Accommodation Entry Loan Held as Unexplained Credit: ITAT Upholds Addition with Interest Disallowance [Read Order]

The Income Tax Appellate Tribunal (ITAT) Mumbai Bench upheld the income tax addition on account of an accommodation entry loan opining that it constituted an unexplained credit.

The assessee Bajaj International Realty Pvt. Ltd had received a loan of ₹20.52 lakh from Aneri Fincap Ltd. On the basis of information received from the Investigation Wing the AO initiated reassessment and treated the loan as an entry for accommodation. Additions were made towards unexplained credit estimated commission expenditure and disallowance of interest.

The assessee argued that the loan was genuine, and they had provided proof in the form of bank statements, confirmatory statements and financial documents. It was contended that Section 69A was not applicable in the present case as the transaction was reflected in the books of account.

Moreover, objections were raised by the assessee regarding cross examination of the entry operator. The Revenue contention was based on the statement of the controller of the lender company wherein they had accepted that they were a paper company and provided accommodation entries.

The Tribunal comprising Om Prakash Kant (Accountant Member) and Kavitha Rajagopal (Judicial Member) noted that though Section 69A was misapplied the addition was justifiable under Section 68 as the nature of inquiry related to the assessment of unexplained credit.

The Bench also noted that the lending company was found to be a shell company without real business activity as admitted by its controller. Further tribunal held that the addition was not only based on the statements of third parties but also on the failure of the assessee to discharge its onus of proof.

Accordingly, the tribunal upheld the addition of ₹20.52 lakh, confirmed the addition of commission and sustained the disallowance of interest.

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