Section 68 Loan Additions Deleted as Identity, Creditworthiness & Genuineness Proved: ITAT Mumbai

By CA Sandeep Kanoi Income Tax Judiciary October 5, 2026

TaxGuru Citation: 2026 taxguru.in 14606
Case Name: DCIT Vs Jayant Shamji Chheda (ITAT Mumbai)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2014-18
Courts: All ITAT, ITAT Mumbai

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DCIT Vs Jayant Shamji Chheda (ITAT Mumbai)

Summary: ITAT Mumbai dismissed the Revenue’s appeals for Assessment Years 2014-15 and 2016-17, upholding the CIT(A)’s deletion of substantial additions relating to unsecured loans and a Section 14A disallowance. For AY 2014-15, the Assessing Officer had treated unsecured loans of Rs.16.67 crore as unexplained under Section 68 and had also questioned Rs.9.50 crore repaid to Shri Pankaj D. Goshar as an alleged accommodation entry. The Tribunal noted that additional evidence furnished before the CIT(A) had been remanded to the Assessing Officer, but no effective independent verification or cross-checking of the creditors was undertaken. The CIT(A), after examining confirmations, bank statements, income-tax records and other documents, found the identity and creditworthiness of the lenders and genuineness of the transactions established. The Tribunal found no valid reason to interfere. It also sustained deletion of the additions concerning Shri Pankaj D. Goshar after considering the evidence and the CIT(A)’s findings on the alleged penny-stock LTCG and uncorroborated WhatsApp material. For AY 2016-17, the Tribunal similarly upheld deletion of a Rs.2 crore Section 68 addition concerning two lenders, noting the documentary evidence and repayment through banking channels. On Section 14A read with Rule 8D, the Tribunal upheld the CIT(A)’s finding that recording dissatisfaction having regard to the assessee’s accounts was mandatory before invoking Rule 8D. Consequently, both Revenue appeals were dismissed.

Cases Discussed

PCIT (Central)-1 Vs NRA Iron & Steel (P.) Ltd., (2019) 103 taxmann.com 48 (SC) — Relied upon by the Revenue on the assessee’s burden to establish identity, creditworthiness and genuineness under Section 68; the Tribunal held the Revenue’s reliance did not dislodge the creditor-wise evidence accepted by the CIT(A).
CIT Vs United Commercial & Industrial Co. (P.) Ltd., (1991) 56 Taxman 304 (Calcutta High Court) — Relied upon by the Revenue on the statutory burden under Section 68 and the insufficiency of banking channels alone where genuineness remains unproved.
S. Hastimal Vs CIT, (1963) 49 ITR 273 (Madras High Court) — Cited by the assessee in support of the Section 68 challenge.
CIT Vs Orissa Corporation (P.) Ltd. (Supreme Court) — Cited by the assessee on discharge of the initial evidentiary burden relating to cash credits.
CIT Vs Vrindavan Farms (P.) Ltd., ITA Nos. 71-72 & 84 of 2015, dated 12.08.2015 — Cited by the assessee in support of deletion of the unsecured-loan addition.
DCIT Vs Rohini Builders, (2003) 127 Taxman 523 (Gujarat High Court) — Relied upon in the reproduced appellate reasoning concerning documentary proof and loan transactions.
PCIT Vs Ojas Tarmake (P.) Ltd., (2023) 156 taxmann.com 75 (Gujarat High Court) — Relied upon on repayment of loans through banking channels together with supporting evidence while considering Section 68.
CIT Vs Ayachi Chandrashekhar Narsangji, (2014) 42 taxmann.com 251 (Gujarat High Court) — Relied upon on the relevance of accepted subsequent repayment of the loan.
PCIT Vs Bairagra Builders (P.) Ltd., (2024) 164 taxmann.com 162 (Bombay High Court) — Cited by the assessee in support of its Section 68 case.
PCIT Vs Skylark Build, ITA No.616 of 2016, order dated 24.10.2018 (Bombay High Court) — Relied upon in the CIT(A)’s reasoning concerning repayment and genuineness of creditors.
PCIT Vs Wel Intertrade (P.) Ltd., (2023) 152 taxmann.com 663 (Delhi High Court) — Cited by the assessee in support of deletion under Section 68.
CIT Vs Lavanya Land (P.) Ltd., (2017) 83 taxmann.com 161 (Bombay High Court) — Cited by the assessee in support of its Section 68 case.
Nemi Chand Kothari Vs CIT, (2004) 139 Taxman 213 (Gauhati High Court) — Cited by the assessee concerning the evidentiary burden under Section 68.
M/s NH Securities Ltd. Vs DCIT, ITA No.1079/Mum/2018, dated 24.03.2021 (ITAT Mumbai) — Cited by the assessee in support of the loan-addition issue.
ITO 41(3)(1) Vs Mr. Bhagwati Prasad N. Rungta, ITA No.1574/M/2024, order dated 22.01.2025 (ITAT Mumbai) — Reproduced by the CIT(A) on documentary evidence, repayment through banking channels and Section 68.
CCIT(OSD)/PCIT Vs Bhupendra Champaklal Dalal, (2024) 160 taxmann.com 645 (Bombay High Court) — Referred to in the reproduced precedent concerning repayment of credit and deletion of Section 68 addition.
CIT Vs P. Mohanakala, (2007) 291 ITR 278 (Supreme Court) — Discussed in the reproduced Bombay High Court reasoning on factual appreciation of cash-credit transactions.
CIT Vs Mahaveer Crimpers, 95 taxmann.com 323 (Gujarat High Court) — Relied upon in the CIT(A)’s reasoning concerning source, creditworthiness, repayment and Section 68.
Shyam R. Pawar (Bombay High Court) — Referred to through the earlier order concerning Shri Pankaj D. Goshar and the alleged bogus LTCG in Pine Animation Ltd.
Ziauddin A. Siddique (Bombay High Court) — Referred to through the earlier order concerning Shri Pankaj D. Goshar and the alleged bogus LTCG.
Principal Commissioner of Income Tax Vs Bombay Stock Exchange Ltd., 113 taxmann.com 303 (Bombay High Court) — Followed on the requirement of recording dissatisfaction having regard to the assessee’s accounts before invoking Rule 8D.
Maxopp Investment Ltd. Vs CIT, (2018) 402 ITR 640 (Supreme Court) — Considered through Bombay Stock Exchange Ltd. on the statutory precondition for application of Rule 8D.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These two appeals are filed by the Revenue against different orders of the learned CIT(A)-50, Mumbai of even date 23.01.2026 for the assessment years 2014-15 and 2016-17.

2. In ITA No.3547/Mum/2026 for A.Y. 2014-15, the Revenue has raised the following grounds of appeal:

“Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 16,66,99,990/-made by the Assessing Officer under section 68 of the Income-tax Act, 1961 on account of unexplained unsecured loans without properly appreciating the findings recorded in the assessment order and without adequately examining the creditworthiness of the lenders and the real source of funds?

2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made under section 68 by accepting documentary evidences such as confirmations, PAN, income-tax returns and bank statements, without appreciating that the assessee had failed to discharge the primary onus during the assessment proceedings and without conducting proper verification of the financial capacity of the creditors.

3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition under section 68‘ by placing reliance on subsequent repayment of loans through banking channels, without appreciating the settled legal position that the genuineness and source of the credit must be established in the year of receipt itself and subsequent repayment does not validate an unexplained credit entry.

4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 9,50,00,000/- made by the Assessing Officer in respect of repayment of unsecured loan to Shri Pankaj D. Goshar, which was treated as an accommodation entry, without properly appreciating the incriminating material and surrounding circumstances brought on record during the course of assessment proceedings.

5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made by the Assessing Officer without properly appreciating the abnormal pattern of receipt of Rs. 15,00,00,000/- and repayment of Rs. 9,50,00,000/- within the same year, which clearly indicates lack of genuineness and absence of economic substance in the transactions.”

3. Briefly stated, the facts are that for the assessment year 2014-15, the Assessing Officer noticed that as per the books of account maintained by the assessee as on 30.03.2014, the total unsecured loans are at Rs. 65,13,20,852/-. On the details furnished by the assessee, the Assessing Officer noticed that Rs. 36.63 crore out of Rs. 65.13 crore had been freshly introduced in the books of account by the assessee as unsecured loans. The assessee was asked to furnish the details, confirmations and supporting evidences to establish the genuineness of the loan creditors. The assessee furnished confirmations, bank statements, details of repayment of loans, financials and PAN details of the creditors to prove the identity, genuineness and creditworthiness of the loan creditors.

4. After examining the details furnished by the assessee, the Assessing Officer concluded that 39 loan creditors, as appearing at pages 25 and 26 of the assessment order, amounting to Rs. 16,66,99,990/-, out of 79 creditors, were treated as unexplained creditors. Apart from treating the unsecured loan to the extent of Rs. 16,66,99,990/- as unexplained, the Assessing Officer also treated Rs. 9,50,00,000/- which was repaid by the assessee to Shri Pankaj the learned CIT(A) deleted the additions made by the Assessing Officer.

5. Before us, the learned DR submitted that the present appeal has been preferred by the Revenue against the order passed by the learned Commissioner of Income Tax (Appeals) for A.Y. 2014-15. During the assessment proceedings, the Assessing Officer made additions under section 68 of the Income-tax Act on account of unexplained unsecured loans after holding that the assessee failed to establish the identity, creditworthiness of the lenders and the genuineness of the transactions. The learned CIT (A), however, granted relief by deleting the additions made by the Assessing Officer. Being aggrieved by the findings of the learned CIT (A), the Revenue has preferred the present appeal before this Hon’ble Tribunal.

6. Ld. DR further submitted that the learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 16,66,99,990/- made under section 68 of the Income-tax Act, 1961. The Assessing Officer, after conducting detailed enquiries under sections 131 and 133(6), recorded specific creditor-wise findings demonstrating that the assessee had failed to establish namely, the identity of the creditors, their creditworthiness and the genuineness of the loan transactions. In several cases, notices remained uncomplied with, incorrect PAN details were furnished, financial statements and income-tax returns were not produced during the assessment proceedings, and independent enquiries revealed deficiencies in the financial capacity of the lenders. These findings were based on tangible material and independent verification, yet the learned CIT(A) has failed to record any cogent finding to dislodge the conclusions reached by the Assessing Officer.

7. Ld. DR submitted that from the above illustrative instances, it is evident that the observations recorded by the learned Assessing Officer during the assessment proceedings were well-founded and based on material available on record. The Paper Book filed by the appellant does not conclusively rebut the deficiencies pointed out by the Assessing Officer. On the contrary, the Paper Book itself reveals discrepancies such as different PAN particulars, absence of balance sheets and financial statements, low returned income vis-à-vis the substantial loans advanced, and other deficiencies which continue to cast serious doubt on the identity, creditworthiness primary onus cast upon the assessee under section 68 of the Income-tax Act, 1961 has not been satisfactorily discharged. The above examples are merely illustrative and demonstrate that the findings recorded by the learned Assessing Officer were justified and ought not to have been disturbed by the learned CIT(A).6. In this regard, reliance is placed on the judgment of the Hon’ble Supreme Court in PCIT (Central)-1 v. NRA Iron & Steel (P.) Ltd. [(2019) 103 taxmann.com 48 (SC)], wherein it was held that the assessee is under a legal obligation to establish the identity of the creditors, their creditworthiness and the genuineness of the transactions to the satisfaction of the Assessing Officer. The Hon’ble Supreme Court further held that mere furnishing of PAN, income- tax returns or routing the transaction through banking channels does not, by itself, discharge the onus under section 68 where the financial capacity of the creditors and the genuineness of the transactions remain unproved. The Hon’ble Court further observed that if the assessee fails to discharge the primary onus, the Assessing Officer is justified in making an addition under section 68.

8. Ld. DR submitted that the learned CIT(A) erred in deleting the addition of 9,50,00,000/- made by the Assessing Officer in Goshar without properly appreciating the detailed findings recorded in the assessment order. The Assessing Officer, recorded a categorical finding that although the assessee claimed to have repaid 9.50 crore out of the loan of 15 crore received from Shri Pankaj D. Goshar, the search conducted under section 132 unearthed seized WhatsApp conversations and other incriminating electronic material establishing that cash was received by the assessee against issuance of cheques and vice versa for facilitating accommodation entries. The Assessing Officer further observed that the assessee and Shri Pankaj D. Goshar had business association in real estate projects, including M/s Goshar Ventures Pvt. Ltd., and that the repayment transaction represented an accommodation entry rather than a genuine discharge of liability. These findings were based not merely on suspicion but on the cumulative appreciation of seized electronic evidence, the conduct of the parties and the surrounding circumstances.

9. Ld. DR submitted that the learned CIT(A) deleted the addition by holding that the unsecured loan and its repayment were routed through banking channels and that the Assessing Officer had based the addition primarily on the alleged bogus the sale of shares of Pine Animation Ltd. and the seized WhatsApp conversations. The CIT(A) held that the ITAT, Mumbai in the case of Shri Pankaj D. Goshar (order dated 20.12.2024), relying upon the judgments of the Hon’ble Bombay High Court in Shyam R. Pawar and Ziauddin A. Siddique, had already held that the LTCG on sale of shares of Pine Animation Ltd. could not be treated as bogus or as an accommodation entry. Therefore, according to the CIT(A), the very foundation of the AO’s allegation regarding the lender’s creditworthiness no longer survived., the learned CIT(A) held that the alleged LTCG could not be treated as bogus and that the WhatsApp chats, being undated, recovered from a third party and unsupported by any corroborative evidence such as cash trail or independent verification, could not form the sole basis for making the addition. Accordingly, the learned CIT(A) concluded that neither of the two bases relied upon by the Assessing Officer survived and directed deletion of the additions of Rs. 5.50 crore under section 68 and 9.50 crore towards alleged accommodation entries. Ld. DR, thus submitted that the Department respectfully relies upon the present written submissions, as the evidence referred to therein is crucial for the addition to be upheld.

10. Ld. DR relied upon the order of the Hon’ble Calcutta High Court in CIT v. United Commercial & Industrial Co. (P.) Ltd. (1991) 56 Taxman 304 (Cal.). The Hon’ble High Court has categorically held that the assessee must establish the identity of the creditor, creditworthiness of the creditor and genuineness of the transaction, and mere production of confirmation letters or the fact that receipts and repayments were made through banking channels is not sufficient to discharge the statutory burden. The Hon’ble Court further held that where accommodation entries are routed through cheques against cash, the mere use of banking channels does not establish the genuineness of the transaction. In the present case also, the Assessing Officer has recorded specific findings that the assessee failed to establish the creditworthiness of the lender and that the seized material indicated a cash-cheque accommodation entry mechanism. Therefore, the learned CIT (A) was not justified in deleting the addition merely on the basis of documentary evidence and repayment through banking to the extent challenged by the Revenue and the additions made by the Assessing Officer be restored.

11. On the other hand, the learned counsel appearing on behalf of the assessee strongly supported the orders of the learned CIT(A). The learned counsel further submitted that, in the course of assessment proceedings, the assessee filed most of the information available with it and in the course of the appellate proceedings also, the assessee filed various information to prove the genuineness, creditworthiness and identity of the creditors. Learned counsel for the assessee submitted that the additions made by the Assessing Officer were not based on any inquiry, information or investigation by the Department but was made in the course of regular assessment proceedings and not related to any accommodation entry provider. The learned counsel for the assessee submitted that on the additional evidences which the assessee filed before the learned CIT(A), the learned CIT(A) called for a remand report in respect of all 39 parties, in which the Assessing Officer had stated that the assessee had not filed any details or confirmations. The learned CIT(A) after considering the remand report of the Assessing Officer, which is placed at pages 485-490 of the paper book and addition observing that the assessee had duly established the identity and creditworthiness of the lenders and the genuineness of the loan transactions through the documentary evidences placed on record.

12. The Ld. Counsel placed reliance upon the following decisions:

1) S. Hastimal vs. CIT, (1963) 49 ITR 273 (Madras)

2) CIT vs. Orissa Corporation (P.) Ltd, (1986) 1986 taxmann.com 1163 (SC)

3) CIT vs. Vrindavan Farms (P) Ltd, in ITA No.71-72 & 84 of 2015 dated 12.08.2015

4) DCIT vs. Rohini Builders, (2003) 127 Taxman 523 (Gujarat)

5) PCIT vs. Ojas Tarmake (P.) Ltd, (2023) 156 Taxmann.com 75 (Gujarat)

6) CIT vs. Ayachi Chandrashekhar Narsangji, (2014) 42 taxmann.com 251 (Guj..)

7) PCIT vs. Bairagra Builders (P.) Ltd, (2024) 164 taxmann.com 162 (Bom.)

8) PCIT vs. Skylark Build, ITA No.616 of 2016 order dated 24th October, 2018.

9) PCIT vs. Wel Intertrade (P.) Ltd, (2023) 152 taxmann.com 663 (Del.)

10) CIT vs. Lavanya Land (P.) Ltd., (2017) 83 taxmann.com 161 (Bom.)

11) Nemi Chand Kothari vs. CIT, (2004) 139 Taxman 213 (Gauhati)

12) M/s. NH Securities Ltd. vs. DCIT, in ITA No.1079/Mum/2018, dated 24.03.2021”

13. We have heard the rival contentions, perused the orders of the authorities below and the materials placed on record before us. We observed that the Assessing Officer in the course of the assessment proceedings, required the assessee to prove the identity, genuineness, and creditworthiness of 79 creditors for which the assessee had partly made submissions along with the evidences in the form of confirmations, bank statements of the creditors, details of the payment of loans, financials, and PAN details of the creditors to prove the identity, genuineness and creditworthiness of the loan creditors. On examining the evidences furnished by the assessee, the Assessing Officer concluded that in respect of 39 loan creditors out of 79 creditors, the assessee did not prove the genuineness, creditworthiness, and identity of the creditors. The assessee furnished additional evidences before the learned CIT(A), upon which a remand report was called for by the learned CIT(A) and considering the remand report, the submissions of the assessee and the evidences furnished on record by the assessee, the learned CIT(A) deleted the addition, observing that the assessee had established the identity, creditworthiness, and genuineness of

14. We observed that the Assessing Officer observed in the remand report that the assessee had submitted various documents such as ledger accounts, bank statements, ITR acknowledgments, computation of income, confirmation of accounts, and in certain cases, balance sheets and profit and loss accounts of the lenders. The Assessing Officer observed that some of the parties had not submitted certain complete documents such as financials and some of them had declared meagre income compared to the loans advanced and no interest deduction details were furnished, and therefore, the creditworthiness and genuineness of the loan transactions remained unsubstantiated. The Assessing Officer further observed that no independent third-party information, inquiry, or cross-checking had been carried out by the Assessing Officer at that stage, and the comments were restricted only to the admissibility of the additional evidences before Ld. CIT(A). We fail to understand as to why the Assessing Officer restricted himself to comments only on the admissibility of the evidences before Ld. CIT(A) without making any effort to verify the documents furnished by the assessee, i.e., inquiry and cross- checking with the creditors. Merely because meagre income cannot be said that the creditor did not have any creditworthiness to lend the amount to the assessee.

15. We further observed that the illustrations referred to by the learned CIT(DR) in the submissions, wherein it is stated that there was no response from the lenders to the notices issued u/s 133(6), appears to be misplaced, since the Assessing Officer in the remand report itself admitted that no independent third- party verification, inquiry or cross-checking had been carried out by his office, and the comments were restricted only to the examination of the documents filed by the assessee during the appellate proceedings.

16. We also further observed that the learned DR in the illustrations submitted in the written submissions, pointed out that in some of the cases no documents were filed by the creditors, i.e., balance sheet, ITR, bank statement, confirmation, etc. However, in the remand report, the Assessing Officer clearly stated that the additional evidences furnished by the assessee in respect of 39 creditors. It is observed that the assessee had furnished all the required documents, including ledger accounts, bank accounts, ITR, copies of returns, balance accounts from all the 39 creditors. Therefore, the submissions of the learned DR on the illustrations stated in his submissions are totally misplaced, and therefore, there is no substance in the submissions made by the learned DR. The case laws relied upon by the learned CIT(DR) have no application to the facts of the assessee’s case.

17. The learned CIT(A) observed that the Assessing Officer primarily made the addition on the ground that complete supporting documents in respect of only certain loan creditors were furnished during the assessment proceedings. The said deficiency was on account of time constraints and practical defects and not due to any transactions themselves. It is observed by the learned CIT(A) that since the assessee rectified the same by furnishing all the relevant details and no adverse material had been brought on record to discredit the evidences now submitted, it was held that the loan transactions were genuine and the assessee had proved the identity and creditworthiness of the lenders. It was also the observation of the learned CIT(A) that except the loan from M/s Hina Chedda, who is the daughter-in-law of the assessee, all the loans were repaid either during the year itself or in subsequent years disputed by the Assessing Officer. The learned CIT(A), therefore, held that the repayment of the loan reinforces the genuineness of the transaction and negates the explanation of any unexplained cash credit. The learned CIT(A) held that once the existence of the loan, identity of the lender and the mode of transaction are established and the amount stands repaid, the provisions of section 68 of the Act cannot be invoked. While coming to such a conclusion, the learned CIT(A) observed as under:-

“8.1.4 Decision:

From the above, in my opinion, the appellant has duly established the identity and creditworthiness of the lenders and the genuineness of the loan transactions through the documentary evidence now placed on record. The addition was made by the Assessing Officer primarily on the ground that complete supporting documents in respect of certain loan creditors were not furnished during the assessment proceedings. The said deficiency was on account of time constraints and practical difficulties and not due to any infirmity in the transactions themselves. The appellant has since rectified the same by furnishing all the relevant details, and no adverse material has been brought on record to discredit the evidences now submitted.

It is also pertinent to mention that all the loans in question (except loan from Mrs. Heena Chheda, who is the daughter-in-law of the appellant) have been repaid in either during the year itself or in subsequent years through regular banking channels, which fact has not been disputed by the Id. AO. Repayment of the loan further reinforces the genuineness of the transaction and negates the allegation of any unexplained cash credit. Once the existence of the loan, the identity of the lender and the mode of transaction are established, and the amount stands repaid, the provisions of section 68 cannot be invoked.

On the issue of repayment of loans, I am inclined to place reliance on the

a. Income Tax Officer 41(3)(1) vs Mr. Bhagwati Prasad N Rungta. ITA No. 1574/M/2024-Mumbai Tribunal order dated 22.01.2025.

6.1 The Ld. Commissioner while deleting the addition in hand, not only considered the filing of the relevant documents for discharging the onus cast upon the Assessee u/s 68 of the Act but also considered the fact that the Assessee has duly provided the phone number and other details of Shri Manoj Tibrewal to the AO during the assessment proceedings and also claimed that Shri Manoj Tibrewal has been his business associate since long, who had good standing in the market and therefore arranged the unsecured loans, however, the AO did not carry out further enquiry to substantiate his view that the loans taken by the Assessee are not genuine. Further, merely saying Kolkata based companies does not mean that these are bogus companies. The loan transactions were carried out and repaid through proper banking channel in the subsequent years and therefore the question of getting accommodation entries does not survive anymore in view of the judgment passed by the Hon’ble Gujarat High Court in the case of PCIT vs. Ojas Tarmake Pvt. Ltd. (2023) taxmann.com 75 (Guj.) wherein it was held as under:

“Where appellant showed unsecured loans received during relevant assessment year and AO made addition on ground that appellant failed to discharge onus of liability as laid down under section 68, since amount of loan received by appellant was returned to loan party during year itself and all transactions were carried out through banking channels impugned addition was to be deleted”.

6.2 We have again given thoughtful considerations to the peculiar facts and circumstances of the case and the determinations made by the authorities below and the relevant documents filed by the Assessee and raising the factual and legal issues and the plausible explanation and are of the considered view that the decision of the Ld. Commissioner as observed above, is not only based on the relevant documents which have been produced by the Assessee to establish identity and creditworthiness of the parties from whom the Assessee had taken the loans and genuineness of the transactions but also based on the legal precedents and the fact that the Assessee has taken the unsecured loan through banking channel and repaid the loan amount along with interest after deducting TDS thereon, through banking channel itself and then only deleted the addition under consideration. We observe, as demonstrated by the Ld. Counsel of the Assessee that the Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Central Vs. Bhupendra Chmpaklal Dalal the fact that where major portion of the credit has been repaid during the year and the AO has accepted the debit entries of trading transactions as genuine and the creditor was having an opening balance and has paid the interest regularly and credit is continuing from the earlier years. The Hon’ble court on the said facts ultimately affirmed the decision of the Tribunal in deleting the addition.

6.3 On the aforesaid analyzations, decision of the Ld. Commissioner in deleting the addition in hand does not require any interference, as the same is neither suffered from any perversity or impropriety and nor illegality.

7. In the result, the appeal filed by the Revenue Department is dismissed.

b. CIT vs. Ayachi Chandrashekhar Narsangji reported in 42 taxmann.com 251 (Guj.), wherein it is decided that once the subsequent repayment of loan had been accepted by the A.O., then the addition of such loan received by the appellant cannot be made u/s. 68 of the Act.

“…..6. Having heard Shri Pranav Desai, learned Counsel appearing on behalf of the revenue and on perusal of the order passed by the CIT(A) confirmed by the ITAT, it appears that CIT(A) was satisfied with respect to the genuineness of the transaction and creditworthiness of Shri Ishwar Adwani and, therefore, deleted the addition of Rs. 1,45,00,000/- made by the Assessing Officer. It is required to be noted that as such an amount of Rs. 1,00,00,000/- vide cheque no. 102110 and an amount of Rs.60 lakh vide cheque no. 102111 was given to the assessee and out of the total loan of Rs.1.60 crore, Rs. 15 lakh vide cheque no. 196107 was repaid and, therefore, an amount of Rs. 1,45,00,000/- remained outstanding to be paid to Shri Ishwar Adwani. It has also come on record that the said loan amount s been repaid by the assessee to Shri Ishwar Adwani in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the ITAT has held that the matter is not required to be remanded as no other view would be possible, we seè no reason to interfere with the impugned order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.

c. Pr. CIT vs M/s. Skylark Build – ITA No. 616 of 2016 (Bom-HC):

“6. It is in these circumstances, he concludes that the creditworthiness of the cash creditor is fully vouched and hence the action of the Assessing Officer in rejecting the explanation of the assessee was not tenable in the eyes of law. We do not think that in endorsing this finding of fact, the Tribunal has not performed its obligation and duty as a last fact-finding authority. When case laws, then, every single line in this 31 page order of the Commissioner was not required to be reproduced by the Tribunal. The Tribunal found that the Commissioner’s order cannot be faulted for he applied the correct legal principles that were applicable to the facts and circumstances of the assessee’s case. In addition, there is a subsequent development and namely that each of these creditors from whom the assessee borrowed moneys or who advanced it the moneys, were repaid the sums borrowed. This would establish that there were indeed real creditors; that they had indeed the funds available with them and that the transactions were genuine. In the circumstances, the finding of fact by the Commissioner was endorsed by the Tribunal. Instead of endorsing it fully and dismissing the Revenue’s appeal in its entirety, the Tribunal, in paragraph 7, deems it fit and proper to send the matter back to the Assessing Officer so as to verify and examine whether indeed there is any repayment.

7. We do not think that the Tribunal committed any error of law nor its finding, as above, is perverse. Once it was satisfied with regard to the essential ingredients of the section and the manner in which the whole case was approached by the Commissioner, then, with regard to the assertion of repayment and styling it as a subsequent development relevant and germane to the case in hand, the Tribunal deemed it fit and proper to send the matter back to the Assessing Officer. That is to make it doubly sure as to whether indeed there was a repayment of the amount borrowed and claimed as advances from these parties.

9. Mr. Mohanty’s reliance on the judgment in the case of Commissioner of Income Tax vs. P. Mohanakala rendered by the Hon’ble Supreme court of India and reported in (2007) 291 ITR 278 is apposite to the extent of the legal principle. The legal principle and heavily relied upon, according to Mr. Mohanty, is that the Court must examine every single aspect and by a proper process. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee may be taken into consideration, according to Mr. Mohanty, but that was not enough. Even the money being paid by cheques is of no consequence according to Mr. Mohanty. It may be so, but when these principles are invoked, their application would depend upon the facts and circumstances in each case. There, the Hon’ble Supreme Court endorsed the 26 of this judgment in P. Mohanakala (supra) what Mr. Mohanty submits is that in that paragraph the Hon’ble Supreme Court was referring to its prior decisions. The reliance thereon was to the extent of the Revenue’s submissions and to give support to it. The argument was that the issue relating to the propriety of the legal conclusion that could be drawn on the basis of the proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the manner since the authorities below failed to draw a proper and logical inference from the proven facts. The Hon’ble Supreme Court expressly rejects this submission and says that findings of fact are arrived at on a proper appreciation of the material available on record and the surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities even in the case before us. The transactions were found to be genuine. It is not only that the moneys came by way of cheques and through proper banking channels, but even the repayment has been verified and the Assessing Officer, while giving effect to the Tribunal’s order records that this is not a transaction which can be said to be hit by the principles relied upon.”

d. CIT vs. Mahaveer Crimpers 95 taxmann.com 323 (Guj HC)

There is further no quarrel that the Assessing Officer does not dispute the fact that the assessee has not availed any cash loan from the said entity. His only case is that the assessee has not been able to prove source alongwith genuineness and creditworthiness of the above stated entity. It emanates from above extracted portion that the assessee has filed all relevant details alongwith assessment records of the said entity explaining source of the loans to the above entity’s balance sheet indicating sufficient reserves, surplus and share premium as followed by repayment in succeeding assessment year. Learned Departmental Representative fails to rebut CIT(A)’s conclusion that the assessee has been having regular loan transactions with the said entity. We notice in this backdrop that hon’ble jurisdictional high court’s decision in DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj) upholding tribunal’s conclusion deleting Section 68 addition in view of identical details; squarely applies here. So is their lordships’ latter decision in CIT vs. Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj) confirming this tribunal’s another decision reversing Section 68 addition wherein the department head accepted repayment of loan in subsequent year to be correct. We take into account all these facts and judicial precedents to affirm CIT(A)’s findings under challenge deleting the impugned addition.

Thus, after considering the facts, circumstances and respectfully following the ratio of judicial decisions referred above, it can be safely concluded that the appellant has adequately explained the nature and source of the credit of unsecured loans amounting to Rs.11,16,99,999/- (Rs.16,66,99,999 – Rs.5,50,00,000) in its books of account for the year under consideration; so I direct the Assessing officer to delete the addition of unsecured loans of Rs.11,16,99,999/- made u/s 68 of the Act. Accordingly, Ground No.1 raised by the appellant is hereby allowed to that extent.” 18.

18. As could be seen from the above, the learned CIT(A) deleted the addition to the extent of Rs. 11,16,99,999/- out of Rs. 16,66,99,999/- in respect of unsecured loan and considered the balance addition of Rs. 5,50,00,000/- along with addition made of Rs. 9,50,00,000/- u/s 69 of the Act while disposing the grounds. We see no infirmity in the order passed by the Ld. CIT(A) in holding that the assessee has proved the genuineness, creditworthiness and identity of the creditors.

19. Coming to the balance addition of Rs.5.50 crore out of Rs.16,66,99,999/- in respect of unsecured loan and the addition made of Rs.9.50 lakh in respect of repayment of loan to on Shri Pankaj D Goshar. The case law relied upon by the Ld. DR have no application to the facts of the assessee’s case.

20. Considering the submission of the assessee, the evidence on record and the averments made in the assessment order, the

“8. 2.1. Through this ground, issue of repayment of unsecured loan of Rs.9,50,00,000/- made during the year by the appellant to Shri Pankaj D Goshar, out of fresh unsecured loans amounting to Rs.15,00,00,000/- taken during the year from Shri Pankaj D Goshar by the appellant, held as accommodation entry, has been challenged. Coming the facts regarding unsecured loans received from Mr Pankaj Goshar, the AO has made following two additions-

– Rs. 5.50 crores with respect to outstanding loan from Pankaj Goshar – challenged by the appellant as part of Ground No.1.

-Rs. 9.50 crores with respect to alleged cash received from Pankaj Goshar against which loan is shown in Assessee’s books of accounts – challenged by the appellant as Ground No.2.

Since facts of both the issues are inter-related, these two issues are dealt with together under Ground No.2 8.

8.2.2. The AO in his assessment order observed that that the appellant had shown receipt of an unsecured loan of Rs 15,00,00,000 from Shri Pankaj Goshar during the year, as reflected in the ledger account. The appellant was required to furnish confirmation and supporting evidence in respect of the said loan. Although notices under sections 133(6) and summons under section 131 were issued, the lender did not appear personally, citing medical reasons and mental stress following a search conducted under section 132 in his case on 10.09.2015. According to the Assessing Officer, the non-appearance of the lender prevented proper verification of the documents furnished. The Assessing Officer further noted that Shri Pankaj Goshar had reported substantial long-term capital gains in AY 2014- 15 from the sale of shares of Pine Animation Limited, which was stated to be a penny stock identified by SEBI. It was observed that a search in the case of the lender had allegedly revealed generation of bogus long-term capital gains, leading to a significant increase in his capital. On this basis, the Assessing Officer held that the creditworthiness of the lender and the genuineness of the loan transaction were not established. The Assessing Officer also referred to certain mobile communications seized during the search, which allegedly indicated cash transactions against cheque entries between the assessee and the lender. Accordingly, the Assessing Officer concluded that the transaction represented an accommodation entry and held that the assessee had failed to discharge the onus under sections 68 and 69 of the Act and made an addition of closing balance Rs 5,50,00,000. The relevant extract of the assessment order is reproduced below

“During the assessment year under consideration, the Assessee has claimed to have received an amount of Rs 15,00,00,000 from the Shri. Pankaj Goshar which is reflecting in the copy of ledger. The Assessee has claimed to have been repaid and squared off the amount of during the year under consideration. Thus the amount of is reflecting as outstanding. The Assessee was asked to file the confirmation for the same. Further a notice under section 133(6) of the Income

Further In this case, a summons under section 131 of the Income Tax Act 1961 was also issued to Shri. Pankaj Goshar. However though the party has filed the reply but did not appear before this office to give statement under section 131 of the act citing the medical reasons and loss of memory and also claimed to have been recovering from acute mental stress which was due to the search action section 132 of the IT Act 1961 in his own case dated 10.9.2015. Thus the party has not appeared before this office to explain the document which he has provided in the support of loans and advances made by to the Assessee. On close examination of the confirmation filed by the party, it was seen that the party has claimed to have been received / booked a huge Long term Capital gain of in AY 2014-15. On examination of the same it was seen that the same was derived by Shri. Pankaj Goshar from sale of a single scrip named Pine Animation Limited.

…..

Thus, it is seen that the advancing party has received a bogus Long Term Capital gain of Rs 55,36,23,476 during the yar under consideration. The said capital gain was achieved from the sale of a scrip name Pine Animation Limited. The said scrip is already identified by the SEBI as a the penny stock. The department has already conducted a search action under section 132 of the IT Act, 1961 and found concluding evidence that Shre. Pankaj Goshar has received a huge bogus LTCG from penny stock trading. Further, On perusal of the Balance Sheet for the AY 2013-14 of Shri Pankaj Goshar it was found that the Shri. Pankaj Dhanji Goshar has shown an investment of in equity shares named M/S. Pine Animation Limited. During the assessment proceedings, of the assessee it was seen that the capital of the party surged from for the AY 2013-14 to for the AY 201415 due to the bogus LTCC. Thus the genuineness of the transaction and creditworthiness of the party which is advancing the loan entry to the Assessee is itself not established before this office by the Assessee with the meaning of section the IT act 1961. Further during the course of search u/s 132 dated 10.09.2015 conducted on Shri. Pankaj Dhanji Goshar and the other entities of Goshar Group, mobile communications between the Assessee and Shri. Pankaj Goshar were found and seized from the personal mobile of Shri. Pankaj Goshar. The relevant part of the same is reproduced as follows:

–not reproduced —

Thus from the above conversation seen that the cash has been accepted by the Assessee from time to time the Assessee has received cash against the cheque /entry given by Shri. Pankaj Goshar and vice versa. Thus the entire process of giving and accepting the loans from Shri. Parikaj Goshar is a mechanism of accepting and giving the accommodation entries in the mutual books of accounts against the receipt of cash. Thus the Assessee has not shed of the onus of bestowed upon him within the meaning of section 68, 69 of the Income Tax Act 1961.”

8.2.3. The AO in the assessment order further held that the appellant claimed repayment of Rs.9,50,00,000 to Shri Pankaj Goshar, the transactions were in the nature of accommodation entries involving exchange of cash against cheque entries. Relying on WhatsApp communications seized during the search under section 132, it was concluded that cash was received and repaid between the parties to mutually accommodate cash and cheque balances. Accordingly, the Assessing Officer treated Rs 9,50,00,000 as unexplained and brought the same to tax under section 69 read with sections 68, 69A and 69B of the Act. The relevant portion of the assessment order is reproduced below –

“16. Further from the submissions of the Assessee it was seen that the Assessee has claimed to have repaid back the Rs. 9,50,00,000/- (RS. 15,00,00,000 less Rs. 5,50,00,000) to Shri. Pankaj Goshar. However during the course of the search it was found that from time to time the Assessee has received back cash from Pankaj Dhanji Goshar against the issue of cheque and subsequently paid cash for getting cheque entry into his own books of accounts. Further the same was conclusively proved from the whatsapp conversation which was recovered and seized by the department during the course of search under section 132 of the IT Act. Thus the undersigned is of view that the repayment made by the Assessee is actually an accommodation entry given by the Assessee to Shri. Pankaj Goshar against the receipt of cash of Rs.9,50,00,000/- from Shri. Pankaj Goshar. The Assessee was also given a showcause for the same. The Assessee contended that just because Shri. Pankaj Goshar has taken a bogus LTCG the assessee cannot be taxed under sections of & explained cash credits. The contention of the Assessee was duly perused but found to be not acceptable. During the course of the search conducted under section 132 of the IT Act 1961 it was found from the mobile whatsapp conversation between the assessee and the party Shri Pankaj Goshar that cash has been received by the assesssee from time to time to Shri. Pankaj Goshar and the cheques are issued by him and vice versa in order to mutually accommodate the cash and cheque balances. The cash is received against the issuance of cheque and the same is repaid after acceptance of the cheques. Further the Assessee is also a investor inthe various real estate projects which are constructed by Goshar group company such as M/s. Goshar Ventures Private Limited. Thus, these transaction performed between the two parties for taking mutual accommodation entries against payment and receipt of cash are required to be brought to tax under section 69 read with section 68 and 69A and 69B of the I T Act 1961. A penalty under section 271(1) (c) of the Income Tax Act 1961 is initiated separately for concealment / inaccurate particulars of income.”

The whastapp chat mentioned above is reproduced below:-

XXXXXX

8. 2.4. The appellant during the course of appellate proceedings submitted that submitted that Shri Pankaj Goshar is a close acquaintance residing in the same building and is engaged in the business of real estate development, in whose and when required, extended interest-free financial support to each other strictly through banking channels. During AY 2014-15, Shri Pankaj Goshar advanced Rs 11 crores to the appellant, out of which Rs 5.5 crores was repaid during the year and the balance Rs 5.5 crorse was duly reflected as unsecured loan outstanding as on 31.03.2014. It was further submitted that a search under section 132 was conducted in the case of Shri Pankaj Goshar on 10.09.2015, during which certain WhatsApp messages were seized from his mobile phone. Based solely on these messages, the Assessing Officer presumed that the appellant was involved in cash accommodation entries and issued a show cause notice. The appellant categorically denied any cash transactions in his statement recorded under section 131 and explained the loan and repayment entries appearing in the books. However, the Assessing Officer ignored the explanation and proceeded to treat the transactions as accommodation entries, primarily relying on the alleged penny stock gains of Shri Pankaj Goshar and the impugned WhatsApp messages.

The appellant has further contended that the additions of Rs 5.5 crores under section 68 and Rs 9.5 crores as alleged cash accommodation entries were made purely on presumptions and on, the basis of material found during search on a third party. It was emphasized that no independent enquiry or corroborative evidence was brought on record to establish receipt of cash by the appellant, nor was any opportunity for cross-examination granted despite specific requests. The seized WhatsApp messages did not contain any dates or clear identification and were not verified with the appellant’s mobile device. Thus, based on above, the appellant prayed that the addition made by the the AO needs to be deleted. eds to

8. 2.5. During the course of appellate proceedings, he appellant also brought to notice a consolidated order of the Hon’ble Tribunal Mumbai, dated 20.12.2024, pronounced in the case of Shri Pankaj Goshar (ITA NO. 1223/Mum/2024 -AY 2015-16 & ITA No.1224/Mum/2024 -AY 2014-15 & ITA NO. 1256/ Mum/2024 – AY 2015-16). It has been submitted that the observations of the Hon’ble Tribunal in the said order are relevant to the case in hand.

8.2.6. Decision: I have gone through the case records, including the assessment order and the written submissions of the appellant. I find that the AO has made the said additions, that is Rs 5.50 crores and Rs 9.50 crores, on the basis of search in the case of Shri Pankaj Goshar. The AO has relied on the following facts emerging from the aforesaid search –

(i) Alleged bogus LTCG of Rs 55,37,28,394/- earned by Shri Pankaj Goshar;

(ii) Whatsapp chat between the appellant and Shri Pankaj Goshar

These two issues are dealt with in subsequent paragraphs:

(i) Alleged bogus LTCG of Rs 55,37,28,394 earned by Shri Pankaj Goshar –

The addition has been made primarily on the premise that the lender, Shri Pankaj D Goshar, had earned long-term capital gains on sale of shares of Pine Animation Limited, which, according to the Assessing Officer, were alleged to be bogus. However, no material has been brought on record by the Id. AO to show that the funds advanced to the appellant belonged to the appellant himself or that the appellant had given any cash to the lender for advancement of unsecured loan to the appellant, the addition made merely on the basis of alleged infirmities in the lender’s capital gains cannot be sustained.

Further, Honourable Tribunal in the case of Mr Pankaj Goshar has observed that LTCG earned by Mr Pankaj Goshar on sale of shares of Pine Animation Limited cannot be considered to be an accommodation entry. The operative paragraphs of the order are reproduced below –

“25. We noticed earlier that the AO has fully placed reliance on the investigation report given by the investigation wing and also relied upon the statements recorded from certain persons and exit providers. The assessee sought opportunity to cross examine all those persons, but such opportunity was not given. However, in the second remand proceeding, the AO issued notice only to an alleged exit provider named Shri Jagdish Purohit only. Even though Shri Jagdish Purohit did not present himself for cross examination, yet he sent a letter to the AO, wherein he has stated that he was not aware of the assessee and further, he did not have any business relationship with the assessee. This reply of Mr. Jagdish Purohit was not proved to be wrong by the AO. However, in respect of other persons, no step was taken by the AO to afford the opportunity of cross examination either during the course of assessment proceedings or in remand proceedings. Even though the Ld CIT(A) has expressed the view that the AO has not solely placed reliance on those statements and hence affording of opportunity of cross examination is not mandatory, yet the important point here is that it is not the case of the AO that those persons had specifically implicated the assessee that he was involved in rigging of prices. Hence, there is no evidence available with the AO to prove that the assessee was part of the group, which were manipulating the prices of shares. The fact that the assessee was not part of the group, which were manipulating the prices of shares has been proved by the final report of SEBI, wherein the assessee and her sister have been exonerated from the initial allegations of being part of the group.

26. Thus, we notice that the documents furnished by the assessee to support the claim of purchase and sale of shares were not found fault with by the AO. Further, we notice that theA O has not proved that the assessee was part of the group, which was manipulating the prices of shares. These two aspects have been considered by the Hon’ble Bombay High Court in the cases of Shyam R Pawar (supra) and Ziauddin A Siddique(supra).

27. Further, the Ld. CIT(A) has also given a finding that the assessee is a regular investor in shares. We also notice that a statement was taken from the assessee u/s the assessee had stated that he had purchased shares of Pine Animation Ltd on the advice of his Share broker Shri Bhavesh Shah and he had also confirmed that he only has advised the assessee to buy shares of M/s Pine Animation Ltd. None of these statements were found to be false.

28. In view of the foregoing discussions, it has to be held that the assessee has purchased the shares of M/s. Pine Animation Ltd in the normal course of his investment activities. Hence the long term capital gain earned by the assessee on sale of shares of above said company cannot be considered to be an accommodation entry. Accordingly, we are of the view that the Ld.CIT(A) was justified in deleting the addition of long term capital gains made by the AO.” Thus, co-joining the facts of the issue with the findings made in the order pronounced by the Hon’ble ITAT, this vey basis of addition does not stand in respect of unsecured loans taken from Shri Pankaj D Goshar amounting to Rs. 15,00,00,000/-.

(ii) Whatsapp chat between the appellant and Shri Pankaj Goshar OME TAX DEPART It is pertinent to mention that a statement under section 131 of the appellant was recorded on 08.12.2016 by the AO. The said statement on oath is reproduced below –

XXX

On perusal of the above, I find that the appellant categorically denied having indulged in any cash transactions or accommodation entries. No adverse inference emerged from the said statement, nor was any contradiction or incriminating material brought on record during the examination. The statement, therefore, does not support the allegations made by the Assessing Officer and, in fact, reinforces the appellant’s stand that the transactions were genuine and routed through regular banking channels. In such circumstances, the said messages do not constitute reliable or conclusive evidence, as they do not bear any date or time to establish their relevance to the year under consideration. Further, it is also observed that the Assessing Officer has relied entirely on material found in the possession of a third party, without any corroborative evidence such as cash trail, bank transactions or statements. Even otherwise, the impugned WhatsApp messages, without authentication or corroboration. cannot form the sole basis for making additions.

The same whatsapp chat has also been tested by the Hon’ble Tribunal (in the aforesaid order dated 20.12.2024), wherein the Tribunal has held that the said chat cannot be used to make the addition. The relevant extract of the order is given

“36. We heard rival contentions and perused the record. We notice that the impugned addition has been made on the basis of whatsapp chat. The contentions of the Ld A.R are summarised below:-

(a) The impugned addition of Rs.2.00 crores has been made on the basis of a print out, which appeared to be a copy of whatsapp between assessee and Shri Jayant S Chheda. The said document was found in the premises of M/s Krazee Properties P Ltd. It is scanned as under by Ld CIT(A)

As submitted by Ld A.R, these whatsapp chat does not contain any dates. Further, it is found from the premises of a third party. Hence, we are unable to understand as to how the AO considered this document as relating to the year relevant to AY 2015-16.

(b) We also examined the notice u/s 142(1) of the Act issued by the AO and notice that the AO has not raised any query with regard to the amount of Rs.2.00 crores. However, the AO raised a query on this issue by a letter dated 15-12-2017. In response thereto, the assessee filed a reply, wherein he denied the whatsapp chat altogether. He also contended that the print out of whatsapp chat does not have any evidentiary value. He also submitted that the said document has been impounded from a third party and it cannot form part of books of accounts of the assessee.

(c) The AO has observed that the data in the I-phone of the assessee has been copied in the Hard disk by the Search team. With regard to copying of the data from mobile phone, the assessee has only confirmed the action of copying the data in reply to the question no. 130 posed to the assessee. Accordingly, we agree with the contentions of Ld A.R, it cannot be taken as confirmation of whatsapp chat.

(d) However, the assessee has filed a letter dated 24-10-2017 before the AO, wherein he has submitted as under:-

“…..I was informed by the concerned officers who were in charge of the Search/Survey that the entire data of my mobile phone has been found to be erased/deleted. In the circumstances, the question of taking print out from my mobile data does not arise….

In view of the peculiar facts and circumstances of the case, I request you to provide me the confirmation from the Whatsapp Service Provider/iCloud Service Provider that the conversations as referred with various persons in several paras of your Notice have been extracted from my mobile phone” We notice that the has contended before the AO that the said Whatsapp chat was not available in his phone. Hence, if the Whatsapp chat was really available in the were copied by the revenue. We notice that the AO has not brought anything on record, despite the fact that the assessee was disputing the same.

We notice that the Ld CIT(A) has also confirmed this addition only for the reason that the data from iphone has been copied in the External Hard disk by the revenue. He also did not bother to call for the same from the AO.

(e) Finally, as submitted by Ld. AR, the AO has not followed the procedure prescribed in sec.65B of the Act before placing reliance on a data supposed to have been collected from an electronic device. Accordingly, it was contended that the AO could not have placed reliance on it. In this regard, the Ld. AR placed reliance on the decision rendered by Hon’ble Supreme Court in the case of Anvar P V vs. P.K. Basheer and Others (Civil Appeal No.4226 of 2012)(2014) (10 SCC 473)(SC), wherein it was held that the certificate prescribed u/s 65B(4) of the Indian Evidence Act is compulsory. This two member decision of Hon’ble Supreme Court was later approved by three judges Bench of Hon’ble Apex Court in the case of Arjun Pandit Rao Khotkar vs. Kailash Khushan Rao (2020)(4 SCC (civil) -3 judges). In the present case, the said certificate has not been obtained.

(1) We have earlier extracted the observations made by the AO in the assessment order with regard to this addition. The conclusion arrived by the AO are extracted here again at the cost of repetition:-

The survey action was carried out on 10th September, 2015 in the premises of M/s Krazee Properties P Ltd and thus presumably the cash was given to Shri Jayant Shamji Chheda before March, 2015 in lieu of accommodation entry of Rs.2 crores received by you on some dates in F.Y. 2014-15.”

It can be noticed that the AO himself was not sure that the alleged transactions pertained to the year relevant to AY 2015-16. He presumes that they may belong to AY.2015-16. When the AO was not sure as to whether the above said transaction has happened or not, he could not have made the addition u/s 68 of the Act.

(g) We also notice that the AO has not brought any corroborative material on record to support the whatsapp chat nor did he examine Shri Jayant Chheda. Hence, we are of the view that the tax authorities are not justified in making this addition, when the evidences relied upon by them do not support their conclusion.

Thus, once gain co-joining the facts of the issue with the findings made in the order pronounced by the Hon’ble ITAT, this second basis of addition does not stand in respect of unsecured loans taken from Shri Pankaj D Goshar amounting to Rs.15,00,00,000/-.

In view of the above discussion, it is evident that neither of the two bases relied upon by the Assessing Officer, namely, the alleged infirmities in the lender’s long- term capital gains and the unverified WhatsApp messages recovered from a third party, can, by themselves, sustain the impugned addition. No corroborative genuineness of the transactions recorded in the books. I thus, direct to AO to delete both the additions, that is, Rs 5,50,00,000/- challenged by the appellant in Ground No. 1 and Rs 9,50,00,000/- challenged by the appellant in Ground No.2.

Accordingly, Ground No. 2 is hereby allowed. Remaining quantum of Ground No.1 to the extent of issue of addition of unsecured loans amounting to Rs.5,50,00,000/- is also allowed hereby.”

21. On careful perusal of the order of the learned CIT(A) and the findings therein, we observe that since the learned CIT(A) on appreciation of the evidences on record and the statements recorded, deleted the addition, we therefore see no valid reason to interfere with the findings of the learned CIT(A). The grounds raised by the Revenue are rejected.

22. Coming to the appeal for the assessment year 2016-17, the first issue is in respect of addition of Rs. 2 crore made u/s 68 as unexplained unsecured loan and the second issue is in respect of disallowance made u/s 14A read with Rule 8D of the Act.

23. In ITA No.3548/Mum/2026 for A.Y. 2016-17, the Revenue has raised the following grounds of appeal:

“1. Whether on the facts and in the circumstances of the case and in law, the Ed. CIT(A) was justified in deleting the addition of Rs. 2,00,00,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961 on account of unexplained unsecured loans without properly appreciating the findings recorded in the assessment order and without adequately examining the creditworthiness of the lenders and the real source of funds?

2. Whether on the facts and in the circumstances of the case and in law. the 1.d. CIT(A) was justified in deleting the addition made under section 68 by returns and bank statements, without appreciating that the assessee had failed to discharge the primary onus during the assessment proceedings and without conducting proper verification of the financial capacity of the creditors.

3. Whether on the facts and in the circumstances of the case and in law, the learned CTT(A) was justified in in holding that subsequent repayment of loans through banking channels establishes genuineness of the transactions, without appreciating that repayment of loan does not ipso facto prove the genuineness of the original credit appearing in the books of the. assessee.

4. Whether on the facts and in the circumstances of the case and in law, the learned CTT(A) was justified in deleting the disallowance of Rs. 13,81,673/- made by the Assessing Officer under Section 14A of the Income-tax Act, 1961 read with Rule 8D of the Income-tax Rules. 1962 by holding that satisfaction was not recorded, without appreciating that the assessment order clearly indicates that the Assessing Officer had examined the accounts and found the assessee’s claim regarding expenditure relating to exempt income to be incorrect.”

24.Coming to the assessment year 2016-17, the facts in this assessment year are identical to the facts for A.Y. 2014-15 insofar as the disallowance made u/s 68 is concerned. Learned counsel strongly placed reliance on the orders of the learned CIT(A).

25. Learned DR placed reliance on the order of the Assessing Officer and the submissions made earlier.

26. Heard the rival contentions and on perusal of the orders of the authorities below, it is noticed that during the assessment year under consideration, the assessee received unsecured loans furnished all the required confirmation letters, bank statements, ITRs and audited financials of the lenders. The Assessing Officer, in the course of the assessment proceedings, issued notices u/s 133(6) to 27 lenders/parties. Out of 27 parties, only two parties neither responded nor could the assessee produce them before the Assessing Officer, namely V.K. Trading Company and Smt. Manjula Vinod Shah. Thus, the Assessing Officer treated the loans obtained from these parties amounting to Rs. 2 crores as unexplained cash credit u/s 68 of the Act.

27. Before the learned CIT(A), the assessee led some additional evidences which were sent to the Assessing Officer by the learned CIT(A) and a remand report was called for. Based on the remand report, the learned CIT(A) deleted the addition made u/s 68 of the Act observing as under:- “

6.2.4. In respect of the additional evidences submitted by the appellant, the Id. AO has stated that these documents were not filed earlier during the assessment proceedings. In this regard, the appellant has stated that due to paucity of time, he was not able to furnish these documents before the Id. AO. Herein, it is seen that out of total 27 loan parties, the appellant did furnish requisite documentary evidences in respect of 25 parties, which were quite voluminous. However, in respect of only these two parties, the appellant was not able to furnish such evidences due to paucity of time and practical difficulties, which, in my opinion, constitute sufficient cause within the meaning of Rule 46A(1)(b). Further, these additional evidences now placed on record are crucial for proper adjudication of the issue and the Id. AO has also been granted an opportunity to examine the said evidences. In warranted in the interest of natural justice. This appeal is being decided accordingly. 6.

6.2.5. Coming to the merits of the issue, the appellant submitted that he cannot be penalized merely because a third party failed to respond to notices issued under section 133(6) of the Act, particularly when all requisite details such as confirmations and bank statements were duly furnished and no defects were pointed out by the AO. Further, additional evidences which have been filed during the appellate proceedings would prove the identity and creditworthiness of the lender and genuineness of the transaction. 6.

62.6. I have gone through the case records, including the assessment order, the written submissions of the appellant, the additional evidences submitted and the Remand Report furnished by the Id. AO. The evidences filed by the appellant are analyzed as under –

(a) B.K. Trading Co – unsecured loan of Rs 50,00,000/- The appellant has filed the following documents:

(i) Ledger account

(ii) Bank statement showing receipt as well as repayment of loan – the loan has been repaid on 01.03.2016.

(iii) Confirmation of accounts

(iv) ITR acknowledgement for AY 2016-17.

(v) Bank statement of the lender.

(b) Manjula Vinod Shah – unsecured loan of Rs 1,50,00,000/- The appellant has filed the following documents:

(i) Ledger account

(ii) Bank statement showing receipt as well as repayment of loan – the loan has been repaid on 04.07.2016.

(iii) Confirmation of accounts

(iv) ITR acknowledgement for AY 2016-17.

6.2.7. From the above, in my opinion, the appellant has duly established the identity and creditworthiness of the lenders and the genuineness of the loan transactions through the documentary evidence now placed on record. The addition was made by the Assessing Officer primarily on the ground that the lender parties did not comply with notices issued u/s 133(6) of the Act and also that the appellant could not prove the identity and creditworthiness of the lenders and the genuineness of the loan. The said deficiency was on account of time constraints and practical difficulties and not due to any infirmity in the transactions themselves. The appellant has since rectified the same by furnishing all the relevant details, and no adverse material has been brought on record to discredit the evidences now submitted. Further, the fact of repayment of loans to the lender parties during the subsequent year, lend credence regarding the nature and source of transactions carried out by the appellant with the said lender parties. Once the existence of the loan, the identity of the lender and the mode of transaction are established, and the amount stands repaid, the provisions of section 68 cannot be invoked.

On the issue of repayment of loans, I am inclined to place reliance on the following judicial precedents:

a. Income Tax Officer 41(3)(1) vs Mr. Bhagwati Prasad N Rungta. ITA No.1574/M/2024 Mumbai Tribunal order dated 22.01.2025.

“Where appellant showed unsecured loans received during relevant discharge onus of liability as laid down under section 68, since amount of loan received by appellant was returned to loan party during year itself and all transactions were carried out through banking channels impugned addition was to be deleted.

6.2 We have again given thoughtful considerations to the peculiar facts and circumstances of the case and the determinations made by the authorities below and the relevant documents filed by the Assessee and raising the factual and legal issues and the plausible explanation and are of the considered view that the decision of the Ld. Commissioner as observed above, is not only based on the relevant documents which have been produced by the Assessee to establish identity and creditworthiness of the parties from whom the Assessee had taken the loans and genuineness of the transactions but also based on the legal precedents and the fact that the Assessee has taken the unsecured loan through banking channel and repaid the loan amount along with interest after deducting TDS thereon, through banking channel itself and then only deleted the addition under consideration. We observe, as demonstrated by the Ld. Counsel of the Assessee that the Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Central Vs. Bhupendra Chmpaklal Dalal (2024) 160 taxmann.com 645 (Bom.) (6th March 2024) has also dealt with the fact that where major portion of the credit has been repaid during the year and the AO has accepted the debit entries of trading transactions as genuine and the creditor was having an opening balance and has paid the interest regularly and credit is continuing from the earlier years. The Hon’ble court on the said facts ultimately affirmed the decision of the Tribunal in deleting the addition.

7 In the result, the appeal filed by the Revenue Department is dismissed.

“…..6. Having heard Shri Pranav Desai, learned Counsel appearing on behalf of the revenue and on perusal of the order passed by the CIT(A) confirmed by the ITAT, it appears that CIT(A) was satisfied with respect to the genuineness of the transaction and creditworthiness of Shri Ishwar Assessing Officer. It is required to be noted that as such an amount of Rs. 1,00,00,000/- vide cheque no. 102110 and an amount of Rs.60 lakh vide cheque no. 102111 was given to the assessee and out of the total loan of Rs. 1.60 crore, Rs. 15 lakh vide cheque no. 196107 was repaid and, therefore, an amount of Rs. 1,45,00,000/- remained outstanding to be paid to Shri Ishwar Adwani. It has also come on record that the said loan amount s been repaid by theassessee to Shri Ishwar Adwani in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the ITAT has held that the matter is not required to be remanded as no other view would be possible, we see no reason to interfere with the impugned order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.

c. Pr. CIT vs M/s. Skylark Build – ITA No. 616 of 2016 (Bom-HC):

“6. It is in these circumstances, he concludes that the creditworthiness of the cash creditor is fully vouched and hence the action of the Assessing Officer in rejecting the explanation of the assessee was not tenable in the eyes of law. We do not think that in endorsing this finding of fact, the Tribunal has not performed its obligation and duty as a last fact-finding authority. When such detailed findings of the Commissioner were on record supported by case laws, then, every single line in this 31 page order of the Commissioner was not required to be reproduced by the Tribunal. The Tribunal found that the Commissioner’s order cannot be faulted for he applied the correct legal principles that were applicable to the facts and circumstances of the assessee’s case. In addition, there is a subsequent development and namely that each of these creditors from whom the assessee borrowed moneys or who advanced it the moneys, were repaid the sums borrowed. This would establish that there were indeed real creditors; that they had indeed the funds available with them and that the transactions were genuine. In the circumstances, the finding of fact by the Commissioner was endorsed by the Tribunal. Instead of endorsing it fully and dismissing the Revenue’s appeal in its entirety, the Tribunal, in paragraph 7, deems it fit and proper to send the matter back to the Assessing Officer so as to verify and examine whether indeed there is any repayment. COME TAX DEPARTME

7. We do not think that the Tribunal committed any error of law nor its finding, as above, is perverse. Once it was satisfied with regard to the essential ingredients of the section and the manner in which the whole case was approached by the Commissioner, then, with regard to the assertion of to the case in hand, the Tribunal deemed it fit and proper to send the matter back to the Assessing Officer. That is to make it doubly sure as to whether indeed there was a repayment of the amount borrowed and claimed as advances from these parties.

8. We do not think that we should entertain a further appeal to this Court for it is not possible to re-appreciate and reappraise such factual findings. They are not demonstrably perverse nor vitiated by any error of law apparent on the face of the record.9. Mr. Mohanty’s reliance on the judgment in the case of Commissioner of Income Tax vs. P. Mohanakala rendered by the Hon’ble Supreme court of India and reported in (2007) 291 ITR 278 is apposite to the extent of the legal principle. The legal principle and heavily relied upon. according to Mr. Mohanty, is that the Court must examine every single aspect and by a proper process. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee may be taken into consideration, according to Mr. Mohanty, but that was not enough. Even the money being paid by cheques is of no consequence according to Mr. Mohanty. It may be so, but when these principles are invoked, their application would depend upon the facts and circumstances in each case. There, the Hon’ble Supreme Court endorsed the findings and dismissed the Revenue’s Appeal. While relying upon paragraph 26 of this judgment in P. Mohanakala (supra) what Mr. Mohanty submits is that in that paragraph the Hon’ble Supreme Court was referring to its prior decisions. The reliance thereon was to the extent of the Revenue’s submissions and to give support to it. The argument was that the issue relating to the propriety of the legal conclusion that could be drawn on the basis of the proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the manner since the authorities below failed to draw a proper and logical inference from the proven facts. The Hon’ble Supreme Court expressly rejects this submission and says that findings of fact are arrived at on a proper appreciation of the material available on record and the surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities even in the case before us. The transactions were found to be genuine. It is not only that the moneys came by way of cheques and through proper banking channels, but even the repayment has been verified and the Assessing Officer, while giving effect to the Tribunal’s order records that this is not a transaction which can be said to be hit by the principles relied upon.”

There is further no quarrel that the Assessing Officer does not dispute the fact that the assessee has not availed any cash loan from the said entity. His only case is that the assessee has not been able to prove source alongwith genuineness and creditworthiness of the above stated entity. It emanates from above extracted portion that the assessee has filed all relevant details alongwith assessment records of the said entity explaining source of the loans to the above entity’s balance sheet indicating sufficient reserves, surplus and share premium as followed by repayment in succeeding assessment year. Learned Departmental Representative fails to rebut CIT(A)’s conclusion that the assessee has been having regular loan transactions with the said entity. We notice in this backdrop that hon’ble jurisdictional high court’s decision in DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj) upholding tribunal’s conclusion deleting Section 68 addition in view of identical details; squarely applies here. So is their lordships’ latter decision in CIT vs. Ayachi Chandrashekhar Narsangji (2014)42 taxmann.com 251 (Guj) confirming this tribunal’s another decision reversing Section addition wherein the department head accepted repayment of loan in subsequent year to be correct. We take into account all these facts and judicial precedents to affirm CIT(A)’s findings under challenge deleting the impugned addition.

Thus, I, after considering the facts, circumstances and respectfully following the ratio of judicial decisions referred above, am satisfied that the appellant has adequately explained Rs.2,00,00,000/- in its books of account the nature and source of the credit of for the year under consideration; so I direct the Assessing officer to delete the addition of unsecured loans of Rs.2,00,00,000/- made u/s 68 of the Act. Accordingly, Ground No.2 raised by the appellant is hereby allowed.”

28. On careful perusal of the learned CIT(A)’s order and also since the assessee had furnished all the relevant documents to prove the genuineness, creditworthiness and identity of the parties, we are of the view that the learned CIT(A) has rightly deleted the addition made u/s 68 of the Act in respect of

29. Coming to the disallowance made u/s 14A read with Rule 8D of the Act, it is observed that the learned CIT(A) following the decision of the Hon’ble Bombay High Court in Principal Commissioner of Income Tax v. Bombay Stock Exchange Ltd. (113 Taxmann.com 303), wherein the decision of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT, (2018) 402 ITR 640 (SC) was considered, agreed with the submissions of the assessee that recording of dissatisfaction having regard to the accounts of the assessee is mandatory and since the Assessing Officer did not do so in the case of the assessee while invoking the provisions of Rule 8D read with section 14A of the Act, no disallowance u/s 14A is warranted. We see no infirmity in the order passed by the learned CIT(A). Thus, the ground relating to disallowance u/s 14A of the Act is rejected.

30. In the result, both the appeals of the Revenue are dismissed.

Order pronounced in the open Court on 19/08/2026