Funali Rakesh Doshi Vs DCIT (ITAT Mumbai)
Mumbai ITAT Deletes ₹14 Lakh Accommodation Entry Addition; Search Report Alone Cannot Override Documentary Evidence and Loan Repayment
The Mumbai ITAT allowed the appeal of Funali Rakesh Doshi, deleting the ₹14 lakh addition under Section 69A read with Section 115BBE made on the allegation that an unsecured loan received from M/s Aarohi Creations LLP was merely an accommodation entry. The reassessment was reopened based on information unearthed during a search in the ARC Group and the case of Lokesh Kumar Khabya, who was alleged to be an entry operator. Although the Assessing Officer treated the loan as the assessee’s own unaccounted money routed back in the guise of a loan, the assessee produced the loan confirmation, ledger account, bank statements of both parties, lender’s income-tax return and details of unsecured loans, and demonstrated that the loan was repaid within the same financial year after remaining outstanding for only three to four months.
The Tribunal held that the addition was based solely on the general findings of the search against third parties, without any independent evidence linking the assessee to any accommodation entry arrangement. It observed that the Assessing Officer had not disproved the identity of the lender, the genuineness of the banking transaction or the creditworthiness of the lender, nor had he shown that the documentary evidence furnished by the assessee was false or fabricated. The Tribunal relied on its earlier decision in ACIT v. Venus Portfolio and Finances Pvt. Ltd., along with other judicial precedents, holding that where a loan is supported by documentary evidence, routed through banking channels and subsequently repaid, no addition can be sustained in the absence of material proving that it represented the assessee’s own unexplained money.
Finding that the Revenue had merely reiterated the search report without producing any fresh incriminating material to rebut the assessee’s evidence, the Tribunal held that the ₹14 lakh addition under Section 69A read with Section 115BBE was unsustainable in law. Accordingly, it set aside the order of the CIT(A), directed the Assessing Officer to delete the addition, and allowed the assessee’s appeal.
Cases Discussed
- ACIT v. Venus Portfolio and Finances Pvt. Ltd. (ITAT Mumbai), ITA No. 4024/M/2025, date of pronouncement 23/02/2026
- Rajuram Savaji Purohit v. ITO (ITAT Mumbai), (2025) 210 ITD 358 (Mum ITAT)
- DCIT v. Supreme Holdings and Hospitality (India) Ltd. (ITAT Mumbai), (2025) 171 taxmann.com 309 (Mum ITAT)
- PCIT v. Bairagra Builders (P.) Ltd. (Bombay High Court), (2024) 299 Taxman 460 (Bom. HC)
- PCIT v. Merrygold Gems (P.) Ltd. (Gujarat High Court), (2024) 164 taxmann.com 764 (Guj. HC)
- Rajuram Savaji Purohit v. ITO (ITAT Mumbai), [2024] 169 taxmann.com 18
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity “Ld. CIT(A)”], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2019-20, date of order 06.02.2026. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity ‘Ld. AO’), order passed under Section 147 r.w.s. 144B of the Act, date of order 06.02.2025.
2. The brief facts of the case are that the assessee in its individual capacity filed the return, declaring total income Rs. 28,67,230/-. The assessee is engaged in profession of Chartered Accountant. The original return was filed and subsequently it was revised u/s. 139(5) of the Act. The assessee’s case was reopened u/s. 148 of the Act related to the transactions with M/s Aarohi Creations LLP, amount to Rs. 14 lakhs. A search and seizure action was undertaken on 15/2/2022 in case of ARC Group on 05/07/2022 in case of Shri Lokesh Kumar Khabya and Associates. Ongoing through seized material from different premises it was found that Shri Lokesh Kumar Khabya and Associates is the entry operator and have provided the accommodation entry on sale of purchase and bogus unsecured loan to various ARC Group concern in lieu of cash. The Ld. AO considered that the assessee received the loan amount to Rs. 14lakh in exchange of cash. So, the entire transactions were treated as sham transaction and added back with the total income of the assessee. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the addition. Being aggrieved, assessee filed an appeal before us.
3. The Ld. AO contended that the assessee had received the loan amount to Rs. 14 lakhs from M/s Aarohi Creations LLP through the banking channel. During the course of assessment proceeding the assessee submitted the following documents:
(i) Bank statement of the assessee highlighting the loan transaction.
(ii) Loan confirmation from lender.
(iii) Copy of ledger account of the lender company.
(iv) Bank statement of lender.
(v) ITR of the lender.
(vi) List of unsecured loans for the entire assessment year which clearly shown that loan received, taken and repaid during the year.
The Ld. AR contended that though the assessee had taken loan from this company but the same amount was duly refunded in the same year and only the assessee held for the 3 to 4 months.
4. The Ld. AR argued and contended that identical issue was adjudicated by the Coordinate Bench of ITAT, Mumbai “F” Bench in the case of ACIT vs Venus Portfolio and Finances Pvt. Limited, ITA No. 4024/M/2025 date of pronouncement 23/02/2026. The relevant observations of the bench contained in paragraphs 9 to 11 is reproduced as below:
“9. Having meticulously gone through the order passed by the Ld. CIT(A) and also documents filed by the Assessee we find that the identity, genuineness and creditworthiness had been successfully proved by the Assessee. Moreover, all the loans taken by the Assessee were repaid in the subsequent years. In this regard, Assessee has placed on record the relevant documents. On this preposition we find reliance on the decision of Coordinate Bench of ITAT Mumbai, in the case of Rajuram Savaji Purohit Vs. ITO [2024] 169 taxmann.com 18, wherein it was held that:
INCOME TAX: Where assessee had taken loan from a company and all ingredients of a genuine loan transaction like loan taken and even its repayment by assessee were through banking channels and identity of lender, genuineness of transaction as also credit worthiness of lender had not been disproved by Assessing Officer, impugned loan could not be treated as unexplained credit.
Apart from this reliance has also been placed on following decisions:
a. PCIT v. Bairagra Builders (P.) Ltd. (2024) 299 Taxman 460 (Bom. HC)
b. PCIT v. Merrygold Gems (P) Ltd. (2024) 164 com764 (Guj. HC)
c. Rajuram Savaji Purohit v. ITO (2025) 210 ITD 358 (Mum ITAT)
d. DCIT v. Supreme Holdings and Hospitality (India) Ltd. (2025) 171 taxmann.com309 (Mum ITAT)
Wherein in all of the above decisions it was held that if loans taken by the Assessee had been subsequently repaid, then in that eventuality, no addition can be made.
In this case, nothing has been brought on record by the AO to suggest that the impugned loans were Assessee’s unaccounted money, channelized through alleged lenders, therefore, in our view AO was not justified in treating the impugned sum as unexplained credit adding to the income of the Assessee.
10. No new facts or circumstances or documents have been placed on records by Ld. DR in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A), therefore, we see no reasons to interfere with or to deviate from the findings so recorded by Ld. CIT(A), hence we dismiss the grounds raised by the Revenue and uphold the order of Ld. CIT(A) deleting the additions made under Section 68 of the Act and also under Section 37(1) of the Act.
11. In the result appeal filed by the Revenue is dismissed.”
5. The Ld. DR argued and contended that though the assessee repaid the loan, but the assessee had entered into the bogus transaction to convert the black money into white. The Ld. DR invited our attention in impugned assessment order in the relevant paragraph is reproduced as below:-
“The assessee has made the response to the notice u/s.148 and 142(1). Reply of the assessee has been reproduced as above. It is to pertinent to mentioned here that as per the amount of money borrowed from the alleged party, as stated in the notice u/s.148A(b) is Rs. 28,00,000/-. Assessee has furnished reply along with supporting documents, in which the loan amount borrowed by assessee from the said party amounts to Rs.14,00,000/- only. In order to prove the genuineness of the loan, the assessee submitted the copy of loan confirmation from M/s. Aarohi Creation LLP, copy of ledger account of M/s. Aarohi Creations LLP, copy of bank statement of the lender, copy of bank statement of assessee, copy of return of income and copy of the financial statement of the lender M/s. Aarohi Creations LLP. It is to pertinent to mentioned here that as per the ledger/copy of account in the books M/s. Aarohi Creations LLP. As per the search report it has been made clear that M/s. Aarohi Creations LLP has given accommodation entry and the assessee is one of the beneficiary.
Considering the above discussion and looking to the fact of the case, it is established that the assessee had taken accommodation entry, hence committed the default in the meaning of section 69A of the I.T Act, 1961. Therefore, an amount of Rs. 14,00,000/- is added in the total income of the assessee for the year under consideration u/s.69A of the Act r.w.s. 115BBE being undisclosed money. Further, the assessee has committed default in the meaning of section 271AAC(1) of the Act, 1961 is initiated on the above addition.”
6. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the assessee had received an unsecured loan of Rs.14,00,000/- from M/s Aarohi Creations LLP through banking channels and had furnished documentary evidence in support thereof, namely, the loan confirmation, ledger account, bank statements of both the assessee and the lender, return of income of the lender, and details of the unsecured loans. It is also an admitted position that the impugned loan was repaid during the same previous year and remained outstanding only for a short period of about three to four months. The addition has been made primarily on the basis of the search findings in the case of certain third parties and the allegation that M/s Aarohi Creations LLP was engaged in providing accommodation entries. However, except for such general information, no independent material has been brought on record by the Ld. AO to establish that the impugned loan represented the assessee’s own unaccounted money routed back in the guise of a loan. The documentary evidence produced by the assessee has not been found to be false or fabricated, nor has the Ld. AO disproved the identity of the lender, the genuineness of the banking transaction, or the creditworthiness of the lender by conducting any meaningful enquiry. We further find that the issue is squarely covered by the decision of the Coordinate Bench of the ITAT, Mumbai in Venus Portfolio and Finances Pvt. Ltd., (supra), wherein, after considering the decisions in Rajuram Savaji Purohit (supra), Bairagra Builders (P.) Ltd. (supra), Merrygold Gems (P.) Ltd. (supra), and Supreme Holdings and Hospitality (India) Ltd. (supra), it was held that where the loan transactions are supported by documentary evidence, are routed through banking channels, and are subsequently repaid, no addition can be sustained in the absence of any material demonstrating that the impugned amount represents the assessee’s own unexplained money. The Ld. DR has merely reiterated the findings recorded by the revenue authorities and relied upon the search report but has not placed any fresh material or cogent evidence to rebut the documentary evidence furnished by the assessee or to distinguish the aforesaid binding Coordinate Bench decision on facts or in law.
Respectfully following the aforesaid decision of the Coordinate Bench and in the absence of any incriminating material establishing that the impugned amount constituted the assessee’s unexplained money, we hold that the addition of Rs.14,00,000/- made under section 69A read with section 115BBE of the Act is unsustainable. Accordingly, we set aside the order of the Ld. CIT(A) and direct the Ld. AO to delete the impugned addition. Consequently, the grounds raised by the assessee are allowed.
7. In the result, the appeal of the assessee bearing ITA No.4748/Mum/2026 is allowed.
Order pronounced in the open court on 30th day of July 2026.
