TaxTMI 
TaxTMI 
2026 (5) TMI 687
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....6,420/-. The AO observed that during the year assessee has received loan of Rs. 14,00,00,000/- from M/s Hallow Securities Pvt. Ltd. and paid interest of 3,62,507/-. Out of the total loan, a sum of Rs. 2,00,00,000/-was treated as unexplained credit and addition u/s. 68 r.w.s 115BBE of the Act was made for the principal amount of 2.00 crores and interest thereon of Rs. 3,62,507/-and the total income was assessed at Rs. 6,91,48,927/-. 3. Against the said order, the assessee filed an appeal before the Ld. CIT(A) who has allowed the appeal of the assessee and deleted the addition made by the AO. 4. Aggrieved by the said order, the Revenue is in appeal before the Tribunal by following grounds of appeal: 1. Whether on facts and circumstances of the case and in taw, the Ld. CIT (A-3 Noida has erred in deleting the addition of Rs. 2,00,00,000/- made under Section 68 r.w.s 115BBE of the Income Tax Act, 1961, without appreciating the fact that the assessee has failed to discharge the onus of proving the identity, creditworthiness of the lender and genuineness of the transaction. 2. Whether on facts and circumstances of the case and in ta@ Noida has erred in deleting th....
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....rities Pvt. Ltd., the assessee has been able to establish the source of source of loan of Rs. 12.00 crores and for the balance amount of Rs. 2.00 crores, assessee has filed to prove the source of source, therefore, AO has made the addition and requested for the confirmation of the same. The Ld. CIT-DR further submits that ld. CIT(A) at page 67 of the order has referred certain enquiries from SFIO which are separate and independent enquiries and based on the same addition should not be deleted. Ld. CIT-DR thus, alternatively prayed that matter be sent to the file of Ld. AO for fresh verifications of this fact. 7. On the other hand, Ld. AR for the assessee vehemently supported the order of Ld. CIT(A) and submits that during the course of assessment proceeding, assessee has filed all the documents to establish the identity and creditworthiness of the lender and genuineness of the transactions of loan taken from M/s. Hallow Securities Pvt. Ltd. which contained the PAN Card, Bank Statements, Assessment Orders from AY 2011-12 to AY 2017-18, RBI Certificate with respect to NBFC Status, Loan confirmation, ledger account evidencing TDS deduction and repayment of loan and financial statem....
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....en to other concerns by Hallow Securities Pvt. Ltd. during the earlier years or the year under consideration (or routed through the genuine entities like Teesta Retails Pvt. Ltd., HFCL and ICICI Prudential Mutual Funds in ACE Group) meaning thereby that the creditworthiness of entities like Sundram Consultant Pvt Ltd, becomes irrelevant. Hence, the application of Section 68 using the source of source theory to the case of the appellant becomes uncalled for in above circumstances. 2. The fund flow statement of M/s. Hallow Securities Pvt. Ltd. from AY 2017-18 to AY 2022-23 reveals that there were sufficient funds available with Hallow Securities Pvt. Ltd. out of additions made by AO which were advanced to various concerns including the appellant. Without prejudice to the above findings and discussion, it is observed that the bank credits in the hands of M/s. Hallow Securities Pvt. Ltd. have already been added by the AO in the assessment orders of M/s. Hallow Securities Pvt. Ltd. for AY 2017-18 to AY 2022-23, the adding the same money emanating from the said accounts in the hands of the assessee company would amount to double taxation of the same money. 3. The AO in ....
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....nced to various entities and returned back or the said funds have been taxed in the hands of Hallow Securities Pvt. Ltd. In view of the discussion on various issues carried out above, the addition made by the AO is not found to be sustainable and accordingly these grounds of appeal are allowed. 10. It is further observed that under identical circumstances and by making similar allegations additions were made in the case of M/s Allure Developers Pvt. Ltd for the loans taken from M/s Hallow Securities Pvt. Ltd. in AY 2020-21 which were deleted by ld. CIT(A) and such orders were upheld by the coordinate Delhi Bench of Tribunal in ITA NO. 3558/Del/2025 vide its order dt. 26.11.2025. The relevant observations of the coordinate bench as contained in para 19 to 40 of the order are reproduced herein below for sake of convenience: 19. Heard the parties and perused the material available on records. In the present case the sole issue before us is the addition made of Rs. 17,74,00,000/- made by AO by holding the loans taken from M/s Hallow Securities Pvt. Ltd as unexplained u/s. 68 of the Act which stood deleted by ld. CIT(A). Before going further, the facts leading to th....
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....f the assessee that no incriminating document whatsoever was found / seized during the course of search from the possession of the assessee or any of the directors or its employees. As the assessee no document is referred / relied upon by the AO for making the additions. He solely placed reliance on the statements of the director of assessee company and one of the employees of Ace group and also placed heavy reliance on the 26. As per section 68 of the Act, there must be a credit of amounts in the books maintained by an assessee and such credit has to be of a sum received during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offer no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true that the opinion of the Assessing Officer fo....
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....Hotels Ltd. Vs. CIT in ITA No. 2688/DEL/2014 dated 31.05.2022. 31. Further the Delhi Bench of ITAT in the case of ACIT v Smt. Prem Anand in ITA No. 3514/Del/2014 vide order dated 13.04.2017 held that amendment made in section 68 of the Act w.e.f. 01.04.2013 empowers the A.O. to examine source of source in case of share application money / share capital / share premium from 01.04.2013 and this amendment does not give power to the A.O. to examine source of source of non-share capital cases. 32. As is evident from the chart as reproduced above, assessee has been able to establish the source of source in the hands of the lender company M/s Hallow Securities Pvt. Ltd. and the AO has wrongly under stood the said receipts as loans taken by the lender company whereas the same were repayment of the loans given by the lender company to all those companies thus the allegations made about the financial statements of the companies whose sums were credited in the bank account of the assessee prior to the funds transferred to the assessee is totally uncalled for and thus ignored and excluded and cannot be considered for examining the genuineness and creditworthiness of the lende....
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.... Hallow Securities Pvt. Ltd. had been regular in its compliances with ROC and RB etc. The exact correspondences with M/s. Hallow Securities Pvt. Ltd. and SEIO have already been reproduced above in the body of the order. M/s. Hallow Securities Pt. Ltd. in response to enquiry from this office provided the following information: a. Details of the annual returns filed with the ROC from AY 2018-19 till AY 2024-25. b. Details of the annual returns filed with the RBl from AY 2018-19 till AY 2024-25. c. No show cause has been received by the above company from the ROC since Financial Year 2017-18 (i.e. even after a period of seven years of the press release quoted by the AO). Enquiry letter was also issued to SFIO to know, if any, proceedings were pending with the Nodal Authority against M/s. Hallow Securities Pvt. Ltd. The response of SFIO authorities has already been reproduced in the body of the order above. The Nodal Authority (SFIO) has clearly reported that no proceedings are pending against M/s. Hallow Securities Pvt. Ltd. with their office" 35. Further from the perusal of observations at page 79 onwards of the order of ld. CIT(A) we find....
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....cises his statutory suo moto power under above sub-section, that requirements of rule 46A need not be followed - Held, yes" Further, the Hon'ble High Court of Karnataka in the case of Shankar Khandasari Sugar Mills v. CIT reported at 59 taxman 405 has observed as under: "The appellate authority should have accepted the material produced by the assessee as clarificatory in nature and considered the same to test the fairness and propriety of the estimate of income made by the Income-tax Officer. Though it was belated production of very relevant material, no prejudice (in its legal sense) would have resulted to the Revenue by considering the material produced by the assessee... In the absence of any prejudice to the Revenue, and the basis of the tax under the Act being to levy tax, as far as possible, on the real income, the approach should be liberal in applying the procedural provisions of the Act. An appeal is but a continuation of the original proceeding and what the Income-tax Officer could have done, the appellate authority also could do." [Emphasis supplied] (p. 673) Further, the Hon'ble High Court of Allahabad in the case of Smt. Mishingar Ka....
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....46A, means that if facts of case warrant further enquiries, it is within powers of Commissioner (Appeals) to do so - Held, yes - Whether if prima facie an information is necessary to examine claim of assessee, Commissioner (Appeals) should consider necessary evidence in exercise of his powers under subsections (4) and (5) of section 250 - Held, yes" Further, the Ld. ITAT Ahmedabad Bench 'C' in the case of Deputy Commissioner of Income-tax vs. J.A. Infracon (P.) Ltd reported at [2025] 171 taxmann.com 228 (Ahmedabad - Trib.) has held as under: Commissioner (Appeals) called for a remand report from Assessing Officer and issued notice under section 133(6) to aforesaid investor companies and in response to same, parties namely 'ATPL' and 'ALPL' confirmed transactions With assessee company with necessary documents and evidences - These Confirmations were not controverted by Assessing Officer by way of bringing anything adverse on record - Further in spite of availability of all documents transaction with share applicant companies who had made share application on record, nothing had been brought on record by Assessing Officer to doubt in assessee....
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....ove issue, the Hon'ble Supreme Court in the case of Assistant Commissioner of income-tax vs. Gujarat Television (P.) Ltd. reported at [2024] 159 taxmann.com 739 (SC) has held as under: "SLP dismissed against order of High Court that where unsecured loans given to assessee were squared up on same date and nothing remained outstanding at end of day, much less at end of financial year, impugned reassessment proceedings to tax same under section 68 deserved to be quashed" On the above issue, the Hon'ble High Court of Mumbai in the case of Principal Commissioner of Income-tax vs. Bairagra Builders (P.) Ltd. reported at [2024] 164 taxmann.com 162 (Bombay) has held as under: "Where assessee had taken unsecured loan from two companies and had submitted all evidences to substantiate loan including confirmation from creditors and loan was taken and repaid through banking channels, Assessing Officer was not justified in treating said unsecured loan as fake and unexplained cash credit" Further, the Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax (Central vs. Dharmesh Padamshibhai Patel soner reported at [2023] 15....
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....late authorities had rightly deleted addition made by Assessing Officer - Held, yes [Paras 9 and 11] [In favour of assessee] Further, the Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax vs. Ambe Tradecorp (P.) Ltd reported at [2022] 145 taxmann.com 27 (Gujarat) has held as under: Where assessee took loan from two parties and assessee had furnished requisite material showing identity of loan givers and that assessee was not beneficiary as loan was repaid in subsequent year, no addition under section 68 could be made on account of such loan Further, the Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax vs. Ojas Tarmake (P.) Ltd. reported at [2023] 156 taxmann.com 75 (Gujarat) has held as under: Where assessee showed unsecured loans received during relevant assessment year and AO made addition on ground that assessee failed to discharge onus of liability as laid down under section 68, since amount of loan received by assessee was returned to loan party during year itself and all transactions were carried out through banking channels, impugned addition was to be deleted." ....
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....low Securities Pt. Ltd. has excluded the funds advanced to ACE Group from the total credits added in the hands of Hallow Securities Pvt. Ltd. The exclusion of the funds advanced to the ACE Group from the total credits added by the AO in the hands of Hallow Securities Pvt. Ltd. is immaterial as when the total addition made in the hands of Hallow Securities Pvt. Ltd. is compared with the increase in the application of funds in its balance sheets over the years, a net surplus persists, clearly demonstrating that same funds have been subjected to multiple and duplicate additions. 4. It is further evident that the exclusion of funds advanced to ACE Group from the current year's credits in the hands of Hallow Securities Pvt. Ltd. is also inconsequential for the reason that the corresponding credits in earlier years have already been added to the income in the case of Hallow Securities Pvt. Ltd. Hence, once the original advances and credits forming the substratum of these transactions have been added to the income of Hallow Securities Pvt. Ltd., any subsequent reduction from the credits in accounts of Hallow Securities Pvt. Ltd. of the advances given to the ACE Group does not....