ITAT Deletes Rs 87 Lakh Section 68 Addition After Finding No Evidence of Assessee’s Involvement in Accommodation Entries
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted an addition of Rs 87 lakh made under Section 68 of the Income Tax Act in the case of Late Govindram Mathuradas Agarwal for Assessment Year 2012-13.
The case involved a loan of Rs 87 lakh received by the assessee from Banas Finance Ltd., a company that had been described by the Income Tax Department as a penny-stock company involved in providing accommodation entries.
The Assessing Officer had reopened the assessee’s assessment after receiving information from the Investigation Wing. According to the information, Banas Finance Ltd. had allegedly been used to provide accommodation entries and the assessee had received a loan of Rs 87 lakh from the company.
During the reassessment proceedings, the assessee’s legal heirs submitted several documents, including the income-tax computation, Form 26AS, bank statements, a loan confirmation from Banas Finance Ltd. and the bank statement showing that the loan had actually been transferred to the assessee.
The AO examined these documents but still treated the Rs 87 lakh loan as unexplained cash credit under Section 68. The addition was later upheld by the CIT(A).
The ITAT, however, disagreed with the authorities below. The Tribunal noted that the assessee had provided documentary evidence supporting the identity of the lender, the loan transaction and the movement of funds through banking channels.
Importantly, the Tribunal observed that there was no specific allegation or evidence showing that the assessee himself was involved in manipulating or rigging the shares of Banas Finance Ltd. The AO had relied mainly on general findings and allegations concerning the lender and other persons allegedly involved in accommodation-entry activities.
The Tribunal also noted that the Rs 87 lakh loan was subsequently repaid through banking channels. The assessee had demonstrated a repayment of Rs 89,00,056 on September 10, 2012, through his Indian Bank account.
According to the Tribunal, while repayment of a loan by itself does not conclusively prove that a transaction is genuine, it becomes an important supporting factor when the assessee has already produced sufficient documentary evidence to discharge the initial burden under Section 68.
The Tribunal relied on earlier decisions of the Bombay High Court, including Pr. CIT v. Skylark Build and Pr. CIT v. Veedhata Tower Pvt. Ltd., where subsequent repayment and documentary evidence were considered relevant in deciding the genuineness of loan transactions. It also referred to the Gujarat High Court’s decision in CIT v. Ayachi Chandrashekhar Narsangji.
The ITAT concluded that there was no substantive evidence establishing that the Rs 87 lakh represented the assessee’s own undisclosed money routed through Banas Finance Ltd.
Accordingly, the Tribunal deleted the Rs 87 lakh addition under Section 68 and allowed the assessee’s appeal.
Case citation: Late Govindram Mathuradas Agarwal Vs ITO (ITAT Mumbai); ITA No.4194/MUM/2026; 24/08/2026; 2012-13.
