Loan Repayment through Bank does Not Prove Genuineness of Bogus Unsecured Loan: ITAT Dismisses appeal of Global Stainless [Read Order]

The Income Tax Appellate Tribunal (ITAT),Delhi Bench, held that unsecured loans treated as bogus under Section 68 of the Income Tax Act, 1961 cannot be legitimized merely because they were repaid through banking channels.

The appellant, Global Stainless, filed the return of income for Assessment Year (AY) 2018-19 declaring total income as ₹28,60,540 and was processed u/s 143(1) of the Income Tax Act, 1961. The appellant has received unsecured loans during the year from Steel Impex and Cloud Zone for ₹3,33,00,000 and ₹2,58,21,000.

Upon assessment, the Assessing Officer (AO) passed an order with addition of ₹5,91,21,000 on the account of unexplained unsecured loans received from the Steel Impex and Cloud Zone. The appellant challenged this order at the Commissioner of Income Tax (Appeals) (CIT(A)), and CIT(A) had confirmed the addition of ₹5,91,21,000.

Amol Sinha, the counsel for the appellant contended that all necessary details including confirmations, PAN, addresses, and bank statements were submitted by the appellant before the AO within the stipulated time.

It was further contended by the appellant counsel that the loans were genuine transactions carried out through proper banking channels and were also repaid during the same financial year.

Manish Gupta, the counsel for the Revenue Department, relied upon the findings of the lower authorities and submitted that the assessee failed to establish the identity, creditworthiness, and genuineness of the loan creditors. It was pointed out that discrepancies such as incorrect PAN details and lack of verifiable information rendered the transactions unexplained.

Madhumita Roy, Judicial Member and Naveen Chandra, Accountant Member observed that the appellant has failed to discharge the onus cast under Section 68 of Income Tax Act. The Tribunal noted that mere submission of documents or routing transactions through banking channels does not prove genuineness when surrounding circumstances indicate otherwise.

The Tribunal further observed that the pattern of transactions reflected accommodation entries, where funds were immediately transferred through various entities leaving negligible balances indicating lack of real financial credibility.

The Tribunal relied on the decision in J.K. Global, where held that repayment of such loans does not cure the defect of lack of genuineness, as the transactions themselves were found to be non-genuine.

Accordingly, the Tribunal upheld the addition made under Section 68 of Income Tax Act and dismissed the appeal of the assessee.

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