ITAT Delhi Quashes Bogus Loan Additions: Third-Party Search Allegations Cannot Override Assessee's Documentary Evidence

In a significant judicial pronouncement, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, has reinforced the evidentiary sanctity of transaction-specific documentation over generalized allegations stemming from third-party search operations. The ruling, delivered in the case of DCIT Vs New Age Infosys Pvt. Ltd. (ITA Nos. 6798 to 6800/Del/2026), establishes that an assessing authority cannot summarily discard an assessee's financial records merely because the lending entity was implicated in an independent search and seizure action.

The common order, pronounced on 29 September 2026, dismissed three appeals filed by the Revenue concerning Assessment Years (AY) 2016-17 and 2017-18. The Tribunal upheld the findings of the Commissioner of Income-tax (Appeals) [CIT(A)], which had previously deleted massive additions made under Section 68, Section 69A, and Section 69C of the Income-tax Act, 1961.

This comprehensive summary delves into the factual matrix, the Assessing Officer's (AO) contentions, the assessee's defense, and the pivotal legal principles established by the Tribunal.

Factual Matrix of the Dispute

The genesis of the dispute traces back to a search and seizure operation conducted under Section 132 of the Income-tax Act, 1961 on 17 November 2021, targeting a third party known as the Galaxy Group. It is crucial to note that no search was conducted on the premises of the assessee, New Age Infosys Pvt. Ltd., nor was any incriminating material directly belonging to the assessee discovered during the third-party search.

Based on an investigation report suggesting that certain entities associated with the searched group were operating as accommodation entry providers, the AO initiated reassessment proceedings against the assessee. Notices were issued under Section 148 of the Act, invoking Explanation 2(iv) to Section 148 for AY 2016-17 and the second appeal of AY 2017-18, while the procedure under Section 148A was followed for the first appeal of AY 2017-18.

The Assessing Officer's Contentions and Additions

The AO's primary allegation was that the assessee had routed its own unaccounted money through paper entities controlled by alleged entry operators. Consequently, the AO treated the unsecured loans received by the assessee as non-genuine and made a series of heavy additions across the two assessment years.