*Section 68 Addition Deleted After Loan Genuineness Proven

Clipped from: https://taxguru.in/income-tax/section-68-addition-deleted-loan-genuineness-proven.html

ITO Vs Mohanbhai Laljibhai Rami (ITAT Ahmedabad)

Unsecured Loan Explained Through Evidence; Section 68 Addition Deleted and Revenue Appeal Dismissed: ITAT Ahmedabad

Summary:

The Ahmedabad Bench (SMC) of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal for AY 2012-13, thereby affirming the CIT(A)’s order deleting the addition of ₹10 lakh made under section 68 on account of an alleged unexplained unsecured loan.

The assessment was reopened under sections 147/148 based on information from the Investigation Wing relating to a loan transaction with M/s Alton Infrastructure Pvt. Ltd. During reassessment, the assessee furnished loan confirmation, bank statements of both the assessee and the lender, and evidence of repayment through banking channels. Despite this, the Assessing Officer treated the loan as unexplained cash credit under section 68.

On appeal, the CIT(A) deleted the addition after examining the documentary evidence and recording a finding that the identity, genuineness, and creditworthiness of the lender were duly established.

Before the Tribunal, the Revenue contended that routing transactions through banking channels alone was insufficient. The ITAT rejected this argument, holding that:

• The assessee had fully discharged the onus under section 68,
• The CIT(A)’s findings were factual and reasoned, and
• No material infirmity or contrary evidence was brought on record by the Revenue.

The Tribunal also clarified that although the case fell under an exception to the low-tax-effect circular, the Revenue had no sustainable case on merits.

Accordingly, the Revenue’s appeal was dismissed, and the deletion of the section 68 addition was upheld.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This is an appeal filed against the order dated 25-08­2025 passed by ADDL/JCIT(A)-2, Noida for assessment year 2012-13.

2. The grounds of appeal are as under:-

“(a) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 10,00,000/- made under section 68 of the Income Tax Act, 1961, on account of unexplained cash credit, without properly appreciating the facts brought on record by the Assessing Officer.

(b) The Ld. CIT(A) has erred in law and on facts in accepting the genuineness of the loan transaction merely on the basis that the amount was received and repaid through banking channels, without verifying the source of funds and creditworthiness of the lender, M/s Alton Infrastructure Pvt. Ltd.

(c) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.”

3. The assessee is an individual and filed return of income for assessment year 2012-13 on 29-09-2012 declaring total income at Rs. 22,26,830/-. The case of the assessee was reopened u/s. 147 of the Act thereby issuing notice u/s. 148 on 29-03-2019. Based on the information from DDIT Investment, the assessee filed return of income in response to the notice u/s. 148 on 20-08-2019. The statutory notices were issued during the re-assessment proceedings and the same was replied by the assessee. The assessee also submitted various documents in respect of land transaction i.e. confirmation of loan bank statement of the assessee as well as bank statement of the lender. The Assessing Officer passed assessment order u/s. 143(3) r.w.s. 147 of the Income Tax Act vide order dated 10-12-2019 thereby making addition of Rs. 10 lakhs as unsecured loan treating as unexplained cash credit u/s. 68 of the Act.

4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee

5. The ld. D.R. submitted that the CIT(A) erred in deleting the addition as the assessee has not explained the cash credit and has not brought anything related to the amount received and repaid through banking channels.

6. The ld. A.R. relied upon the order of the CIT(A) and submitted all the relevant documents were filed before the CIT(A). The ld. A.R. also submitted that the present appeal is low tax appeal.

7. Heard both the parties and perused all the material available on record. It is pertinent to note that this is a search matter related to the unsecured loan from M/s. Alton Infra Pvt. Ltd., therefore does not come under the circular of low tax effect but comes under the exceptions prescribed in the said circular. Beside this, on merit, the assessee has explained the details related to the unsecured loan and in fact has given the details related to the repayment of the said loan and after taking cognizance of the same, the CIT(A) has passed reasoned order thereby deleting the addition. There is no need to interfere with the findings of the CIT(A).

8. In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 06-01-2026