Mere Payment by Cheque Doesn’t Make Loan Transaction Genuine

The Tribunal recently dismissed two appeals filed by a company because it never appeared for a personal hearing, gave no proof for payments or loans, and failed to explain the source of the money.

The present appeal has been filed by a company named Appu Ghar Entertainment Ltd (Appellant) against the Assistant Commissioner of Income Tax (Respondent) in the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘A’: New Delhi before Shri Challa Nagendra Prasad (Judicial Member) and Shri Avdhesh Kumar Mishra (Accountant Member). The case is related to the assessment years 2017-18 and 2018-19, and the final decision was announced on November 10, 2025.

The assessee, i.e., Appu Ghar Entertainment Ltd., filed two appeals for assessment years 2017-18 and 2018-19, against the Commissioner of Income Tax (Appeals)-23, New Delhi. Both appeals involved only one issue each, both related to unexplained money under the Income Tax Act; hence, the tribunal announced decisions for both appeals simultaneously.

Background of Case:

For Assessment Year 2017-18:

• The assessee made a payment of Rs. 61.20 lakh to a foreign company named D E Shaw Composite Investments Appu, Mauritius.
• It could not explain how it got the money or show documents proving that this payment was for purchasing Foreign Convertible Debentures (FCDs).
• As a result, the assessing officer (AO) treated this amount of Rs. 61.20 lakh as an unexplained investment under Section 69 and added it to the taxable income.

Dissatisfied assessee then filed an appeal before CIT(A); however, the assessee did not appear for a personal hearing on the scheduled date, even after being given 11 chances. Resulting in which, the CIT(A) upheld the addition of Rs. 61.20 lakh made by the AO as unexplained income.

For Assessment Year 2018-19:

• The company received a loan of Rs. 4.10 crore from its group company, Appu Ghar Securities & Solutions Private Limited.
• Similar to the assessment year 2017-18, the company failed to prove the creditworthiness of the lender and the genuineness of the loan transaction.
• As a result, the Assessing Officer (AO) made an addition of Rs. 4.10 crore to the income of the assessee under Section 68 as unexplained cash credit.

Aggrieved asseesse again filed an appeal before the CIT(A); however, same the previous senior, the assessee did not appear for the personal hearing on the scheduled date, even after getting 9 chances. In conclusion, the CIT(A) confirmed the addition of Rs. 4.10 crore to the assessee’s income made by the AO.

ITAT’s Findings

• The Tribunal noted that the company never attended hearings (even after 11 hearing dates at ITAT).
• It agreed with the tax department that the company failed to submit any evidence to justify the payments or loans.
• Under Sections 68 and 69, the burden is on the taxpayer to explain the source of money or investment.
• Since Appu Ghar Entertainment Ltd did not do this, both additions made by the AO and confirmed by CIT(A) were upheld.

Decision

The tribunal, in its final decision, dismissed both the appeals filed by the assessee and confirmed that the additions of Rs. 61.20 lakh (AY 2017-18) and Rs. 4.10 crore (AY 2018-19) remain taxable as unexplained money.