Addition u/s 68 deleted as identity of loan givers established and loan was repaid

Addition u/s 68 deleted as identity of loan givers established and assessee was not beneficiary as loan was repaid in subsequent year.

In a recent judgment ITAT Mumbai deleted addition under section 68 as the  assessee had furnished requisite material showing identity of loan givers and assessee was not beneficiary as loan was repaid in subsequent year.

ABCAUS Case Law Citation:
4665 (2025) (07) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition u/s 68 of the Income Tax Act, 1961 (the Act) on account of deposits/unsecured loan received.

The appellant assessee filed its return of income and assessment was framed u/s 143(3) of the Act.

Subsequently a survey u/s 133A of the Act was conducted in the case of assessee firm along with survey on its group concern and some of the entities which had provided bills to the group company.

In consequence to the survey action and the materials found therefrom, the case of the assessee was reopened and accordingly statutory notice were issued were issued and served upon the assessee.

On perusal of the survey report, the AO found that the assessee had received loan from one company alleged to be an accommodation entry. The assessee was asked to produce details with regard to the unsecured loans in the light of Section 68 of the Act.

The assessee furnished details along with the confirmations and pointed out to the AO that the loan taken during the year was also repaid during the year itself. The assessee also furnished ITR, financial statements and bank statements to prove the loan transactions. The explanation and the documents submitted by the assessee were dismissed by the AO who proceeded by making addition u/s 68 of the Act.

Before the Tribunal, the assessee reiterated the claim that the assessee had successfully discharged the onus cast upon it by the provisions of Section 68 of the Act inasmuch as, pursuant to the notice issued u/s 133(6) of the Act, the said loan creditor had not only confirmed the transactions but had also confirmed by the repayment of the loan.

The Tribunal observed that it was an undisputed fact that the assessee had furnished complete details along with the supporting evidence justifying the loan taken. Most importantly, the loan had been repaid during the year itself as evidence from the statement of account confirmed by the loan creditor.

The Tribunal further observed that on similar facts, the Hon’ble High Court of Gujarat had held that where assessee took loan from two parties and assessee had furnished requisite material showing identity of loan givers and assessee was not beneficiary as loan was repaid in subsequent year, no addition u/s 68 of the Act can be made on account of such loans.

The Tribunal noted that in the instant case, the assessee had repaid the loan within few months of borrowing as was evident from the extract of the statement of account.

The Tribunal also noted that the Hon’ble Bombay High Court had deleted the similar addition observing that there was 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.

Considering the facts of the case in totality in the light of the decisions of the Hon’ble High Courts , the Tribunal  held that there was no merit in the impugned addition and accordingly, the AO was directed to delete the impugned addition.

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• Receipts mentioning that it was towards corpus, donation assumed to be for corpus of trust
• Credit in partner’s capital account for book entry adjustments can not be added u/s 68
• Non-compliance of summons issued u/s 131 no ground to make addition u/s 68
• Assessee not obliged to demonstrate actual utilization of donation u/s 35(1)(ii)
• For Registration u/s 12AB, phrase “genuineness of activities” is interpreted liberally