ITAT Holds Repaid Loan Cannot Be Treated as Bogus Accommodation Entry Merely on Suspicion:

The assessee had filed its return of income declaring Rs 22,83,230 on 13 March 2022. Subsequently, the AO initiated reassessment proceedings under Section 147 of the Income Tax Act, 1961, based on information arising from a search conducted on the Galaxy Group and alleged accommodation entry providers, including Shri Deepak Agarwal and Shri Himanshu Verma.

The investigation indicated that the assessee had allegedly received an accommodation entry of Rs 1 crore through entities controlled by the said operators. The AO treated the unsecured loan received from M/s Saivi Finance Private Limited as non-genuine and made an addition of Rs 1 crore under Section 68 for AY 2021–22, along with other additions and a disallowance of interest under Section 36(1)(iii). Further additions were made for AY 2022–23 under Sections 69A and 69C.

On appeal, the CIT(A) partly allowed the assessee’s appeals by deleting the disputed additions. 

The Tribunal examined the findings recorded by the CIT(A), the rival submissions and the material available on record. It noted that the loan of Rs 1 crore had been received from M/s Saivi Finance Private Limited through banking channels and had been repaid, along with interest, before the issuance of the notice under Section 148 dated 19 March 2024.

The Tribunal found that the assessee’s repayment of the loan before the reassessment notice, supported by banking records and ledger entries, remained unrebutted by contrary material. It held that the Revenue’s grounds lacked merit and declined to interfere with the CIT(A)’s findings.

The Tribunal accordingly upheld the deletion of the disputed addition and the consequential relief granted by the CIT(A). It applied the same conclusion to the appeal concerning AY 2022–23, as the facts and issues were materially similar. The Tribunal condoned the 15-day delay in filing the Revenue’s appeals, finding no indication of mala fides in the explanation offered. However, on merits, it dismissed both appeals filed by the Revenue and upheld the relief granted by the CIT(A).