Mere Link with Alleged Entry Operator Not Enough – ITAT Deletes Section 68 Addition of Loan After Assessee Proves Identity, Creditworthiness and Genuineness

Suketu Rajnikant Jhaveri Vs ACIT (ITAT Pune)

Mere Link with Alleged Entry Operator Not Enough – ITAT Deletes Section 68 Addition of Loan After Assessee Proves Identity, Creditworthiness and Genuineness

The Pune ITAT deleted an addition of ₹4.50 lakh under section 68, holding that once the assessee furnishes documentary evidence establishing the identity of the lender, genuineness of the transaction and creditworthiness of the creditor, the burden shifts to the Revenue to disprove the claim. Mere association of the lender with an alleged accommodation entry operator is insufficient to sustain the addition.

The assessee had received a loan of ₹4.50 lakh from M/s. Natasha Enterprises and utilized it for repayment of a housing loan. The Assessing Officer treated the loan as unexplained cash credit on the basis of information that the concern was allegedly connected with the accommodation entry network of Praveen Jain.

Before the Tribunal, it was demonstrated that the assessee had furnished comprehensive evidence including the lender’s confirmation, PAN, address, bank statements, income-tax return, balance sheet, profit and loss account and ledger account. It was also undisputed that the loan had subsequently been repaid.

The Tribunal observed that despite the assessee discharging the primary onus under section 68, the Assessing Officer neither issued notice under section 133(6) nor summons under section 131 to verify the lender’s credentials. No defect or discrepancy was found in the documents furnished. The addition was made solely because of the alleged connection of the lender with Praveen Jain.

The ITAT further noted that for AY 2008-09, prior to the amendment in section 68 effective from 01.04.2013, the assessee was required to explain the source of the credit and not the source of the source. Since the assessee had satisfactorily established the nature and source of the loan, invocation of section 68 was unjustified. Accordingly, the entire addition of ₹4.50 lakh was deleted.

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal at the instance of the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-12, Pune [“CIT(A)”] dated 15/07/2025 passed under section 250 of the Income Tax Act, 1961 (“Act”) which is arising out of assessment order dated 29.01.2016 passed u/s. 143(3) r.w.s. 147 of the Act by the ACIT, Circle-1, Aurangabad, for the Assessment Year (AY) 2008-09.

2. The sole grievance of the assessee is that Ld.CIT(A) erred in confirming the addition of ₹ 4,50,000/- made by the Assessing Officer (AO) invoking section 68 of the Act for the alleged accommodation entry received from M/s. Nitasha Enterprises.

3. At the outset, learned counsel for the assessee referring to the submissions made before the lower authorities submitted that assessee filed all necessary details to explain the nature and source of loan of ₹ 4,50,000/- which was taken by the assessee for the purpose of repaying housing loan and the alleged loan has been repaid back after two years.

4. On the other hand, Ld. Departmental Representative (DR) supported the order of the Ld.CIT(A).

5. I have heard rival contentions and perused the records placed before me. I notice that assessee received loan of ₹4,50,000/- from M/s. Natasha Enterprises during the year under consideration. The assessee has declared income of ₹17,14,260/- in the return of income for A.Y. 2008-09 filed on 09.08.2008. Ld.AO based on the information about the alleged involvement of M/s. Natasha Enterprises with Shri Praveen Jain and that M/s. Natasha Enterprises is engaged in providing accommodation entries has made the impugned addition for the loan taken by the assessee. I observe that the assessee in order to explain the nature and source of loan taken from M/s. Natasha Enterprises has filed the ledger, confirmation, complete address and PAN no. of the proprietor of M/s. Natasha Enterprises, bank statement, original loan confirmation, income tax return along with balance sheet and profit & loss account of M/s. Natasha Enterprises. It is also an admitted fact that the assessee has subsequently repaid loan. Now once the assessee has discharged its primary onus casted upon it, as provided the provisions of section 68 of the Act by filing necessary evidence to explain the identity and genuineness of the transactions and creditworthiness of the cash creditor then the burden of proof shifts on the Revenue which is required to find any material controverting the details filed by the assessee. However, in the instant case, there is no observation of the Ld.AO that any information has been called for from M/s. Natasha Enterprises by issuing notice u/s. 133(6) of the Act or issued any summons u/s. 131 of the Act nor any discrepancy has been communicated in the documents furnished by the assessee. The only basis observed by the Ld.AO is the relation between M/s. Natasha Enterprises and Shri Praveen Jain. However, prior to amendment made in section 68 effective from 01.04.2013, assessee was required to file the details to explain the nature and source of sum received by it and not the source of source to the satisfaction of the Assessing Officer.

6. Under these given facts and circumstances and also considering the income of ₹ 17,14,260/- offered in ITR and the alleged loan having been repaid subsequently, I am of the considered view that since the assessee has successfully explained the nature and source of alleged sum with sufficient documentary evidence, the Ld.AO grossly erred in invoking section 68 of the Act. Accordingly, impugned finding is reversed and addition made u/s. 68 of the Act at ₹ 4,50,000/-is deleted. Effective grounds of appeal raised by the assessee are allowed.

7. In the result, appeal of the Assessee is allowed.

Order pronounced in the open Court on 16.02.2026