S. 68 Not Attracted as Repayment Established by Banking Channels: ITAT upholds Deletion of ₹2.90 Cr Addition [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal and where an assessee establishes the identity, creditworthiness, and genuineness of a transaction through documentary evidence and proves that the loans were repaid through banking channels, no addition can be sustained.

Educo Ventures Pvt. Ltd. (assessee) received advances totaling ₹2,90,00,000 from three parties M/s Anamika Dealmark Pvt. Ltd. (₹35,00,000), M/s Bholenath Commosale Pvt. Ltd. (₹2,50,00,000), and Eyesore Tradecom Pvt. Ltd. (₹5,00,000).

The Assessing Officer (AO) treated these as unexplained cash credits under Section 68 and alleged they were accommodation entries provided by "Jamakharchi" companies managed by entry operators.

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The AO’s decision was primarily based on a database from the Investigation Wing and statements from third parties alleging the companies were non-existent. Aggrieved by the addition, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)].

The CIT(A) deleted the addition and highlighted that the loans were received for a brief period in the normal course of business and were returned with interest through banking channels after deducting TDS.

The CIT(A) held that the assessee provided account confirmations, bank statements, and audited balance sheets for all three creditors and the net worth of the lender companies was substantial ranging from approximately ₹9 crore to ₹45 crore, establishing their financial capacity.

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The CIT(A) also observed that the AO failed to provide the assessee with copies of the third-party statements used against them for cross-examination. Aggrieved by this deletion, the Revenue filed an appeal before the ITAT.

The two-member bench, comprising Rajesh Kumar (Accountant Member) and Pradip Kumar Choubey (Judicial Member), observed that the case was squarely covered by precedents from the Calcutta and Gujarat High Courts.

The tribunal noted that once the repayment of a loan was established based on documentary evidence, the initial credit cannot be doubted for genuineness.

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The Bench concluded that the AO's case relied on "presumptive and assumptive value" rather than factual data. It upheld the CIT(A)’s findings and noted that all three ingredients of Section 68 identity, creditworthiness, and genuineness were satisfied. The appeal of the Revenue on this ground was dismissed.

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