Spar Geo Infra Pvt. Ltd. Vs Circle-2(2) (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘C’, comprising Judicial Member Yogesh Kumar U.S. and Accountant Member Manish Agarwal, allowed the appeal of Spar Geo Infra Pvt. Ltd. and deleted an addition of ₹70,00,000 made under Section 69A of the Income-tax Act, 1961. The Tribunal held that the Assessing Officer could not sustain an addition on an issue different from the recorded reason for reopening when no addition was made on the original ground. The reassessment was initiated on information alleging accommodation entries involving a bogus unsecured loan of ₹1,19,68,090 from M/s Odisha Finlease Pvt. Ltd. However, the eventual addition concerned repayment of an unsecured loan rather than its receipt. Applying the principle laid down by the jurisdictional Delhi High Court in Sunlight Tour and Travel Pvt. Ltd. and Jaguar Buildcon Pvt. Ltd., the Tribunal concluded that the Commissioner of Income Tax (Appeals) had erred in sustaining the addition.
The assessee had filed its revised return declaring income of ₹4,19,00,740 for Assessment Year 2019-20. Based on information received through the Investigation Wing, the Assessing Officer initiated reassessment proceedings under Sections 147 and 148, alleging that the company had obtained accommodation entries of ₹1,19,68,090 from M/s Odisha Finlease Pvt. Ltd. during Financial Year 2018-19. The reassessment order dated 22 March 2024 made an addition of ₹1,73,97,501 under Section 68 and another addition of ₹70,00,000 under Section 69A. On appeal, the CIT(A), by order dated 8 October 2025, deleted the Section 68 addition but sustained the Section 69A addition. The assessee accordingly challenged the surviving addition before the Tribunal.
The assessee contended that the reasons recorded in the proceedings under Section 148A(d), including the notice dated 27 February 2023 reproduced in the order, related specifically to an alleged bogus unsecured loan. No addition was ultimately made in respect of that allegation. Instead, the Assessing Officer treated repayment of ₹70,00,000 to the lender as unexplained money under Section 69A. It was submitted that the assessee had not obtained any fresh loan during the relevant assessment year and had merely repaid an existing borrowing. The assessee relied on judicial precedents holding that, where the recorded reason for reopening does not result in an addition, the Assessing Officer cannot independently sustain an addition on another issue. The Revenue defended the addition, arguing that the lender had failed to respond to a notice under Section 133(6), its address was incomplete or doubtful, and its existence as a genuine entity had not been satisfactorily established.
After considering the rival submissions, the Tribunal observed that the reassessment proceedings were initiated exclusively on the allegation of accommodation entries representing bogus unsecured loans. The recorded information specifically referred to ₹1,19,68,090 allegedly received from M/s Odisha Finlease Pvt. Ltd. However, no addition was made on that ground. The addition under Section 69A related instead to repayment of ₹70,00,000. The Tribunal referred to the Delhi High Court’s ruling in Sunlight Tour and Travel Pvt. Ltd., which had reiterated that the Assessing Officer cannot expand reassessment proceedings to make an independent addition on an unrelated issue when the foundational reopening ground does not survive. That decision had also discussed the principle established in Ranbaxy Laboratories Ltd. Vs CIT, together with the effect of Explanation 3 to Section 147. The Tribunal also noted that the same principle had been adopted in Jaguar Buildcon Pvt. Ltd.
The Tribunal further found that the genuineness of the unsecured loan had not been questioned by the Department in the earlier assessment years in which the borrowing had originally been obtained. In those circumstances, it observed that without doubting the original receipt of the loan, the Department could not question its repayment. Respectfully following the jurisdictional High Court’s decision in Sunlight Tour and Travel Pvt. Ltd., the Tribunal held that the CIT(A) had committed an error in sustaining the addition under Section 69A. Accordingly, the addition of ₹70,00,000 was deleted and the assessee’s appeal was allowed. The decision reinforces the requirement that reassessment proceedings must remain legally connected with their foundational jurisdictional basis and cannot be sustained merely through an addition on a different issue where the original alleged escapement has not resulted in an addition.
Cases Discussed
- Ranbaxy Laboratories Ltd. Vs CIT (Delhi High Court); (2011) 336 ITR 136 — Referred to in the High Court decision reproduced by the Tribunal. Established that the Assessing Officer cannot independently reassess another item where no addition survives on the ground originally recorded for reopening. Explanation 3 to Section 147 does not override this limitation.
- ATS Infrastructure Limited Vs ACIT (Delhi High Court); 2024:DHC:5474-DB; 2024 SCC OnLine Del 5048 — Discussed in the quoted High Court reasoning through its reference to Ranbaxy Laboratories. Distinguished the validity of initiating reassessment from the wider power to assess other escaped income after jurisdiction has been validly assumed.
- PCIT Central-1 Vs Naveen Infradevelopers & Engineers Pvt. Ltd. (Delhi High Court); ITA No. 524 of 2024; 2024:DHC:7997-DB — Cited in the quoted extract from Sunlight Tour and Travel Pvt. Ltd. for the proposition that an independent addition on another issue cannot survive where no addition is made on the original reopening ground.
- PCIT Vs Jaguar Buildcon Pvt. Ltd. (Delhi High Court); ITA No. 756 of 2023; 01/08/2024; 2024 SCC OnLine Del 5447 — Followed by the Tribunal for the principle that additions made during reassessment cannot independently survive where the basis for reopening has not resulted in an addition.
- Sunlight Tour and Travel Pvt. Ltd. (Delhi High Court); ITA No. 222 of 2022 — Directly followed by the Tribunal. The decision explains that Section 147 and Explanation 3 do not permit an Assessing Officer to sustain additions on other issues where no addition is made in respect of the recorded reasons for reopening.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals) (‘Ld. CIT(A)’ for short), New Delhi dated 08/10/2025 for the Assessment Year 2019-20.
2. Brief facts of the case are that, the Assessee filed revised return of income at Rs. 4,19,00,740/-. Based on the information received from inside portal by DDIT/ADIT (Inv), it came to light that the Assessee company has taken accommodation entries of bogus unsecured loan of Rs. 1,19,68,090/- from dummy entity M/s Odisha Finlease Pvt. Ltd. during Financial Year 2018-19 relevant to Assessment Year 2019-20, accordingly the case of the Assessee was reopened by issuing notice u/s 148 of the Act. An assessment order came to be passed on 22/03/2024 by making an addition of Rs. 70,00,000/- under Section 69A of the Act and also made addition u/s 68 of the Act to the tune of Rs. 1,73,97,501/-. Aggrieved by the assessment order dated 22/03/2024, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 08/10/2025, deleted the addition of Rs. 1,73,97,501/- made by the A.O. u/s 68 of the Act. However, sustained the addition of Rs. 70,00,000/- made u/s 69A of the Act. Aggrieved by the order of the Ld. CIT(A) dated 08/10/2025, Assessee preferred the captioned Appeal.
3. The Ld. Counsel for the Assessee vehemently submitted that the reasons recorded by the A.O. as mentioned in the notice issued u/s 148A(d) of the Act was on the ground that the ‘Assessee Company has taken accommodation entries of bogus unsecured loan of Rs. 1,19,68,090/- from dummy entity M/s Odisha Finlease Pvt. Ltd. during the F.Y 2018-19 relevant to Assessment Year 2019-20’, however, no addition has been made by the A.O./sustained by the Ld. CIT(A), on the contrary the addition has been made by the A.O. u/s 69A of the Act to the tune of Rs. 70,00,000/- which was sustained by the Ld. CIT(A). The Ld. Counsel further submitted that the Assessee has not availed any loan for the year under consideration, on the other hand, the Assessee made repayment of the loan, therefore, the assessment order and the order of the Ld. CIT(A) deserves to be set aside. The Ld. Counsel relied on plethora of judicial precedents and submitted that, if the reasons recorded are entirely different than the addition made by the A.O., such addition cannot be sustainable in the eyes of law. Thus, sought for allowing the Appeal.
4. Per contra, the Ld. Departmental Representative submitted that the addition has been made on its merit. The Assessee company has repaid an amount of Rs. 70,00,000/- to Orissa Finlease Pvt. Ltd. and on issuing notice u/s 133(6) of the Act, no response was received by the party and as per the verification, it is found that the address given by the Assessee either incomplete or the said entity is dummy one. The addition has been madeu/s 69A of the Act by treating the same as unexplained money, which has been upheld by the Ld. CIT(A) and the same requires no interference at the hands of the Tribunal.
5. We have heard both the parties and perused the material available on record. The case of the Assessee was reopened and the notice u/s 148A(d) of the Act was issued for taking accommodation entries of bogus unsecured loan. For the sake of ready reference, the reasons as mentioned in the notice dated 27/02/2023 issued u/s 148A(d) of the Act is reproduced as under:-
“Whereas I have information which suggests that income chargeable to tax for the A.Y. 2019-20 has escaped assessmet within the meaning of sec. 147 of the Income-tax Act, 1961. As per information in possession of the undersigned, the assessee company M/s Spar Geo Infra P. Ltd. has taken accommodation entries of bogus unsecured loan of Rs. 1,19,68,090/- from dummy entity M/s Odisha Finlease Pvt. Ltd., during the F.Y. 2018-19 relevant to the A.Y. 2019-20. The details of the information / enquiry conducted on which reliance is being placed, alongwith supporting documents, are enclosed with this notice.”
6. However, the addition has been made by the A.O. u/s 69A of the Act for repayment of the unsecured loan by treating the same as unexplained money u/s 69A of the Act. Admittedly no addition has been made by the A.O. for taking accommodation entries of bogus loan of Rs. 1,19,68,090/-. It is also not in dispute that the Assessee has not taken any loan for the year under consideration.
7. The Hon’ble High Court of Delhi in the case of Sunlight Tour and Travel Pvt. Ltd. (supra), while dealing with the identical issue decided in favour of the Assessee in following manners:-
17. The said view has also been consistently followed by this Court including recent decisions in The Principal Commissioner of Income Tax-1v. Naveen Infradevelopers& Engineers Pvt. Ltd. (supra) and PCIT v. Jaguar BuildconPvt. Limited (supra). We concur with the aforesaid view. It is well established that Section 147 of the Act enables the reopening of concluded assessments only in exceptional cases, where there the AO has reason to believe that Assessee’s income for the relevant period has escapedassessment. It is trite law that concluded assessment should not be lightlyinterfered with. If the ground on which the concluded assessment is soughtto be re-opened, cannot be sustained, there would be little rationale forexpanding the reassessment proceedings. In our view, it would not beapposite to accept an expansive interpretation to the provision of Section147 of the Act. Given that the nature of the proceedings is to unsettle concluded assessment, a strict interpretation of the plain language of Section147 of the Act, is warranted. We respectfully concur the view of this courtas articulated in Ranbaxy Laboratories Limited v. CIT; ATS InfrastructureLtd. v. ACIT; and PCIT v. Jaguar BuildconPvt. Limited (supra).
18. It is also relevant to note that various courts had taken a view that the reassessment proceedings were confined under Section 147 of the Act only to the issues (reasons to believe) on the basis of which the assessments werereopened. Thus, there was no scope for making any addition other thanthose which were circumscribed by the reasons to believe as recorded by theAO prior to the issuing a notice under Section 148 of the Act. However, thiscontroversy was set at rest by introduction of Explanation 3 by virtue of theFinance Act, 2009 with retrospective effect from 01.04.1989. Explanation 3to Section 147 as applicable at the material time reads as under:
“Explanation 3. – For the purpose of assessment or reassessmentITA 222/2022 Page 14 of 15under this section, the Assessing Officer may assess or reassess theincome in respect of any issue, which has escaped assessment, andsuch issue comes to his notice subsequently in the course of theproceedings under this section, notwithstanding that the reasons forsuch issue have not been included in the reasons recorded under sub section (2) of section 148.”
19. It is apparent from the above that the said explanation merely clarified that the AO would assess or reassess the income in respect of the issue which had escaped assessment and such other issue, which came to the notice subsequently. However, the said explanation does not control the import of the plain language of Section 147 of the Act. Explanation 3 to Section 147 of the Act, merely clarifies that the jurisdiction of the AO was not confined to assessing or reassessing of the income of an Assessee only inrespect of the issue, which formed a part of the reasons recorded for reopening the assessment. The said explanation cannot be interpreted to mean that the AO could assess other incomes of the Assessee even in cases where no addition is made on account of the reasons for which reassessmentwas initiated.”
8. Identical ratio has also been laid down in the case of Jaguar Buildcon (P) Ltd. (supra) by the Jurisdictional High Court.
9. It is also observed that the genuineness of the unsecured loan has not been doubted by the Department in the earlier Assessment Years in which the said loan has been obtained, thus, in our opinion, without doubting the receipt of the loan, the Department cannot doubt the repayment of the loan.
9. In view of the above discussion and by respectfully following the above ratio down by the Hon’ble Jurisdictional High Court in the case of Sunlight Tour and Travel Pvt. Ltd. (supra),we are of the considered opinion that, the Ld. CIT(A) committed error in sustaining the addition of Rs. 70,00,000/- made u/s 69A of the Act. Accordingly, we allow the Grounds of Appeal of the Assessee and delete the addition made by the A.O. which has been confirmed by the Ld. CIT(A).
10. In the result, Appeal of the Assessee is allowed.
Order pronounced in the open court on 15th May, 2026
