ACIT Vs Garima Showbiz Pvt. Ltd. (ITAT Delhi)
Section 68: Delhi ITAT Upholds Deletion of ₹11.47 Crore Loan Addition in Garima Showbiz Case
The Delhi Bench of the Income Tax Appellate Tribunal has upheld deletion of an ₹11.47 crore addition under Section 68, along with related interest and alleged commission additions, in the case of Garima Showbiz Pvt. Ltd.
The Tribunal followed an earlier coordinate Bench decision arising from the same search action, finding no distinction in facts or law warranting a different conclusion. The relief rested on documentary evidence supporting the loans and the absence of a specific link between the assessee’s transactions and alleged accommodation entries.
The order was pronounced on 11 November 2026 by Judicial Member Satbeer Singh Godara and Accountant Member Krinwant Sahay, in ITA No.4813/Del/2025 and CO No.169/Del/2025, concerning Assessment Year 2016-17.
Background of the Dispute
The proceedings arose from a reassessment under Section 147 of the Income-tax Act, 1961. The Assessing Officer treated unsecured loans received by the assessee as unexplained cash credits.
The disputed additions comprised ₹11,47,00,000 towards loans, ₹37,95,397 towards interest expenditure and ₹5,43,500 towards alleged commission for obtaining accommodation entries.
The CIT(A), through an order dated 24 April 2025, deleted these additions. The Revenue challenged that relief before the Tribunal.
Its principal contention was that the lenders were shell entities and that audited accounts, bank statements and other formal documents merely gave an appearance of genuine business activity.
Loans Received From Four Entities
The appellate findings reproduced in the order recorded loans from Satsai Finlease Private Limited, Savita Holdings Private Limited, R.N. Khemka Enterprises Private Limited and RMP Holdings Private Limited.
The assessee furnished confirmations, PAN details, income-tax returns, bank statements and audited financial statements to substantiate the transactions.
The loans had been received through account-payee cheques or RTGS. Repayments were also made through banking channels, partly during the relevant year and partly in subsequent years, together with interest.
The CIT(A) examined this evidence and concluded that the assessee had discharged its initial burden concerning the credits.
Identity, Creditworthiness and Genuineness Established
The CIT(A) applied the three requirements ordinarily examined under Section 68: identity of the creditor, creditworthiness and genuineness of the transaction.
It found that the lenders’ identities and tax status were established. Their financial statements and banking records supported their capacity, while the receipt and repayment records supported the transactions.
The appellate findings also recorded that the Assessing Officer had not brought credible evidence directly linking these loans to accommodation entries.
The relief therefore followed an assessment of the supporting record. It did not rest solely on the fact that money had moved through bank accounts.
General Allegations Required a Transaction-Specific Link
The Department relied on material gathered during a search involving the Filatex Group, including statements and WhatsApp communications associated with alleged entry operators.
It argued that these materials indicated cash exchanges and the routing of unaccounted funds through lender entities.
However, the reasoning adopted by the Tribunal distinguished general suspicion about a lender from proof concerning a particular borrower’s transaction.
The earlier decision reproduced in the order emphasised the absence of a specific cash trail or direct nexus connecting the disputed loans with cash allegedly provided by the assessee.
Suspicious communications could justify inquiry, but they did not automatically displace the documentary evidence supporting every loan.
Coordinate Bench Decision Followed
The assessee relied on the Tribunal’s earlier order in ITA No.4849/Del/2024, decided on 29 October 2025, arising from the same search action.
That decision had considered similar allegations involving unsecured loans, the evidentiary record, interest payments and presumed commission expenditure.
After reproducing the earlier reasoning, the Bench applied it to the present dispute, recording that no factual or legal distinction had been demonstrated.
The Revenue’s substantive grounds consequently failed, and the CIT(A)’s deletion of the loan addition remained undisturbed.
Interest and Presumed Commission Additions Also Failed
The Assessing Officer had disallowed ₹37,95,397 of interest because the underlying unsecured loans were treated as bogus.
Once the loans were accepted as genuine, the basis for that consequential disallowance no longer survived. The CIT(A) had also recorded that diversion of funds for non-business purposes had not been established.
The ₹5,43,500 commission addition was based on the assumption that the assessee must have paid commission for obtaining accommodation entries.
The appellate findings identified no evidence substantiating such payment. With the underlying accommodation-entry allegation unproved, the presumed commission addition was also deleted.
Revenue’s Appeal Dismissed
The Tribunal dismissed the Revenue’s appeal, preserving the deletion of additions aggregating ₹11,90,38,897.
The assessee’s cross-objection was dismissed as infructuous, rather than adjudicated on its substantive grounds.
The order highlights the importance of testing search-related allegations against the assessee’s specific transactions. Where loan evidence establishes the relevant Section 68 requirements, an addition requires more than general observations about alleged entry operators or unsupported assumptions concerning cash exchanges and commission.
Cases Discussed
- CIT v. Green Infra Ltd. — (2014) 367 ITR 102 (Bombay)
- CIT v. Kamdhenu Steel & Alloys Ltd. — (2012) 361 ITR 220 (Delhi)
- CIT v. Vrindavan Farms Pvt. Ltd. — (2015) 63 taxmann.com 333 (Delhi)
- CIT v. P. Mohankala — (2007) 291 ITR 278 (SC)
- Ranbaxy Laboratories Ltd. v. CIT — (2011) 336 ITR 136 (Delhi)
- CIT v. Jet Airways (I) Ltd. — (2011) 331 ITR 236 (Bombay)
- CIT v. Adhunik Niryat Ispat Ltd. — (2011) 63 DTR 212 (Delhi)
- ATS Infrastructure Ltd. v. ACIT — (2025) 166 taxmann.com 61 (Delhi)
- CIT (Exemption) v. Monarch Educational Society — (2017) 387 ITR 416 (Delhi)
- CIT v. Software Consultants — (2012) 341 ITR 240 (Delhi)
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
These Revenue’ appeal ITA No. 4813/Del/2025 with assessee’s cross objection C.O No. 169/Del/2025 for assessment year A.Y.: 2016-17, arises against Commissioner of Income ITA 4813/DEL/2025 & CO No. 169/DEL/2025 Tax (Appeals) (for short, “CIT(A)”), Delhi-23’s order dated 24.04.2025 passed in DIN & Order No. ITBA/APL/S/250/2025-26/1075780799(1), involving proceedings u/s 147 of the Income Tax Act, 1961; hereinafter referred to as, “the Act”.
Heard both the parties. Case file perused.
2. Delay of 5 days in filing of the Revenue’s instant appeal is condoned in larger interest of justice.
3. The Revenue’s instant appeal ITA No. 4813/Del/2025 raises the following substantive grounds:
“1. The Ld. CIT(A) has erred in deleting the addition of Rs. 11,47,00,000/- made by Assessing Office u/s 68 of the Incometax Act, 1961.
2. The Ld. CIT(A) has failed to appreciate that the creditors are only shell companies, created for abatement of, and legitimize, illicit means and evade taxes, and its legal identity is only a façade to hide its illegal operations.
3. The Ld. CIT(A) has failed to appreciate that submissions of audited accounts and bank statements of alleged entry operator are necessary pre-requisite to give such entities a semblance of a genuine business. Filing of such documents does not mitigate lack of genuineness in its actual operations.
4. Ld. CIT(A) has failed to appreciate that accommodation entry operators have sufficient funds only in the form of investments in other non-genuine companies. There is hardly any substantial balance in the bank account or genuine investment.
5. Ld. CIT (A) has erred in not appreciating that WhatsApp chats undertaken between the entry operator and promoter of the company clearly shows that cash are being exchanged and such chats are backed up by statements u/s 132(4) of respective parties.
6. Ld. CIT(A) has failed to appreciate that the evidence collected clearly reveals the cash trails and in reply to notice ITA 4813/DEL/2025 & CO No. 169/DEL/2025 u/s 133(6) of the Act the entry operators are not expected to accept that the loan transactions are not genuine.
7. The Ld. CIT(A) erred in deleting the addition of Rs. 37,95,397/- without appreciating the fact that interest paid on account of bogus unsecured loan is also bogus in nature, therefore, the interest paid by the assessee to the tune of Rs. 37,95,397/- is not genuine expense.
8. The Ld. CIT(A) erred in deleting the addition of Rs. 5,43,500/- without appreciating the fact that the accommodation entries to the tune of Rs.5,43,500/- were taken during the year under consideration and commission must have paid to accommodate such entries.
9. The appellant craves to add or amend any/all the grounds of appeal before or during the hearing of the appeal.”
7. We next notice that the learned CIT(A)’s lower appellate discussion reversing the Assessing Officer’s action making the impugned additions u/s 68 of unexplained cash credits and bogus unsecured loans etc; involving varying issues, reads as under:
5. Ground No.1 and 2 is regarding addition of Rs.11,90,38,900/- made by the Assessing Officer. During the year under consideration, the appellant received loans from Four (4) entities as follows:
| S.No. | Name of the Person | Opening Balance | Unsecured loans taken during the year | Interest paid during the year | Repayments | Closing Balance | Loan taken in FY 2015-16 repaid during FY 2016-17 |
| 1 | M/s Satsai Finlease Private Limited (herein after referred as Satsai) | 2,93,00,000 | 3,90,00,000 | 15,02,426 | 6,83,00,000 | NIL | — |
| 2 | M/s Savita Holdings Private Limited (herein after referred as “Savita”) | 0 | 3,80,00,000 | 15,52,504 | 1,54,00,000 | 2,26,00,000 | 2,26,00,000 |
| 3 | M/s R N Khemka Enterprises Private Limited (herein after referred as “R N Khemka”) | 0 | 2,95,00,000 | 4,75,299 | 1,60,00,000 | 1,35,00,000 | 1,35,00,000 |
| 4 | M/s RMP Holdings Private Limited (herein after referred as RMP) | — | 81,00,000 | 2,65,168 | 30,00,000 | 51,00,000 | 51,00,000 |
| Total | 11,47,00,000 | 37,95,397 | 10,27,00,000 | 4,12,00,000 | |||
6. The loan received by the appellant were treated as cash credits u/s 68 of the Act.
7. I have carefully considered assessment order and relevant submissions filed by appellant along with paper book. The appellant received loan of Rs.11,47,00,000/- from above mentioned entities which were treated as cash credits. The findings made by Assessing Officer, submissions made by appellant, counter argument of appellant on evidences relied upon by Assessing Officer while making additions, other relevant facts and relevant decisions are discussed herein above while adjudicating above addition made in case of appellant.
8. A search and seizure operation was conducted on Filatex India Ltd. (FIL in short) Group entities on 01.09.2021. The appellant is a Limited Company and one of the group entities of the Filatex Group. While making impugned addition, Assessing Officer in the assessment order has discussed various materials found during the course of search at FIL Group, statements of various persons recorded during the course of search and financial analysis of various companies owned and managed by Shri Ankit Bhageria (alleged entry provider). The Assessing Officer has contended that appellant has taken loan from shell company owned and managed by Shri Ankit Bhageria.
9. The appellant submitted detailed submission. Summary of written submissions filed by the Appellant and the documents placed on record is as under:-
i. The loan of ₹11,47,00,000/- from above mentioned four entities was received through account payee cheque/RTGS.
ii. Confirmations, PAN, ITRs, bank statements and audited financials of the lenders were furnished and form part of assessment records.
iii. The appellant had repaid the entire loan partly during the year and partly in subsequent years through banking channels and paid interest thereon, which further evidences the genuineness of the transaction. The details of repayment is given in table above.
iv. The AO has not demonstrated any specific cash deposit linked to the appellant or lender to support the allegation of accommodation entry.
v. Reliance was placed by AO on statements of third parties which were either vague, obtained under duress, or unrelated to the appellant. No opportunity for cross-examination was afforded, violating principles of natural justice.
10. I have carefully considered the facts of the case, the contentions of the appellant, the findings recorded by the AO, and the judicial precedents relied upon. The central issue is whether the loan of ₹11,47,00,000/- received by the appellant from M/s. Satsai, M/s. Savita, M/s. RN Khemka and M/s. RMP (tabulated above) can be treated as unexplained under section 68 of the Act, despite the fact that the loan was subsequently repaid through banking channels and was supported by confirmations, ITRs, financials, and other documentary evidences.
11. It is now a settled position of law that for making an addition under section 68, 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. In the present case, the appellant has discharged the primary onus by furnishing PAN details, income-tax returns, financial statements, confirmation letters, bank statements, and the loan agreement. Furthermore, the loan was repaid in full during the year itself, thereby negating the suspicion of any layering or retention of unexplained cash.
12. It is pertinent to refer here to the judgment of the Hon’ble Gujarat High Court in the case of CIT v. Rohini Builders [2002] 256 ITR 360 (Guj), wherein it was held that where the loans are received by account payee cheque, confirmations are filed, and repayments are also made, no addition under section 68 can be sustained, even if the creditworthiness of the lender is not conclusively established. The court emphasized that mere non-enquiry into the affairs of the creditor cannot be the sole basis for treating the loan as unexplained.
13. Similarly, in CIT v. Green Infra Ltd. [2014] 367 ITR 102 (Bom), the Hon’ble Bombay High Court held that once a loan is repaid and the genuineness of the transaction is shown through banking channels, no addition can be made under section 68 solely based on suspicion. In that case, the department had raised doubts on the source of the creditor’s funds, but the court rejected the revenue’s stand and held in favour of the assessee.
14. The Delhi High Court, in the case of CIT v. Kamdhenu Steel & Alloys Ltd. [2012] 361 ITR 220 (Del), observed that the department cannot merely reject the explanation of the assessee without conducting proper investigation. The court emphasized that where identity and transaction are supported by documentary evidence and repayment is made, no addition can be made u/s 68.
15. Moreover, the Hon’ble Delhi High Court in CIT v. Vrindavan Farms Pvt. Ltd. [2015] 63 taxmann.com 333 (Del), held that where the assessee has discharged the primary onus by submitting PAN, bank details, confirmation, and proof of repayment, then the burden shifts to the AO to disprove the claim. In absence of such evidence from revenue’s side, addition u/s 68 cannot be sustained.
16. In the present case, the assessee has gone beyond the ordinary threshold. Not only has the identity and creditworthiness of the lender been substantiated through financials, tax returns and confirmations, but also the transaction has been conclusively proved by way of repayment of loan with interest through banking channels. This fact has not been denied or disputed by the AO in the assessment order.
17. Reliance is also placed on the judgment of Hon’ble ITAT Ahmedabad in ACIT v. Bhavya Construction [2012] 139 ITD 90 (Ahd), where it was held that once the loan is repaid and all necessary documents are filed, the transaction is deemed genuine and cannot be rejected based on mere suspicion or absence of fixed repayment terms.
18. Further, in CIT v. P. Mohankala [2007] 291 ITR 278 (SC), the Hon’ble Supreme Court laid down that where the explanation offered by the assessee is reasonable and supported by evidence, and where no material has been found to suggest otherwise, then the addition cannot be sustained under section 68.
19. To conclude, I find that the appellant has conclusively proved all three ingredients required under section 68. The identity and tax status of the lender are not in doubt. The loan was received and repaid through proper banking channels. The AO has not brought any credible evidence to establish that the said loan was an accommodation entry. The addition is based on general observations without any direct linkage to the appellant’s transaction.
20. In view of the above facts, evidences on record, and judicial precedents cited, I am of the considered opinion that the addition of ₹11,47,00,000/- made under section 68 of the Act is unsustainable in law and on facts. The same is accordingly directed to be deleted. This part of ground of appeal is allowed.
21. Further, so far as disallowance of interest of Rs. 37,95,397/- is concerned, it is observed that appellant had paid interest to lender companies. As loan taken from lender companies is already held to be genuine loan u/s. 68 of the Act, consequent interest disallowance made by Assessing Officer u/s. 37 of the Act is deleted.
22. Further, regarding addition of Rs. 5,43,500/- made u/s. 69C of the Act. The Assessing Officer has held that the appellant must have paid 0.25% as commission for total receipts and payments during the year. Such commission must have been paid in cash, therefore, the Assessing Officer made addition u/s. 69C of the Act.
23. In view of the above stated decision, wherein it has been held that there was no bogus entry taken, the addition of Rs.5,43,500/- do not survive. Therefore, Ground No.1 and 2 of the Appeal is allowed.
24. Ground No. 10 relates to disallowance of Interest on Loan amounting to ₹37,95,397. Since the loans have been accepted as genuine (as per Grounds 1 and 2), the interest paid thereon qualifies as a legitimate business expenditure under Section 36(1)(iii) of the Act. The AO has not established any diversion of funds for non-business purposes. Hence, the disallowance of ₹37,95,397 is not sustainable and is accordingly deleted. Thus, ground No. 10 is allowed.
25. In Ground No. 11, relates to notional addition of ₹5,43,500 on account of alleged commission paid to obtain accommodation entries. No evidence or material has been brought on record to substantiate such payment. The addition is purely hypothetical and not supported by facts or documents. Therefore, this addition is deleted. Thus, ground No. 11 is allowed.
26. Since, appeal is decided on merits, other grounds of appeal become academic, hence not adjudicated separately.
27. In the result, the appeal is “Allowed”.
5. That being the case, the Revenue vehemently argues in support of the assessment findings that the learned Assessing Officer had rightly treated the assessee’s aforesaid credits and unsecured loans etc.; as the case may; as unexplained u/s 68 of the Act. And that CIT(A) herein has erred in law and on facts in reversing the same in his lower appellate discussion.
6. The assessee, on the other hand, submits that the instant issue of genuineness of creditor and unsecured loans etc coming from above four parties is no more res integra as this tribunal has already upheld the learned CIT(A) identical findings in the Revenue’s appeal ITA No. 4849/Del/2024 decided on 29.10.2025; arising from the very search action, reading as under:
“The Revenue has raised the following grounds of appeal :-
“1. The Ld. CJT(A) has erred in deleting the addition of Rs.1,83,00,000/- made by Assessing Office u/s 68 of the Income-tax Act, 1961.
2. The Ld. CIT(A) has failed to appreciate that the creditors 10 are only shell companies, created for abatement of, and legitimize, illicit means and evade taxes, and its legal identity is only a facade to hide its illegal operations.
3. The Ld. CIT(A) has failed to appreciate that submissions of audited accounts and bank statements of alleged entry operator are necessary pre-requisite to give such entities a semblance or a genuine business. Filing of such documents does not mitigate lack of genuineness in its actual operations.
4. Ld. CIT(A) has failed to appreciate that accommodation entry operators have sufficient funds only in the form of investments in other non-genuine companies. There is hardly substantial balance in the bank account or genuine investment.
5. The Ld. CIT(A) failed to appreciate that there is no information of conduct of any audit/investigation by SEBIIRBI, while the search conducted by Investigation Wing brought out substantial evidence about actual financial conduct of these entry operators, masquerading in the guise of NBFC.
6. Whether the Ld. CIT(A) is correct in holding that the term “in evidence” used in section 132(4) of the Act cannot be treated as “as evidence” when statement u/s 132(4) made while con fronting with incriminating material gathered during the search operations.
7. Ld. CIT(A) has erred in holding that the Assessing Officer should have conducted further enquiry to find about the source of fund of the entry operator, without appreciating that Ld. CIT(A) could have conducted such enquiry himself or directed the Assessing Officer to conduct requisite enquiry so as to ascertain the true nature and source of the cash credit.
8. Ld. CIT (A) has erred in not appreciating that whatsapp chats undertaken between the entry operator and promoter of the company clearly shows that cash are being exchanged and such chats are backed Lip by statements u/s 132(4) of respective parties.
9. Ld. CIT(A) has failed to appreciate that the evidence collected clearly reveals the cash trails and in reply to notice u/s 133(6) of the Act the entry operators are not expected to accept that the loan transactions are not genuine.
10. The Ld. CIT(A) erred in deleting the addition of Rs.7,74,727/- without appreciating the fact that interest paid on account of bogus unsecured loan is also bogus in nature, therefore, the interest paid by the assessee to the tune of Rs.7,74,727/- is not genuine expense.
11. The Ld. CIT (A) erred in deleting the addition of Rs.2,23,500/- without appreciating the fact that the accommodation entries to the tune of Rs.1,83,00,000/- were taken during the year under consideration and commission must have paid to accommodate such entries.”
3. With regard to addition of Rs.1,83,00,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961 (for short ‘the Act’), at the time of hearing, ld. AR of the assessee brought to our notice that the assessee company is a Group company of Filatex India Limited and the issues involved in the case of Filatex India Limited in ITA Nos.4635, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062/De1/2024 which was decided by the coordinate Bench vide order dated 30.06.2025 are exactly similar to the present case.
4. He submitted that the assessee has taken loans from the following parties:-
1. Bhageria Finance Investment Private Limited
2. M/s.Savita Holdings Private Limited
3. M/s. R N Khemka Enterprises Private Limited
4. M/s.Satsai Finlease Private Limited
5. M/s.Fidus Finance
5. Filatex India Ltd. had also taken loans from the same parties which have been held to be genuine loans by the ITAT in the case of Filatex India Limited for AY 2016-17 vide ITA No.2060/Del/2024 & C.O.No.89/Del/2024.
6. He further brought to our notice the facts narrated in the assessment order as under:-
-
- It was alleged by AO that Filatex group companies had taken bogus Share premium and bogus unsecured loan from other Shell companies as well in past several years. List of such bogus Entities mentioned by AO on Page 3 of Assessment order.
- Shri Ankit Bhageria’s office and residence was also covered in the above referred search operation and statements of Sh. Ankit Bhageria was recorded u/s 132(4) and key points from the statements are reproduced by Ld. AO on page 4-6 of Assessment order.
- AO alleged that on ITR analysis and analysis of bank statements, these companies are found to be typical shell entity acting as an intermediary layer and a pass-through mechanism for routing of unaccounted money into the books of account of beneficiaries.
- During the search and post search enquiries AO alleged that incriminating documents/loose papers, SMS and WhatsApp chats were found which indicates that the Filatex Group has taken bogus unsecured loans. During the year under consideration following transactions were entered into by assessee:-
Sr. No. |
Name of Party |
Opening Balance |
Loan taken during the year |
Interest paid during the year |
Repayment of loan during the year |
Closing Balance |
Commission |
Addition on amount |
|---|---|---|---|---|---|---|---|---|
1. |
Ms. R.N. Khemka Enterprises Private Limited |
2,35,00,000 |
1,35,295 |
1,98,00,000 |
37,00,000 |
1,08,250 |
1,20,00,000 |
|
2. |
Bhageria Finance Investment Private Limited |
25,00,000 |
7,376 |
25,00,000 |
12,500 |
Nil |
||
3. |
M/s. Savita Holdings Private Limited |
57,15,179 |
90,00,000 |
3,27,344 |
1,45,00,000 |
2,00,000 |
58,750 |
13,00,000 |
4. |
M/s. Fidus Finance |
50,00,000 |
2,32,786 |
50,00,000 |
25,000 |
50,00,000 |
||
5. |
M/s. Satsai Finlease Private Limited |
50,00,000 |
71,926 |
50,00,000 |
25,000 |
Nil |
||
Total |
4,50,00,000 |
7,74,727 |
4,68,00,000 |
2,23,500 |
1,83,00,000 |
-
- AO made addition of Rs.1,83,00,000/- in the hands of assessee on presumption and assumption basis considering the lenders as Bogus parties merely on the basis of statements recorded during the course of search.
- Further, to discharge the onus cast by section 68 has been duly discharged by assessee by submitting the following documents before AO as well as CIT(A):
1. Copy of Confirmation of Accounts
2. Copy of Bank statements of Lender
3. Audited Financials of Lender
4. Copy of ITR Acknowledgement of Lenders
5. 133(6) responses filed by Lenders
-
- All these details have been filed creditor wise in Paper book at Page nos. 25-84. These submissions filed by the Assessee prove the genuineness of the source as well as the source of the sources. The bank statements of the lenders as well as the PAN and Bank A/c details of the persons from whom the lenders have taken they are duly submitted so as to prove the source as well as the source of source of funds received.
- Further the CIT(A) has held that addition made by AO is not tenable as AO himself has accepted that out of Rs.90 Lakhs received from Savita Holdings Private Limited Rs.77 Lakhs is not bogus, out of Rs.235 Lakhs received M/s R N Khemka Enterprises Private Limited Rs. 115 Lakhs is not bogus and loans received from M/s Bhageria Finance Investment Private Limited and M/s Satsai Finlease Private Limited nothing is bogus. (Page 44-45, Para 52 of CIT(A)). Then finding of AO that the lenders are bogus is itself self-contradictory.
7. Ld. AR further brought to our notice that the assessee made submissions before the ITAT in the case of Group Company Filatex India Limited (supra) and the Tribunal has dismissed the appeal of the Department accepting the contentions of the assessee: –
-
- The unsecured Loans has been repaid in subsequent Assessment Years which has been accepted by the AO and to substantiate the same, Ledger Accounts of the above Parties was submitted before CIT(A).
- The assessee submitted that no evidences were found which can prove that assessee has paid cash against receipt of loan from such entities.
- The AO could not find any corroborative evidence to prove that the contents of the Whatsapp Messages were true and linked with the unsecured loan taken by the assessee.
- Further, no cash trail was established by the AO to prove that unsecured loans were taken in exchange of Cash Payments.
- The source as well as the source of source have been provided by the assessee.
- Assessee also submitted the Affidavits of Ankit Bhageria and Purushottam Bhageria retracting the statement recorded u/s 132 which has been relied upon by AO to make addition in the hands of Assessee.
- There was no admission on the part of Shri Purshottam Bhageria regarding payment of cash in lieu of unsecured loan received in assessee Company.
- The reference of the statement of Shri Prabhakaran Pillai and Shri Jitender Kumar is directly given in the assessment order without providing copy of the statements and cross-examination of such persons to the Appellant Company.
8. Further, in the same Para point (vi) it was held by Ld. CIT(A) that WhatsApp chats relied upon by AO does gives rise to suspicion but the same nowhere proves that cash has been exchanged against any specific loan taken by appellant. Based on the above mentioned reasons, ld. CIT(A) held that the addition u/s 68 of Rs.590 Lakhs made by AO shall be deleted. He further relied on various decisions relied upon to prove that no addition can be made on unsecured loans taken when the repayment is not doubted.
9. In the conclusion, ld. AR submitted that out of addition of Rs.1,83,00,000/- on account of unsecured loan taken from M/s. R.N. Khemka P. Ltd. and M/s. Savita Holdings P. Ltd., the same are squarely covered by decision of coordinate Bench in the case of Filatex India Limited order in AY 2016-17 (supra) and as regards addition of Rs.50,00,000/- made in M/s. Fidus Finance (P) Ltd, he relied on the impugned order of the ld. CIT (A).
10. On the other hand, ld. DR of the Revenue did not controvert the findings that the issue is covered by the decision of coordinate Bench in the case of M/s. Filatex India Limited (supra).
11. Considered the rival submissions and material placed on record. We observe that out of the addition of Rs.1,83,00,000/- in dispute, loan taken from M/s. R.N. Khemka P. Ltd. and M/s. Savita Holdings P. Ltd. (group company of M/s. Filatex India Limited) is squarely covered by the decision of M/s. Filatx India Limited in ITA No.2060/Del/2024 & CO No.89/Del/2024 (supra). For the sake of brevity, we reproduce the order in the case of M/s. Filatx India Limited as under :-
“ITA No.2060/Del/2024 & C.O.No.89/Del/2024 (AY-2016-17)
48. In the cross objections filed by the assessee, cross-objections No. 1.1 & 1.2 are taken wherein assessee has challenged the action of the AO in making additions on the issues for which no reasons were recorded and on issue for which reason was recorded, no addition is made. The cross objections taken by the assessee are as under:
1.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) should have quashed the assessment order as illegal, not tenable, void and without jurisdiction.
1.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in ignoring that no independent reason for reopening was recorded, as the notice was issued on the basis of report of received from TDS ward 1(3)(1), International Taxation, Delhi.
1.3 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the assessment order was passed without following the principle of natural justice by not providing the copies of statement of various persons relied upon by Assessing Officer. On the ground of principle of natural justice also, the addition was liable to be deleted.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the addition simply on the ground that the material relied upon by Assessing Officer is totally unrelated and irrelevant to the respondent.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not considering the fact that the assessment order passed by Assessing Officer had provided the new material directly in assessment order without confronting the same to the respondent company during assessment proceedings. On the basis of the principle of opportunity of being heard also, the addition was liable to be deleted.
4. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same.
49. During the course of hearing it was requested by the ld.AR that the issues raised in cross objections No. 1.1 and 1.2 are legal and thus prayed to adjudicate the same separately, therefore, in the interest of justice and looking to the very nature of the cross objections, the same are hereby taken for consideration.
50. Before us, Ld.AR submits that the case of the assessee was reopened on the basis of the information received by the AO that the assessee has made payment on account of technical services to a foreign company and that these remittances are liable to withhold taxes within the definition of Fee for Technical Services under the provisions of Sec 9(1)(vi) and (vii) of the IT Act and as per Article 12(4) of the DTAA also, chargeable to tax u/s 115A(1)(b)(A) and 115A(1)(b)(B) of the Income Tax Act. The assessee was required to deduct Tax at source on the remittance amounting to Rs.87,34,375/- and thus after obtaining the approval from the competent authorities, notice u/s 148 was issued in 31.3.2021. Ld. AR submits that in response to said notice, return of income was filed on 14.07.2021. Thereafter, due enquiries were made by the AO and no addition was made on account of the reasons recorded and therefore, AO has no jurisdiction to make any other addition.
For this, he placed reliance on the judgement of Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. vs CIT [2011] reported in 336 ITR 136 (Delhi) and in the case of CIT-II vs Jet Airways (I) Ltd. reported in [2011] 331 ITR 236 (Bom.). Ld. AR thus requested that the re-assessment order making additions of INR 100,11,32,484/- on the issues which are not the subject matter of reopening and without making additions on the issue for which reasons for reopening the assessment were recorded, is without jurisdiction and, therefore, the reassessment order deserves to be quashed.
51. On the other hand, Ld. Sr. DR for the Revenue supported the order of the lower authorities and stated that once the case is reopened, the AO has jurisdiction to consider and decide all the issues which have come to his knowledge. He thus, requested for the confirmation of the initiation of the proceedings and consequent order passed u/s 143(3)/147 of the Act.
52. Heard the contentions of both the parties and perused the material available on record. From the perusal of the reassessment order it is seen that the case of the assessee was reopened on the issue of the non-deduction of Tax at source on the payment made towards fees for technical services to a foreign company. The AO after reopening the case, vide notice issued on 24.3.2022 asked the assessee to file the details of transactions with foreign company which were replied by the assessee on 29.03.2022, as reproduced at re-assessment order at page 3. After considering the reply of the assessee, the AO in para 9.6 of the order observed that no adverse inference is drawn on this account. Thereafter, the AO from para 10 onwards of the reassessment order went on discussed the issue of accommodation entry and finally made the additions/ disallowance towards unsecured loans taken and interest paid thereon by holding the same as accommodation entries.
53. It is thus clear that the AO has recorded his satisfaction of the escapement of income of Rs. 87,34,375/- being the payment towards fee for technical services made to foreign company without making deduction of Tax at source. However, no adverse inference was taken on this issue as has been observed in para 9.6 of the order and no addition was made on this account. In the context, the Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. (supra) has held as under:-
“18. “We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of V. Jaganmohan Rao (supra). We may also note that the heading of section 147 is “income escaping assessment” and that of section 148 “issue of notice where income escaped assessment”. Section 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148.”
54. The Hon’ble jurisdictional High Court in the case of CIT vs Adhunik Niryat Ispat Ltd. reported in [2011] 63 DTR 212 (Delhi) has held as under:
“Reassessment – Scope – Additional reason – Notice issued by AO on the ground that the assessee had accepted accommodation entries in the garb of share capital-During the reassessment proceedings additions made in respect of the credits received from some other parties additions for accommodation entries were made were not found valid and additions were deleted by the Tribunal-Additions in respect of other items which were not part of “reasons to believe” were also not sustainable.”
55. Further the hon’ble jurisdictional high court in the case of ATS Infrastructure Ltd. vs ACIT reported in [2025] 166 taxmann.com 61 (Delhi) has that AO cannot be permitted to improve the reasons recorded which form basis for initiating action under section 148A. The relevant observations of the hon’ble high court as contained in para 29 to 32 of the order reads as under:
“29. In our considered opinion, and bearing in mind the import of Explanation 3 as well as the language in which Section 147 of the Act stands couched, we find no justification to differ from the legal position which had been enunciated in Ranbaxy Laboratories Ltd. We also bear in consideration the said decision having been affirmed and approved subsequently in CIT (Exemption) v. Monarch Educational Society 2016 SCC OnLine Del 6636/[2017] 79 taxmann.com 43/387 ITR 416 (Delhi) and CIT v. Software Consultants 2012 SCC OnLine Del 316/[2012] 21 taxmann.com 155/211 Taxman 120/341 ITR 240 (Delhi).
30. We thus, come to the conclusion that the enunciation with respect to the indelible connection between Section 148A(b) and Section 148 A(d) of the Act are clearly not impacted by Explanation 3. As we read Sections 147 and 148 of the Act, we come to the firm conclusion that the subject of validity of initiation of reassessment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened.
31. Explanation 3, or for that matter, the Explanation which presently forms part of Section 147, would come into play only once it is found that the power to reassess had been validly invoked and the formation of opinion entitled to be upheld in light of principles which are well settled. The Explanations would be applicable to issues which may come to the notice of the AO in the course of proceedings of reassessment subject to the supervening requirement of the reassessment action itself having been validly initiated.
32. Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions.
56. Similarly, the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (supra) has held that “it is not open to AO to independently assess some income other than the income referred in section 148 for which reason was recorded”. The relevant head note of the judgement reads as under:-
“Section 147 of the Income-tax Act, 1961 Income escaping assessment – Nondisclosure of primary facts Assessment years 1994-95 and 1995-96 Whether an Explanation to a statutory provision is intended to explain its content and cannot be construed to override it or to render substance and core nugatory Held, yes Whether after insertion of Explanation 3 to section 147 by Finance (No. 2) Act, 2009, with effect from 1-4-1989, section 147 has an effect that Assessing Officer has to assess or reassess income (‘such income’) which escaped assessment and which was basis of formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during course of proceedings Held, yes Whether, however, if after issuing a notice under section 148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income; if he intends to do so, a fresh notice under section 148 would be necessary, legality of which would be tested in event of a challenge by assessee – Held, yes
Words and phrases: The words ‘and also’ as occurring in section 147 of the Income tax Act, 1961.”
57. In view of the facts of the case as discussed above and by respectfully following the judgement of Hon’ble Delhi High Court and Hon’ble Bombay High Court, we are of the considered view that the AO in the instant case has exceeded its jurisdiction by making additions on the issue which is not forming part of the reasons recorded for reopening the assessment when no addition was made on the issue covered in the reasons recorded. Therefore, no additions could be made dehorse the reasons recorded before issue of notice u/s 148 of the Act. Accordingly, the reassessment order passed u/s 147 of the Act is hereby quashed. Cross objections No. 1.1 and 1.2 taken by the assessee are accordingly allowed.
58. As we have already quashed the reassessment order dt. 31.03.2022 passed u/s 147 r.w.s. 143(3) of the Act while allowing the cross objections No. 1.1 & 1.2 taken by the assessee, thus the issues challenged by the revenue on the merits of the additions made in such reassessment order become infructuous and thus, the appeal of the Revenue in ITA No. 2060/Del/2024 is hereby dismissed.
59. In the result, appeal of the Revenue in ITA No.2060 Del/2024 is dismissed and C.O.No.89/Del/2025 of the assessee is allowed.”
12. Further with regard to addition of Rs.50,00,000/- made in M/s. Fidus Finance (P) Ltd., we observe that ld. AR relied on the impugned order of the ld. CIT (A) wherein the ld. CIT (A) has deleted the addition and the same is reproduced below for the sake of brevity :-
“105. In view of above discussion, and considering relevant facts on record, it is observed as under:
(i) The appellant has proved identity of the creditor which is not disputed by Assessing Officer in assessment order.
(ii) The appellant has also proved creditworthiness of the creditor by submitting its audited annual account along with relevant bank statement of depositors. The Assessing Officer has not proved that any cash has been deposited prior to giving cheque to appellant even though appellant was not required to prove sources of source, the bank statement submitted by appellant clearly reflects such sources which is not doubted by A.O. nor any inquiry has been made by A.O. for concluding that loan received by appellant is accommodative loan from shell companies. As discussed herein above, when appellant was asked to further explain sources of source, the appellant has provided such details, availability of funds with depositors who have transferred funds to Fidus, Savita and RN Khemka who have in turn transferred funds to appellant and their sources are mainly from unsecured loan taken from group entities or third parties. The appellant had also submitted relevant return of income of depositors of Fidus, Savita and RN Khemka to prove that they have disclosed income arising from such transactions in return of income. The Assessing Officer has observed that relevant documents submitted by appellant prove creditworthiness of depositors
(iii) The appellant has taken loan from Savita, Fidus and RN Khemka who are having sufficient funds as on 31st March, 2014 and 2015 and same is duly disclosed in audited annual accounts of such company and such details are from time to time submitted to MCA. Thus, the capacity of depositor is proved by the appellant.
(iv) The A.O. has not doubted the utilisation of such loans by appellant and such loan has been repaid in subsequent Assessment Years after making payment of interest and deducting TDS on such interest payment.
(v) During the course of assessment proceedings, notice u/s 133(6) was issued to Savita, Fidus and RN Khemka and in response to such notice they have filed relevant details. If the Assessing Officer had any doubt about sources of funds either in balance sheet or sources of funds in their bank statement, he could have made further inquiries either under Section 133(6) or 131 of the Act.
(vi) While making the addition Assessing Officer has relied upon various WhatsApp chats but such chats nowhere prove that those cash has been exchanged against any specific loan taken by appellant. Though such evidences found during the course of search does give rise to suspicion but such suspicion alone cannot be the basis to reject all the documentary evidences filed by appellant in support of loans taken by it.
(vii) Though according to Assessing Officer, Shri. Ankit Bhageria is an entry provider or he is operating shell companies, but what is required to be seen is whether in the case of Assessee the documents found during the course of search at their premises or from the premises of Shri. Ankit Bhageria or otherwise show that Assessee was beneficiary of any accommodation entry or not. In the present case, the A.O. sans any specific link about loan taken from the three companies with any cash trail and on the contrary the creditors in reply to notice u/s 133(6) has accepted that genuine loan was given to appellant. The A.O. has failed to prove any direct nexus linking the Assessee with accommodation entries from Sh Ankit Bhageria.
106. In view of detailed discussion made above it is observed that appellant has discharged its onus as required by provision 68 of the Act hence addition made u/s. 68 of the Act for Rs.1,83,00,000/- is deleted. Ground No.5 of appeal is allowed.
13. Respectfully following the aforesaid decision of coordinate Bench and relying on the impugned decision of ld. CIT (A), we are inclined to uphold the findings of the ld. CIT (A) and dismiss ground nos.1 to 9 raised by the Revenue.
14. With regard to ground no.10 regarding deletion of addition ofRs.7,74,727/- made by Assessing Officer on account of expenditure claimed for the year under consideration u/s 37 of the Act, at the time of hearing, ld. AR of the assessee submitted that this ground is in relation to the consequent interest disallowance made by AO as the unsecured Loans were held bogus by AO. Since, the Loans were held genuine by CIT(A) and TDS has been deducted on the interest expenses claimed, the disallowance of the same made by AO was deleted by CIT(A). After going through the submissions of both the parties and going through the order of ld. CIT (A), we are not inclined to disturb the findings of the ld. CIT (A) on this issue, accordingly this ground is dismissed.
15. With regard to ground no.11 regarding deletion of commission expenses of Rs.2,23,250/-, at the time of hearing, ld. AR brought to our notice that AO also made addition of alleged commission expense incurred by assessee for obtaining accommodation entries @ 0.25% on total credits as well as repayments i.e. 0.25% i.e. Rs.2,23,250 is added to income of assessee. Since the loans were held genuine by CIT(A), the alleged explained expenditure for taking accommodation entries was also deleted by Ld. CIT(A). After going through the order of the ld. CIT (A), we are of the opinion that ld. CIT (A) has rightly decided the issue in favour of the assessee and accordingly, we do not interfere with the findings of the ld. CIT (A). Hence, this ground is dismissed.
16. Since we have already dismissed the grounds of appeal taken by the Revenue, the objections raised in the cross objections of the assessee become academic and thus not adjudicated and are dismissed.
17. In the result, the appeal of the Revenue as well as cross objections of the assessee are dismissed.”
7. Faced with this situation, we adopt the learned co-ordinate bench’s above extracted detailed discussion mutatis mutandis to reject the Revenue’s various substantive grounds raised in the instant appeal in absence of any distinction of facts or law as the case may be. Its appeal ITA No. 4813/Del/2025 fails therefore. The assessee’s cross objection CO. No. 169/Del/2025 is rejected since rendered infructuous.
No other ground or argument has been pressed before us.
8. This Revenue’s appeal ITA No. 4813/Del/2025 and assessee’s Cross Objection CO No. 169/Del/2025; are dismissed in preceding terms. A copy of this common order be placed in the respective case files.
Order pronounced in the open court on 11.11.2026
