ITO-28(1), CIVIC CENTER NEW DELHI V. ARPITAM BUILDERS LLP, SOUTH DELHI

ITA 1368/DEL/2025

AI Insights

The case involves the Income Tax Department (Appellant) contesting the decision of the CIT(A) which allowed the appeal of Arpitam Builders LLP (Respondent) and deleted the addition of Rs. 15,65,35,565 as unexplained cash credit under Section 68 of the Income Tax Act. The Assessing Officer had initially added this amount to the assessee's income, alleging it as unexplained cash credit from an inter-corporate loan. The CIT(A) found that the assessee had provided sufficient evidence to prove the genuineness and creditworthiness of the loan, which the Tribunal agreed with, dismissing the revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783699 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2022-2023
• Appeal Filed On: 05-03-2025
• Other Referred Cases: Orissa Corporation vs. CIT, Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd., Deputy Commissioner of Income-tax v. Paswara Papers Ltd., ITO Vs. Alpha Contech Pvt. Ltd., CIT vs. Fair finvest Itd., Commissioner of Income-tax v. Mark Hospitals (P.) Ltd., ITO Vs. Neelkanth Finbuild Ltd., CIT v. Kamdhenu Steel & Alloys Ltd., CIT vs. Vrindavan Farms (P) LTD, PCIT vs. Agson Global Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: MAYANK PATWARI; AKASH OJHA; ADVOCATES; PRODUCED
• Keywords: Additional evidence; Question of law; Unexplained cash credit; Income from undisclosed sources; Onus to prove; Accommodation entries; Source of fund; Bogus
• Section: 143(3); 68; 131; 69; 133(6)

Judgement Text

"ITA No.1368/Del/2025 Page | 1 THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI BEFORE SHRI SUDHIR KUMAR, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.1368/Del/2025 [Assessment Year : 2022-23] ITO, Ward 28(1), E-2 BLOCK, CIVIC CENTER. NEW DELHI-110002 vs ARPITAM BUILDERS LLP G-3, 2ND FLOOR, MAHARANI BAGH, EAST OF KAILASH, DELHI-110065. PAN: ABQFA2725F APPELLANT RESPONDENT Appellant by Shri Dayainder Singh Sidhu, CIT DR Respondent by Shri Mayank Patwari & Shri Akash Ojha, Advocates Date of Hearing 18.08.2025 Date of Pronouncement 07.11.2025 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by revenue against the order dated 26.12.2024 passed by Ld. Commissioner of Income Tax , National Faceless Appeal Centre (NFAC) [“Ld. CIT(A)”] in Appeal No. NFAC/2021-22/10341574 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 27.03.2024 passed u/s 143(3) of the Act pertaining to assessment year 2022-23. 2. Brief facts of the case are that assessee had filed its return of income on 27.03.2024 declaring total income at Rs. 2,91,970/-. The case was selected for scrutiny through CASS. The AO found that Printed from counselvise.com ITA No.1368/Del/2025 Page | 2 the assessee has taken inter Corporate unsecured loan of Rs.15,65,35,565/- from M/s Shinning Infrabuildcon for purchases of two properties, thus he called for information with respect to the unsecured loan from the assessee. In reply, the assessee filed furnished relevant document and after considering the same, AO concluded assessee has failed to substantiate the genuineness, identity and creditworthiness of the lender and thereafter has completed the assessment u/s 143(3) r.w.s. 144B of the Act by assessing the total income at Rs.15,68,27,535/- by making addition of Rs.15,65,35,565/- alleging the same as unexplained cash credit u/s 68 of the Act. 3. Against this order, assessee preferred an appeal before Ld. CIT(A), who after considering the submissions, vide impugned order dated 26.12.2024, allowed the appeal of the assessee. 4. Aggrieved by the order of Ld. CIT(A), revenue preferred appeal before the Tribunal by taking following grounds of appeal:- 1. Whether on facts and in circumstances of the case, the Ld. CIT(A), NFAC, Delhi has erred in law in deleting of the addition of Rs. 15,65,35,565/- as unexplained cash credit u/s 68 of the Income Tax Act, 1961 made by the Assessing Officer by ignoring the fact that the assessee has failed to discharge its primary onus to prove the identity and creditworthiness of the creditor and genuineness of the transactions by furnishing concrete documentary evidence. 2. Whether on facts and in circumstances of the case, Ld. CIT(A) has erred in not considering the facts that external verification of unsecured loan transactions and creditworthiness of loan creditor could not become possible for the AO during the assessment Printed from counselvise.com ITA No.1368/Del/2025 Page | 3 proceedings due to failure on the part of assessee in providing basic requisites for third party enquiry. 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal. 5. Ground of appeal No. 1 & 2 raised by the revenue are in respect to the deletion of addition of Rs. 15,65,35,565/- made by AO u/s 68 of the Act. 6. Before us, ld. CIT Dr submits that assessee has filed to establish the identity and creditworthiness of the lender company during the assessment proceedings before the AO. He drew out attention to para 4.4 of the assessment order and stated that in the said para the AO has made categorical observations that the assessee has failed to file any details to prove the identity of the loan creditor. He thus submits that ld. CIT(A) has deleted the addition by admitting the additional evidences without obtaining the remand report from the AO under Rule 46A of the IT Rules, 1962 and therefore, the order of the ld. CIT(A) deserves to be struck down and matter be remanded to the file of the AO for fresh consideration of the details filed by the assessee. 7. Per contra, Ld. AR for the assessee vehemently supported the order of the ld. CIT(A) and submits that assessee had filed all the relevant details before the AO who has failed to consider the Printed from counselvise.com ITA No.1368/Del/2025 Page | 4 same. He drew our attention to the written submission filed before the AO as available in paper book filed by the assessee. Ld. AR submits that assessee entered into an Inter Corporate Loan agreement for obtaining loan upto Rs. 30.0 crores @ 11% per annum rate of interest with M/s. Shining Infrabuildcon LLP on 08.11.2019, for business growth. Thereafter assessee received Rs.15,65,35,565/- from M/s Shining Infrabuildcon LLP and paid interest of Rs.86,89,435/-. It is submitted by ld. AR that to prove the identity and creditworthiness of lender and genuineness of the transaction assessee has filed Ledger account of M/s Shining Infrabuildcon LLP in the books of assessee, copy of Bank Statements of assessee highlighting the relevant transaction, Confirmation from M/s Shining Infrabuildcon LLP, Copy of Bank A/c of M/s Shining Infrabuildcon LLP and Copy of Financial statements of lender LLP for the period ending on 31.03.2022, wherein loan to assessee is duly appearing. 8. Ld. AR further submits that in addition to this assessee also submits the source of source i.e. the immediate source of funds in the hands of the lender by filing a details chart which is reproduced at pages 5-7 of the appellate order. Ld. AR submits that after considering these details which were also filed before the AO, the ld. CIT(A) has deleted the additions and requested for the confirmation of the said order of ld. CIT(A). Printed from counselvise.com ITA No.1368/Del/2025 Page | 5 9. Heard the contentions of both the parties and perused the material available on record. From the fact it appears that AO has made the addition of loans received form M/s Shining Infrabuildcon LLP by observing that the assessee has filed to file any details to prove the identity and creditworthiness of the lender. From the perusal of the documents placed before us, we find that assessee had filed every possible detail to establish the identity, genuineness and creditworthiness of the loan transaction. However, the AO has failed to take cognizance of the same. It is further seen that assessee not only prove the creditworthiness but also established the source of source in the hands of the lender company which is evident from the chart reproduced in the order of ld. CIT(A). As per the said chart, majority of funds were by M/s Shining Infrabuildcon LLP form its sister concerns. It is also seen that M/s East India Udyog, from whom major amount was received by the lender, assessment in its cases was done for AY 2022-23 u/s 143(3) of the Act wherein all transactions related to the amounts transferred to the appellant were thoroughly examined and accepted by the assessing officer as genuine. Ld. CIT(A) after considering these facts has deleted the additions by making following observation: 5.4 “The submissions made by the appellant, along with the documentary evidences provided, have been thoroughly examined. The core issue raised by the AO was whether the appellant had satisfactorily established the genuineness, identity, creditworthiness of the unsecured loan amounting to Rs.15,65,35,565/-. Upon review of the appellant’s submission and supporting documentation, it is evident that the appellant has complied with the requirements to establish the nature and source of the loan before the AO. During the appellate proceedings, the Printed from counselvise.com ITA No.1368/Del/2025 Page | 6 appellant submitted detailed information such as loan agreement, bank statements, ledger extracts, confirmation letters, and financial statements of the lender, M/s Shining Infrabuildcon LLP. The appellant also submitted the ICD agreement between the two parties, providing clear evidence that the loan was obtained through proper banking channels and was fully documented. The appellant further clarified the purpose of the loan, demonstrating that it was utilized for acquiring properties related to its real estate business. The identity the lender has been established beyond all reasonable doubts. The genuineness of the transaction can also be safely concluded since the entire transaction has been done through the banking channels duly recorded in the books of account of the assessee and duly reflected in the financial statement of the lender i.e. M/s Shinning Infrabuildcon LLP. Upon verification of financial statement, it is noted that the financial credibility of M/s Shining Infrabuildcon LLP has been supported by its audited financial statements and income tax returns. Additionally, the appellant also placed on record source of unsecured loans in the tabular form to demonstrate that the funds received were sourced from inter- corporate loans from associated entities, particularly M/s East India Udyog Limited, which has also been assessed for assessment year 2022-23 and all such loan transactions were thoroughly examined and accepted as genuine by the Department. The AO's claim that the appellant failed to establish the genuineness of the transaction lacks substance, as the evidence submitted by the appellant sufficiently demonstrates the identity, creditworthiness, and genuineness of the loan. The funds were transferred through recognized banking channels, and all transactions were recorded in the bank statements and ledgers of both the appellant and the lender. Therefore, I find that the initial onus to prove the receipt of the unsecured loan capital u/s 68 was therefore discharged. The AO's claim that the appellant failed to establish the genuineness of the transaction lacks substance, as the evidence submitted sufficiently demonstrates the identity, creditworthiness, and genuineness of the creditors/lenders. The AO neither conducted independent inquiries nor provided any contrary evidence to dispute the appellant's claims which are evident from order. The AO’s observation that the appellant failed to establish the genuineness appears to be based on conjecture rather than any onus substantive findings. The initial onus to prove the receipt of the unsecured loan under Section 68 was therefore discharged by the appellant. It is evident that the appellant has provided sufficient evidence to establish the existence, identity, creditworthiness, and genuineness of the lender, M/s Shining lnfrabuildcon LLP, and the inter-corporate loan transaction. The AO has not been able to discharge the shifted onus to disprove the Printed from counselvise.com ITA No.1368/Del/2025 Page | 7 appellant’s submissions. The AO's acceptance of the factual position that the funds were received from M/s Shining Infrabuildcon LLP a sister concern of the appellant, is corroborated by the loan provider's confirmation and the signed agreement. In light of the above, I find that the appellant has satisfactorily discharged the onus of proving the identity of the lender, the creditworthiness of M/s Shining Infrabuildcon LLP, and the genuineness of the inter-corporate loan transaction. Thus. I find no merit in the A0's adverse view which appears to be based on presumptive factors rather than substantial evidence The appellant has all the evidence to show the existence, identity, creditworthiness and genuineness of transactions. I am therefore of the view that the addition d Rs. 15,65,35,565/- cannot stand on merits. I therefore delete the addition of Rs. 15,65,35,565/- on account of unexplained cash credit u/s 68 of the Act made by the AO. Accordingly, ground nos. 01 to 03 raised by the appellant is hereby allowed.” 10. Now coming to the issue of invocation of provisions of section 68 of the Act. The provisions, as contained in section 68 of the act, read as under: 68. “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : [Provided that where the assessee is a company (not being a company in which the public are substantially Interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Printed from counselvise.com ITA No.1368/Del/2025 Page | 8 Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]” 11. That a bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression \"the assessee offer no explanation\" means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true the opinion of the Assessing Officer of not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. 12. During the appellate proceedings, our attention was drawn to the details filed before the AO containing the bank statement, confirmation and financial statements alongwith the loan Printed from counselvise.com ITA No.1368/Del/2025 Page | 9 agreements to establish the identity and creditworthiness which are placed in paper book filed by the assessee. It is further seen that all the loans were received through proper banking channel and were from the sister concerns thus genuineness of the transactions was also proved. As per appellant, the AO made addition on the basis of conjuncture and surmises. It is worthy to mention that the above- mentioned details were submitted during the appellate proceedings also and after appreciating the same ld. CIT(A) has deleted the additions made as is evident from the observations of ld. CIT(A) in para 5.4 of the appellate as reproduced above. 13. It is further noticed that the AO has not considered the appellant's submission and made addition with predetermined mind. As can be seen from the submission filed by the appellant before the AO that the appellant had furnished loan confirmation, bank statement, etc. however, ignoring all these, the AO had concluded that identity, creditworthiness of the loan creditor and genuineness of transaction has not been proved. By filing all the relevant details of the loan creditors before the AO, assessee has discharged the onus lies upon it. Therefore, there is nothing left on the part of the assessee to prove further. If the AO wanted to inquire further, he has powers under the provisions of section 131 and section 133(6) of the Act which he could have opted for and could have verified whatever is submitted before him. The AO did not do so. This shows clearly the biased mind of the AO. Printed from counselvise.com ITA No.1368/Del/2025 Page | 10 14. The Hon’ble Supreme Court in the case of Orissa Corporation reported in [1986] 159 ITR 78 (SC) has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In the present case as observed above, no such exercise was carried out by the AO. 15. The Hon’ble Jurisdictional High Court in the case of Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd. reported in [2024] 162 taxmann.com 792 (Allahabad) held as under “INCOME TAX : Where assessee had received unsecured interest bearing loans from three corporate entities and had furnished necessary acknowledgement of return, balance sheet, profit and loss account, etc., to prove identity, creditworthiness and genuineness of transaction of unsecured loan taken by it, addition under section 68 was not warranted. “ 16. Similarly in the case of Deputy Commissioner of Income-tax v. Paswara Papers Ltd. reported in [2024] 159 taxmann.com 604 (Allahabad), the Hon’ble Court has held as under: Printed from counselvise.com ITA No.1368/Del/2025 Page | 11 “INCOME TAX : Where assessee received loan from various creditors who sold their old jewellery and gave loan to assessee out of sale consideration, since assessee had disclosed name of jewellers to whom jewellery was sold and also established mode of payment through banking channel, and moreover existence of deposits made to assessee by creditors was not in dispute, impugned addition under section 68 with respect to loan could not be sustained.” 17. The Co-ordinate Bench of ITAT Delhi in the case of ITO Vs. Alpha Contech Pvt. Ltd. in ITA No.3351/Del/2016 vide order dt. 28.07.2023 held as under: 7. “On careful consideration of above rival submission, first of all, we note that the Assessing Officer made addition u/s. 68 of the Act, by observing that despite several opportunity the assessee failed to prove creditworthiness of lender and genuineness of transaction and thus could not discharge onus as per requirement of sec 68 of the Act. The assessee carried the matter before ld. CIT(A) and filed additional evidence under rule 46A of the Rules on which remand report was called wherein the Assessing Officer did not made any adverse comment on the additional documentary evidence of assessee and also admitted that the lender company received amount of Rs. 7,30,62,000/- as share premium reserve during immediately preceding assessment year and amount of loan of Rs. 3.60 crore advanced to the assessee during present assessment year was from the said reserve amount. The remand report of the Assessing Officer supported the case of assessee which was based on the strength of additional evidence filed by the assessee without raising any doubt or discrepancy therein. 8. We also find and appropriate to reproduce the relevant operative part of first appellate order as follows:- The appellant company has received Rs.3,60,00,000/- from M/s Fennie Commercial Pvt. Ltd. as unsecured loan / share application money during the year. The same was added by the AO on the ground that appellant has failed to file confirmation as well as other supporting documents of the lender party before AO to prove identity, genuineness and creditworthiness of the party. During the course of appellate proceedings, appellant filed an Printed from counselvise.com ITA No.1368/Del/2025 Page | 12 application under Rule 46A and filed following documents to prove identity, genuineness and creditworthiness of the party: i. Copy of Acknowledgement of IT. Paper Book page no. 48. ii. Copy of Audited Financial Statements along with all the annexures.Paper Book page no. 49-60. iii. Copy of Confirmed ledger account. Paper Book page no. 61. iv. Copy of Bank Statements reflecting the amount given to the assessee company. Paper Book page no. 62-63. v. Copy of confirmation. Paper Book page no. 64. These documents were forwarded to the A for carrying out necessary enquiry with reference to the lender party. The Assessing Officer after conducting enquiries with reference to the lender party has submitted remand report vide his letter dated 2.03.2016 which was forwarded by the Addl. CIT, Range 2 vide his letter dated 08.03.2016. The relevant part of the remand report is submitted as under: \"4. As per directions received, the submissions made by the assessee before your good self as well as additional evidence submitted by it for admission at the appellate stage have been carefully perused. Besides, the additional evidence furnished by the assessee has also been independently verified from this Office by way of issue of letter us 133(6) of the Income Tax Act, 1961, to the third party concerned, i.e., to Ms Fennie Commercial Private Limited, 96-AV9, Neelkanth Apartments, Kishan Ganj, Vasant Kunj, New Delhi - 110070. 5. The said party has furnished its detailed reply to the letter issued us 133(6) vide its letter dated 08.01.2016, which is placed on record. The said party has given the details of the share application money of Rs.3.60 crores advanced by it to the appellant company and also produced the ledger account of the assessee company in its books for the relevant period, apart from the copy of the ITR-V in its case, copy of the Audit Report, Balance sheet, P & L Account and annexures. It is also seen from the annexures to the Audit Report that under the head \"Loans & Advances (totaling Rs. 7,41,00,000/-), the name of the appellant company is appearing the List of Share application money given details wherein the sum of Rs.3.60 crores has been shown against the name of the appellant company, amongst other entities to whom share application money had been advanced by this company. As regards the source of investment made by this company, it has been submitted that the same has been made out of its own sources. Further, the perusal of the Balance Sheet Printed from counselvise.com ITA No.1368/Del/2025 Page | 13 of this company shows that it has Share Premium Reserve of Rs.7,30,62,000/-, which is the same as in the immediately preceding previous year, out of which funds have been invested in the appellant company and others. 6. However, it is also seen from the P & L Account filed in this case that this company has no apparent business activity during the relevant period, i.e. during the FY 2010-11, and it has declared a nominal sum of Rs.35,600/- as Consultancy / Commission income. This company has also furnished a copy of the intimation us 143(1) in its case, issued by CPC, Bangalore, in response to the specific query regarding furnishing copy of assessment order passed in its case for AY 2011-12. 7. As regards the present position of the said money advanced by MIs Fennie Commercial Pvt. Ltd. to the appellant company, it has been stated that they have not received any shares from M/s Alfa Contech Private Limited till date and the said Sum is lying as Loans & Advances in their books. However, this company has not furnished copy of its latest IT filed as well as copy of Audit Report, Balance Sheet and P & L Account despite being specifically called for in the letter issued us 133(6) to it. 8. It is also submitted here that as per the Balance Sheet of the appellant company for the AY 2011-12, it has shown a sum of Rs.3.60 crores as \"Loans from Body Corporate\", as per Schedule 3 annexed to the Balance Sheet and not as Share Application Money. Also, as per details filed by the appellant vide its letter dated 03.02.2014 during the course of the assessment proceedings in its case for AY 2011-12, it has furnished the name of Ms Fennie Commercial Private Limited, PAN AAACF9549A, from whom it had allegedly received unsecured loan of Rs.3.60 crores whereas the said party is showing this Loan & Advance as \"Share Application Money\". It is seen from the remand report that Assessing Officer has carried out enquiry with the lender party us 133(6) of the I.T. Act. The said party furnished the detailed reply vide its letter dated 08.01.2016. It has been reported by the AO that Ms Fennie Commercial Pvt. Ltd. has confirmed that it has given share application money of Rs.3.60 crore which has been accounted for by the appellant as unsecured loan in its balance sheet. The AO has also examined the ledger account of the appellant company from the lender party's books of accounts. The lender party has also filed copy of its return of income, audit report, balance sheet, profit & loss account and annexures. It Printed from counselvise.com ITA No.1368/Del/2025 Page | 14 has been observed by the AO from the annexures of the audit report that lender has shown loans and advances totalling Rs.7,41,00,000/- in its balance sheet. The appellant's name is also appearing in the loan and advances and has been shown as share application money of Rs.3.60 crore in the name of appellant. AO has also verified the balance sheet of the lender company and it is seen that said company has shown share premium reserve in its balance sheet in A.Y. 2010-11 out of which the amount has been given to the appellant. All these facts establish the identity, creditworthiness and genuineness of the transactions. It is seen that the said party has confirmed the transactions with the appellant and source of the money is also explained. M/s Fennie Commercial Pvt. Ltd. is assessed to tax with Ward 9(1). New Delhi and filing its return of income. The appellant company has filed copies of their bank statement, balance sheets and profit & loss a/c of the lender company before me to prove the identity, creditworthiness and genuineness of the transaction. These facts have been verified by the AO in the remand proceedings and has submitted report in this regard. It is seen that name of the appellant company is appearing in the balance sheet of the lender company. In view of the documents filed by the above named lender company before me as well as AO, it is established that the identity, source, creditworthiness of the lender company and genuineness of the transactions has been established. I find that the AO has not been able to bring on record any evidence to negate the genuineness of the transaction done by the appellant. Therefore, the addition cannot be sustained only on suspicion and surmises. Considering the fact that the identity, genuineness and creditworthiness of the lender company duly established, the addition made by the A cannot be upheld and hence the AO is directed to delete the addition of Rs.3,60,00,000/- made on account of unexplained income us 68 of the I.T. Act. In support of my above decision, reliance is placed on following judicial pronouncements: a. CIT Vs. Fair finvest Itd. [ 2014 ] 44 taxmann.com 356 (Delhi) HIGH COURT OF DELHI \"Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2002-03 - Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application and affidavits of directors, Assessing Officer could not make addition on account of share application money solely on basis of investigation report [In favour of assessee. Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it Printed from counselvise.com ITA No.1368/Del/2025 Page | 15 and reject it on tenable grounds. In case he wishes to rely on report of investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc., Assessing Officer was not justified in making addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report. The least that Assessing Officer ought to have done was to enquire into matter by, if necessary, invoking his powers under section 131 summoning the share applicants or directors. b. Commissioner of Income-tax v. Mark Hospitals (P.) Ltd. [ 2015 ] 58 taxmann.com 226 (Madras) HIGH COURT OF MADRAS \"Section 68 of the Income-tax Act, 1961 - Cash credit (Burden of proof - Assessment year 2006-07 - Assessee had obtained unsecured loans from agriculturists and submitted their names and addresses, but did not provide their PAN cards - Assessing Officer made addition under section 68 - It was found that loans were given to assessee through cheques and all creditors had confirmed that they had advanced loans mentioned against their names to assessee and, thus, identity of creditors could not be disputed - Further, all creditors were agriculturists and therefore, they did not have PAN card - Whether, on facts, no addition could be made - Held, yes [Para 6] [In favour of assessee]\" c. ITO Vs. Neelkanth Finbuild Ltd., [2015] 61 taxmann.com 132 (Delhi - Trib.), held that \"6. Keeping in view the findings given so the Assessing Officer as well as the learned first appellate authority and the documentary finding by the assessee before us, we are of the considered view that the learned first appellate authority has deleted the addition in dispute on the basis of various documentary evidence filed by the assessee before the Assessing Officer as well as before him. The hon'ble Supreme Court of India (sic.) in the case of CIT v. Lovely Exports (P.) Ltd. [2008] 299 ITR 268 (Delhi) which has confirmed the order of the hon'ble Delhi High Court has held that once the identity of the shareholder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. The learned first appellate authority has examined the documentary evidence filed by the Printed from counselvise.com ITA No.1368/Del/2025 Page | 16 assessee before the Assessing Officer as well as before him and held that the assessee has provided confirmations from all the parties as well as various evidences to establish the genuineness of the transaction, the assessee has also relied upon the judgment of Nemi Chand Kothari v. CIT [2003] 264 IT 254/[2004] 136 Taxman 213 (Gau.) wherein it has been held that it is a certain law that the assessee is to prove the genuineness of transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of the assessee to find out the source of money of creditors. Similar observation has also been given in the case of S. Hastimal v. CIT [1963] 49 ITR 273 (Mad.) and CIT v. Daulat Ram Rawatmull [1973] 87 IT 349 (SC). The learned first appellate authority has cited various decisions rendered by the hon'ble Supreme Court of India as well as the hon'ble jurisdictional High Court in the impugned order and finally has held that the assessee has substantiated the transaction regarding share application money received by it was genuine transaction and the same were not accommodation entries. He did not find any evidence collected by the Assessing Officer which could prove otherwise and deleted the additions in dispute. As regard the addition of Rs. 12,500 made on account of commission which was presumed to have been allowed by the assessee for obtaining the hawala entry in dispute, the learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer was not able to bring anything on record that it was the assessee's own money which was routed in the form of share application money and has rightly deleted the same. 7. Keeping in view all the facts and circumstances, we are of the considered view that the learned first appellate authority has passed the impugned order under the law and according to the facts of the present case and has rightly deleted the addition in dispute. We find no infirmity in the impugned order and uphold the impugned order by dismissing the appeal filed by the Revenue.\" d. Honorable Supreme Court of India in the case of CIT v. Kamdhenu Steel & Alloys Ltd., SLP (CC) no. 15640 of 2012, dated 17-09- 2012 (Supreme Court), wherein the Hon'ble Supreme Court has dismissed the Special Leave Petition filed by the Revenue against the decision of Hon'ble Delhi High Court in the case CIT v. Kamdhenu Steel & Alloys Ltd. in which it has been held by Hon'ble Court that once adequate evidence/material given by the assessee, which would prima facie discharge the burden of the Printed from counselvise.com ITA No.1368/Del/2025 Page | 17 assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter, in case such evidence is to be discarded or it is proved that the assessee has \"created\" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act.\" e. COMMISSIONER OF INCOME TAX-9 ERSTWHILE CIT-VI versus VRINDAVAN FARMS (P) LTD, ITA 71/2015, ITA 72/2015, ITA 84/2015, the High Court of Delhi held as under : \"3. The ITAT has in the impugned order noticed that in the present case the Revenue has not doubted the identity of the share applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the A by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders. 4. The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the Assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law. 5. In the facts and circumstances of the present appeals, the Court is satisfied that no substantial question of law arises. The appeals are dismissed.\" Printed from counselvise.com ITA No.1368/Del/2025 Page | 18 The facts of the above cited judicial pronouncements are identical with the facts of the appellant case, therefore, the ratio of the above cited judicial pronouncements is squarely applicable to the facts of the appellant case, hence, unsecured loan received by the appellant from M/s Fennie Commercial Pvt. Ltd. cannot be termed as unexplained income of the appellant and cannot be added u/s 68 of the I.T. Act. Therefore, the unsecured loan received from the above mentioned party is treated as genuine transaction and cannot be added us 68 of the I.T. Act. Therefore, the addition of Rs.3,60,00,000/- is deleted.” 18. On the issue of discharging the onus, the Hon'ble Delhi High Court in the case of Mod. Creations (P.) Ltd. v. ITO reported in [2013] 354 ITR 282, held as under: \"It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors.” 19. It was further observed by the Hon’ble Court as under: 14. “With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the ASSESSING OFFICER that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order Printed from counselvise.com ITA No.1368/Del/2025 Page | 19 to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala Ride. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.0. had any doubt about the material placed on record, which was largely bank statements or the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Etd (20092- 229-178.268 (Delhi) and CIT v. Lovely Exports (P.) Ltd. 2006) 215 CTR 495 (SC).” 20. The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd. etc. in ITA. No.71 of 2015 dated 12th August, 2015 held as under : \"The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. lt was observed by the ITAT that the Assessing Officer had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon’ble High court.”] 21. The Hon'ble Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd reported in [2022]134 Taxmann.com 256 (Delhi) while allowing the appeal in favour of the assessee towards the additions made u/s 68 of the Act has held as under : Printed from counselvise.com ITA No.1368/Del/2025 Page | 20 “Section 68 of the Income-tax Act, 1961 – Cash credits (Share capital money) – Assessment years 2012-13 to 2017-18 – Assessee-company received share capital and share premium money from several investors – Assessing Officer made addition in respect of same on account of unaccounted income under section 68 on basis of recorded statement of managing director of assessee-company – Whether since assessee placed sufficient documentary evidence to establish that money which assessee had paid to investors was routed back to it in form of share capital/share premium and identity, creditworthiness and genuineness of investors was proved, there was no justification to make addition under section 68 – Held, yes [Paras 11.4, 11.5 and 14.4] [In favour of assessee]” 22. It is also relevant to state an amendment is made that vide Finance Act, 2022 wherein second proviso to section 68 is added, so as to provide that the nature and source of any sum, whether in the form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider. This amendment has taken effect from 1st April, 2023 and accordingly applies on and from Assessment Year 2023- 24 and onwards. Though the year before us is AY 2022-23 however, as could be seen from the order of ld. CIT(A), the appellant has satisfactorily proved the source of source in the hands of the lender which fact is admitted by ld. CIT(A) and before us, the revenue has failed to controvert this categorical finding of ld. CIT(A). At this stage, it is also relevant to state that in the case of major lender M/s East India Udyog, assessment for Ay 2022-23 was completed u/s 143(3) of the Act, wherein all the transactions related to the funds transferred to assessee were accepted as Printed from counselvise.com ITA No.1368/Del/2025 Page | 21 genuine after thorough examination of its financials and banking transactions. 23. In view of above facts and in the circumstances of the case, we are of the considered view that the decision of the Ld. CIT(A) as observed above, is not only based on the relevant documents which were filed by the Assessee to establish identity and creditworthiness of the parties from whom the Assessee had taken loan. Further the assessee has established the genuineness of transactions thus based on the legal precedents and the fact that the Assessee has taken the unsecured loan through banking channel, deleted the addition made by AO in the year under consideration. We observe that assessee has discharged its burden by filing all the necessary evidences to prove the loan, provisions of section 68 cannot be invoked. 24. Regarding revenue’s alternate prayer of the remanding back the matter to the file of AO, as discussed above, the assessee has duly discharged the burden casted upon it and the AO has failed to make any enquiry if he had doubts about the genuineness of the evidences filed thus if one more opportunity is given to the AO, it would be gross injustice on the part of assessee. It is also a settled law that AO cannot be provided with an opportunity to plug the loopholes and once a view is taken after appreciating the evidences available, it cannot be said that no proper opportunity was provided Printed from counselvise.com ITA No.1368/Del/2025 Page | 22 to AO. It is further seen that no new or fresh evidence was filed by the assessee before the ld. CIT(A) and all the details filed before him were already submitted before the AO. Thus, we find no force in this argument taken by the revenue. 25. Based on above discussion and analyzation of the facts and by respectfully following the decisions of Hon’ble Supreme Court, various high courts and coordinate bench of Tribunal as referred herein above, 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. Accordingly, the order of ld. CIT(A) is hereby, upheld and both the grounds raised by the revenue are dismissed. 26. In the result, appeal of the revenue is dismissed. Order pronounced in the open Court on 07.11.2025. Sd/- Sd/- (SUDHIR KUMAR) JUDICIAL MEMBER Date:-07.11.2025 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Printed from counselvise.com ITA No.1368/Del/2025 Page | 23 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "