fact that it is the assessee’s group company having common Director(s) who has made the impugned investment. Learned CIT(DR) at this stage sought to reiterate Assessing Officer’s conclusion that this investor company has adopted cash deposit root to reinvest the same in assessee’s stake holding. We do not see any material on record to agree to the instant plea. We afforded sufficient opportunity to the Revenue to file on record any such cogent material indicating M/s. General Capital and Holding Company Pvt. Ltd. to have first deposited cash sums followed by its reinvestment in assessee’s share holding. The Revenue has failed to indicate any such material.
6. Ms. Vasundhra Upmanyu at this stage reiterates the above case law in Revenue’s favour (supra). We find that the above co-ordinate bench’s decision in Nakoda Fashion Pvt. Ltd. (supra) deals with case wherein the investor company(ies) had turned out to be shell entity without any genuineness/creditworthiness. Latter two case laws in Sumati Dayal and Durga Prasad More (supra) settle the law regarding genuineness of an explanation in light of human probability and appreciation of relevant details on record. The Revenue fails to indicate any mis-appreciation of evidence at the CIT(A)’s behest during the course of lower appellate proceedings. We rather find that the CIT(A)’s directions to the Assessing Officer to pass the relevant information to assessee’s group concerns Assessing Officer sufficiently protect Revenue’s interest so far as the impugned addition is concerned. Learned CIT.D.R’s. further reliance on all the case laws discussed in assessment order is also without any significance since there is no instance therein dealing with a group entity having invested in concerned assessee’s stake holding. The said case law is therefore held to be not relevant to the issue in hand. We conclude in light of all these facts and circumstances that the assessee has been able to prove all three components of identity, genuineness and creditworthiness of impugned share application/premium amount of Rs.9,99,99,900/- to have come from its group company M/s. General Capital and Holding Company Pvt. Ltd. Coupled with this, we must also observe that it has successfully produced its common Director Mr. Shah (supra) before the Assessing Officer alongwith all necessary details and confirmation despite the fact that such a personal appearance is required as per Section 68 (First proviso) inserted by the Finance Act, 2012 applicable w.e.f. 01.04.2013 only whereas we are dealing with assessment year 2010-11. We thus affirm the CIT(A)’s findings under challenge. The Revenue’s sole substantive grievance is accordingly declined.
5. We further find that hon’ble Gujarat high court has upheld the above order in Tax Appeal No. 1180 of 2018 on 01.10.2018 in PCIT vs Gyscoal Alloys Ltd. We conclude in this factual backdrop that both the learned lower authorities have erred in law and on facts in treating the assessee’s unsecured loan and share capital coming from its directors’ side as unexplained cash credits addition u/s 68 of the Act which is hereby deleted in very terms therefore.
6. This assessee’s appeal is allowed.
Order pronounced in the open court on 05.10.2026.
