The Income Tax Appellate Tribunal, Mumbai Bench “A”, in Income Tax Officer, Ward-6(1)(1), Mumbai v. Agility Consultancy Private Limited, upheld the deletion of an addition of ₹3.05 crore made under Section 68 of the Income-tax Act, 1961. The Tribunal held that transactions cannot be treated as unexplained merely on the basis of an Investigation Wing report when the assessee has furnished comprehensive documentary evidence and the Assessing Officer has not conducted an independent enquiry. The order was pronounced on 29 July 2026 in ITA No. 8683/Mum/2025 for Assessment Year 2013-14.
Background of the Case
Agility Consultancy Private Limited, engaged in consultancy services, had received an unsecured loan of ₹2.80 crore from PNR Exim Private Limited and share application money of ₹25 lakh from Blow Agency Private Limited. The Assessing Officer treated the aggregate amount of ₹3.05 crore as bogus accommodation entries and added it to the assessee’s income under Section 68.
The Commissioner of Income Tax (Appeals) deleted the addition after examining the documentary evidence submitted by the assessee. The Revenue challenged that decision before the ITAT Mumbai.
Documentary Evidence Furnished by the Assessee
The assessee produced corporate registration details, permanent account numbers, registered office addresses, particulars of directors, certificates of incorporation, audited financial statements, income-tax returns, cash-flow statements and records relating to the business operations of the creditor companies.
The Tribunal noted that these documents were furnished before both the Assessing Officer and the appellate authority. The Revenue did not produce any material demonstrating that the documents were false, fabricated or otherwise unreliable.
Repayment Through Banking Channels Supported Genuineness
A significant factor considered by the Tribunal was that the unsecured loan and share application money had been repaid through banking channels before completion of the assessment proceedings. A substantial portion had been repaid even before the notice under Section 143(2) was issued.
The share application money of ₹25 lakh was returned on 15 May 2013, whereas the scrutiny notice was issued only on 11 September 2014. In relation to the unsecured loan, ₹2.15 crore was repaid on 29 April 2014, and the running account ultimately reflected a nil balance.
The Departmental Representative did not advance any substantial argument disputing the fact of repayment.
Investigation Report Cannot Replace Independent Enquiry
The Tribunal found that the Assessing Officer had primarily relied upon information received from the Investigation Wing, according to which the creditor companies were allegedly controlled by an accommodation-entry provider.
However, the Assessing Officer did not undertake any specific or independent enquiry to rebut the evidence submitted by the assessee. The Tribunal observed that every transaction must be examined on its own merits and cannot be characterised as non-genuine merely because the concerned entity is alleged to be connected with an entry operator.
An Investigation Wing report may provide a basis for examining a transaction, but it cannot by itself justify an addition when the assessee has discharged the primary burden imposed under Section 68.
Creditworthiness Must Be Examined From Complete Financial Records
The appellate findings also highlighted that the creditworthiness of a creditor cannot be rejected merely by referring to its profit and loss account while ignoring its reserves, surplus, cash-flow position and other financial resources.
The assessee had furnished cash-flow statements and audited financial records supporting the lending capacity of the creditor companies. No contrary evidence was brought on record by the Revenue.
ITAT Mumbai’s Decision
The ITAT held that the assessee had satisfactorily established the identity of the creditors, their creditworthiness and the genuineness of the transactions. The Revenue failed to discredit the documentary evidence or produce any binding judicial precedent warranting interference with the order of the Commissioner of Income Tax (Appeals).
Accordingly, the Tribunal upheld the deletion of the ₹3.05 crore addition made under Section 68 and dismissed the Revenue’s appeal.
Legal Principle Emerging from the Decision
The ruling reinforces that an addition under Section 68 must be based on a proper examination of the evidence relating to the particular transaction. General information regarding an alleged accommodation-entry network cannot override credible documentary evidence without an independent investigation by the Assessing Officer.
Repayment through normal banking channels, particularly where it takes place before scrutiny proceedings begin, may constitute material evidence supporting the genuineness of the transaction. Nevertheless, the issue must be determined from the complete factual record, including the creditor’s identity, financial capacity, transaction documents and banking trail.
Why This Judgment Matters
The decision is relevant for advocates, Chartered Accountants, tax consultants, corporate tax teams and businesses dealing with additions involving unsecured loans, share application money and alleged accommodation entries. It clarifies the evidentiary burden under Section 68 and emphasises that suspicion or third-party intelligence cannot substitute a transaction-specific enquiry.
