Joynest Premises Private Limited Vs ACIT (ITAT Mumbai)
Section 69A Cannot Apply to Recorded Bank Loan Transactions Merely Because Revenue Labels Them as ‘Accommodation Entries’ – Mumbai ITAT
The Mumbai ITAT deleted an addition of ₹1.12 crore made u/s 69A, holding that where loan transactions are fully routed through banking channels and recorded in the regular books of account, Section 69A cannot be invoked merely because the Revenue alleges that the transactions were accommodation entries based on third-party search material.
The reassessment arose from a search on the Areion Group, where a “Personal Tally” allegedly reflecting accommodation entries was seized. Based on statements recorded during search, the AO alleged that the assessee company had provided funds to Areion Fincap Pvt. Ltd., which were later returned through banking channels after corresponding cash movements outside the books. Relying upon this material, the AO treated ₹1.12 crore as unexplained income u/s 69A.
Before the Tribunal, the assessee demonstrated that the amounts represented genuine inter-corporate loans advanced and repaid through bank accounts, supported by ledger accounts, confirmations, bank statements, financial statements and income-tax records of the borrower company. The assessee specifically argued that the very foundation of Section 69A failed because the transactions were admittedly recorded in the books.
The ITAT accepted this contention and observed that even according to the CIT(A), the transactions were actually recorded in the books, though under an allegedly “false description” as loans. The Tribunal held that Section 69A applies only where the assessee is found to be owner of money or valuables not recorded in the books of account. In the present case, the source of alleged cash movement itself originated from recorded bank transactions. Therefore, the statutory condition for invoking Section 69A completely failed.
The Tribunal further noted that even if the “Personal Tally” entries are accepted at face value, the assessee was never found to be owner of any unrecorded money outside the books. Since the loan transactions and repayments were admittedly entered in the regular books, addition u/s 69A was held to be legally unsustainable and deleted in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
