In Passion Realtech Private Limited v. Assistant Commissioner of Income Tax, Central Circle-2, Faridabad, the Delhi Bench of the Income Tax Appellate Tribunal examined the validity of an addition of ₹4.87 crore made under Section 68 of the Income-tax Act, 1961 on account of unsecured loan received from M/s Height Propcon Pvt. Ltd. for Assessment Year 2017–18.

The Assessing Officer treated the loan as unexplained cash credit on the basis of statements recorded during search and survey proceedings in the case of third parties and alleged that the lender was a dummy accommodation entry provider. The CIT(A) upheld the addition. Before the Tribunal, the assessee demonstrated that it had furnished complete documentary evidence including confirmation of accounts, income-tax returns, bank statements, and audited financial statements of the lender. It was also shown that the assessee had substantial opening balance of loans from the same lender and that the entire loan was repaid in subsequent years without any adverse inference by the Revenue.

The Tribunal noted that in the case of the lender company itself, assessment for the same Assessment Year 2017–18 had been completed under Section 143(3) and the Revenue had accepted its identity and capacity to advance loans. In such circumstances, the Tribunal held that the Assessing Officer could not take a contradictory stand by doubting the lender’s creditworthiness in the hands of the borrower. The Tribunal further observed that repayment of loan is a significant factor establishing the genuineness of the transaction and distinguishes the case from those involving mere paper entries.

Relying on its own earlier decisions and coordinate bench rulings including Dazzling Constructions Pvt. Ltd. v. ITO, the Tribunal held that the assessee had successfully discharged the onus cast upon it under Section 68. Accordingly, the addition of ₹4.87 crore was deleted.
The Tribunal also upheld the Assessing Officer’s jurisdiction to examine loans within the scope of limited scrutiny, but granted full relief on merits.

Source Link- https://itat.gov.in/public/files/upload/1767788352-qeftCh-1-TO.pdf

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