S K SARAWAGI & COMPANY (P) LTD.,KOLKATA V. DCIT, CIRCLE 5(1), KOLKATA

ITA 2676/KOL/2025

AI Insights

The case involves SK Sarawagi & Company (P) Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals)-4, Chennai, confirming the addition of 1.00 crores as unexplained cash credit under section 68 of the Income-tax Act, 1961. The addition was initially made by the Assessing Officer, who suspected the loan from M/s Harish Tie Up Ltd. to be an accommodation entry. The Tribunal, referencing several precedents, concluded that the assessee had sufficiently demonstrated the legitimacy of the loan, including its repayment with interest, and that the Assessing Officer had not conducted a proper inquiry to substantiate the claim of it being a shell company.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 842248 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2025
• Other Referred Cases: PCIT-2, Kolkata Vs. Rahul Premier India Agency Private Limited, PCIT Vs. M/s Narayan Tradecom Pvt. Ltd., PCIT Vs. Alom Extrusions Ltd., PCIT Vs. M/s Edmond Finvest Pvt. Ltd., PCIT Vs. Parwati Lakh Udyong, Ambe Tradecorp (P.) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIP KUMAR BISWAS
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Set aside; Question of law; Unexplained cash credit; Unexplained expenditure; TDS; Accommodation entries
• Section: 143(3); 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 2676/KOL/2025 (Assessment Year: 2011-12) SK Sarawagi & Company (P) Ltd. 507, Shubham, 1, Sarojini Naidu Sarani, Park Street, Kolkata- 700017, West Bengal Vs. DCIT, Circle 5(1) Aaykar Bhawan, P-7, Chowringhee Square, Kolkata- 700069, West Bengal (Appellant) (Respondent) PAN No. AADCS8887R Assessee by : Shri Manoj Kataruka, AR Revenue by : Shri Pradip Kumar Biswas, DR Date of hearing: 27.01.2026 Date of pronouncement: 26.02.2026 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals)-4, Chennai, (hereinafter referred to as the “Ld. CIT(A)”] dated 30.10.2025 for the AY 2011-12. 2. The issue raised in ground no.1 is against the order of ld. CIT (A) confirming the addition of ₹1.00 crores as made by the ld. AO u/s 68 of the Act on account of unsecured loan by treating the same as unexplained cash credit. 2.1. The facts in brief are that the assessee filed the return of income on 19.09.2011, declaring total income at ₹6,31,61,245/-. The assessee is engaged in the business of mining of Manganese Ore, Iron Printed from counselvise.com Page | 2 ITA No. 2676/KOL/2025 SK Sarawagi & Company (P) Ltd.; A.Y. 2011-12 Ore, Coal and other items, manufacturing of sponge Iron, MS ingots and TMT Bars. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were duly issued and served upon the assessee. The ld. AO in Para no.2 noted that the information was received from DIT (investigation), Kolkata that the assessee has taken accommodation entries from the companies controlled and run by shri Anand Sharma, an entry operator. Accordingly, the assessee was called upon to explain the money received from M/s Harish tie Up Ltd. The assessee submitted before the ld. AO that assessee has received ₹1.00 crores from the said entity as unsecured loan on which interest of ₹1,17,808/- was provided after deduction of TDS of ₹11,781/- and the net amount was paid of ₹1,06,027/- on 26.03.2011. The assessee also filed the details and confirmation of loans with the ld. Assessing Officer. The assessee submitted that the said loan was repaid on 16.06.2011, along with interest after deduction of tax at source. However, the ld. AO doubted the said loan and treated the same as unexplained expenditure u/s 68 of the Act and added to the income of the assessee in the assessment framed u/s 143(3) of the Income-tax Act, 1961 (the Act) vide order dated 30.03.2015. 2.2. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO on the ground that the loan was received from a shell company and therefore, rightly added by the ld. AO. 2.3. After hearing the rival contentions and perusing the materials available on record, we find that undisputedly the assessee raised an unsecured loan of ₹1.00 crores from M/s Harish tie Up Ltd. According to the ld. AO, the said entity is a shell entity operated by Shri Anand Sharma an entry provider. We note that the assessee during the assessment proceeding, provided all the details of the said loan Printed from counselvise.com Page | 3 ITA No. 2676/KOL/2025 SK Sarawagi & Company (P) Ltd.; A.Y. 2011-12 including the PAN, copy of balance sheet, confirmation etc. along with copy of bank statement. However, the ld. AO treated the said loan as unexplained cash credit u/s 68 of the Income-tax Act, 1961 and added the income of the assessee, which was confirmed by the ld. CIT (A). We note that the assessee has repaid the loan on 16.06.2011, along with interest after deduction of tax at source. Therefore, once, the assessee has filed all the evidences before the ld. AO and the ld. AO has not carried out any enquiry, in order to point out any defects into these evidences then no addition can be made u/s 68 of the Act if the repayment made in the subsequent financial years. The case of assessee is squarely covered by the decisions of the Hon’ble Calcutta High court in number of cases namely PCIT-2, Kolkata Vs. Rahul Premier India Agency Private Limited in ITAT/133/2025, IA No.GA/2/2025 vide order dated 05.08.2025, PCIT Vs. M/s Narayan Tradecom Pvt. ltd. in ITAT/76/2025, IA No. GA/1/2025 dated 10.06.2025, PCIT Vs. Alom Extrusions Ltd. ITAT/268/2024, IA no. GA/1/2024, GA/2/2024 dated 17.12.2024, PCIT Vs. M/s Edmond Finvest Pvt. ltd., in ITAT/28/2024, GA/2/2024 dated 26.02.2024, PCIT Vs. Parwati Lakh Udyong, ITAT/2/2024, IA No.GA/1/2024 dated 19.02.2024. In all the above decisions the Hon'ble court has held that where the assessee has filed all the evidences qua the loan creditors before the ld. AO and loans are also repaid then the same cannot be added us/ 68 of the Act. Similarly, the of assessee is squarely covered by the decision of the Hon’ble Gujarat High Court in the case of Ambe Tradecorp (P.) Ltd., reported in [2022] 145 taxmann.com 27 (Gujarat), wherein it has been held as under :- \"3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the Printed from counselvise.com Page | 4 ITA No. 2676/KOL/2025 SK Sarawagi & Company (P) Ltd.; A.Y. 2011-12 creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act. 3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions. 3.2 The appellate authority observed that, \"In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information.\" 3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt. The accounts were finally settled with the repayment of the loan to the lender companies. 3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of Durga Prasad More (82) ITR 540 and also in Sumati Dayal (214) ITR 801, to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under Section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. 3.5 While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine. 4. Learned advocate for the appellant attempted to emphasize that for the purpose of application of Section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied. 5. As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the Printed from counselvise.com Page | 5 ITA No. 2676/KOL/2025 SK Sarawagi & Company (P) Ltd.; A.Y. 2011-12 subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. 6. The Tribunal rightly recorded in para 29 of the judgment, \"Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A. \" 7. For the reasons recorded above, no question of law much less substantial questions arises in this appeal. It stands meritless and accordingly dismissed. 2.4. Accordingly, we respectfully following the ratio laid down by the Hon’ble Jurisdictional High Court and Gujarat High Court, set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the addition. 3. The issue raised in ground no.2 is consequential to ground no.1 and is accordingly, allowed. 4. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.02.2026 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 6 ITA No. 2676/KOL/2025 SK Sarawagi & Company (P) Ltd.; A.Y. 2011-12 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "