Once loans is repaid in subsequent years, addition u/s 68 cannot be made

Once loans were repaid in subsequent assessment years with cogent evidences then the addition u/s 68 of the Income Tax Act cannot be made – ITAT Guwahati

In a recent judgment, ITAT Guwahati has held that once the assessee has established that loans were repaid in the subsequent assessment years with cogent evidences then the addition u/s 68 of the Income Tax Act cannot be made.

ABCAUS Case Law Citation:
4952 (2025) (12) abcaus.in ITAT

In the instant case, the Revenue had challenged the order passed by the CIT(A) in deleting the addition made by the ld. Assessing Officer in respect of unsecured loans and interest thereon by treating the same as unexplained cash credit u/s 68 of the Income Tax Act, 1961 (the Act).

The case of the assessee was selected under scrutiny through Computer Assisted Scrutiny Selection (CASS). The AO observed that the assessee has taken unsecured loans from five parties (loan creditors).

The AO was of the view that the lender company had no creditworthiness to advance such loans as they had very meagre turnover and no credentials. The AO concluded that the assessee had failed to establish the identity, creditworthiness of the lenders and genuineness of the transactions and added u/s 68 of the Act by treating the same as unexplained cash credit. Besides, the AO also added interest paid on these unsecured loans. 

The CIT (A) allowed the appeal of the assessee after recording a finding of fact that the assessee had repaid the loans in the subsequent assessment years.

The Tribunal opined that once the assessee had established that loans were repaid in the subsequent assessment years with cogent evidences then the addition u/s 68 of the Act cannot be made.

The Tribunal observed that the case of assessee was squarely covered by the decisions of the Hon’ble Jurisdictional High court (Calcutta) in number of cases. In all the above decisions the Hon’ble court had held that where the assessee had filed all the evidences qua the loan creditors before the AO and loans were also repaid then the same cannot be added us/ 68 of the Act. Similarly, the case of assessee was squarely covered by the decision of the Hon’ble Gujarat High Court.

Considering the facts of the case in the light of the above decisions, the Tribunal dismissed the revenue’s appeal. 

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