₹25 Lakh Loan from Unverified Entity: Delhi HC Dismisses Income Tax Appeal for Lack of Genuineness and Creditworthiness [Read Order]

The High Court of Delhi, dismissed an income tax appeal involving a ₹25 lakh loan received from an unverified entity, M/s Oxygen Projects Pvt. Ltd., due to lack of evidence establishing the genuineness and creditworthiness of the lender.

Meenakshi Gupta, petitioner-assessee, filed an appeal under Section 260A of the Income Tax Act challenging the Income Tax Appellate Tribunal (ITAT ) order dated 06.01.2025 for AY 2012-13. The ITAT had upheld the Commissioner of Income Tax (Appeals) [ CIT(A) ]’s order dated 09.02.2024, which arose from the reassessment order passed under Section 143(3) read with Section 147 on 23.12.2019.

The reassessment was based on a notice issued under Section 148 on 30.03.2019, relying on information from the Investigation Wing. It was alleged that the petitioner received ₹25 lakhs from M/s Oxygen Projects Pvt. Ltd., a company through whose account ₹15.70 crores had passed during FYs 2009-10 to 2014-15, despite showing nil operational income in its tax returns.

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The reasons recorded for reopening the assessment showed that M/s Oxygen Projects Pvt. Ltd., from whom the petitioner had received ₹25 lakhs, had no real business activity and reported nil revenue between FYs 2009-10 and 2014-15. Authorities suspected the company was used to provide accommodation entries.

Bank records showed the petitioner received ₹25 lakhs in FY 2011-12. In response, the petitioner claimed it was an interest-free unsecured loan received on 26.03.2012 and repaid in three parts by September 2012. A confirmation from the lender was submitted, but it was undated.

The Assessing Officer (AO) issued notices under Section 133(6) to the lender, which were returned unserved. The petitioner failed to produce the Principal Officer of the company or explain who controlled it or why such a loan was given.

Due to lack of evidence on the genuineness and creditworthiness of the lender, the AO treated the loan as unexplained credit and made an addition of ₹25 lakhs in the reassessment order dated 23.12.2019 under Section 143(3)/147.

The petitioner challenged the order, raising objections about the reopening and approval under Section 148. However, both the CIT(A) and ITAT rejected the contentions and upheld the reassessment.

The assessee counsel argued that the ITAT order lacked proper application of mind. It was submitted that the tribunal wrongly assumed M/s Oxygen Projects Pvt. Ltd. was an accommodation entry provider based on a departmental search and a statement by its authorised person, even though such details were not part of the actual reasons recorded for reopening the assessment.

Justice Vibhu Bakhru and Justice Tejas Karia noted that the record did not show any search or any statement from the authorised person of M/s Oxygen Projects Pvt. Ltd. to support the claim that it was an accommodation entry provider.

However, it found no reason to interfere with the ITAT’s order since the facts were undisputed. The assessee failed to explain why an interest-free unsecured loan was given by the company. Notices sent by the AO were returned unserved, and the company was not found at its given address. The assessee also did not produce anyone to prove who controlled the company.

The Court held that the AO was right in treating the transaction as not genuine and found no substantial question of law. The appeal was dismissed.

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