ITAT Mumbai Dismisses Revenue's Appeal: Loan Repayment Cannot Be Treated as Unexplained Cash Credit Under Section 68
Case Reference
DCIT Vs A P Trading Co. (ITAT Mumbai)
Assessment Year: 2019–20
**Order Date of CIT(A)😗* 24th April, 2025
Order Pronounced by ITAT: 07th April, 2026
Background and Overview
This matter arose from an appeal preferred by the Revenue and a cross-objection filed by the assessee, both directed against the order dated 24th April, 2025 passed by the Commissioner of Income Tax (Appeals)-49, Mumbai, for assessment year 2019–20.
At the heart of this dispute was an addition of ₹12,69,00,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, treating unsecured loans received from Prathna Private Limited as unexplained cash credits. The Revenue contended that the CIT(A) had erroneously deleted this addition. The assessee, meanwhile, had filed a cross-objection raising jurisdictional challenges to the search proceedings under Section 132 and consequent notices under Section 153A — but ultimately chose not to press those grounds at the time of hearing.
Grounds Raised by the Revenue
The Revenue raised the following grounds before the Tribunal:
The CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee could not prove the repayment of the unsecured loans along with sources of repayment and reasons thereof.
The CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee could not prove the creditworthiness of the lenders and the genuineness of the transactions.
The CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee could not provide any satisfactory explanation about the nature and source of the amount credited in its books of accounts. Therefore, the assessee held that the amounts totaling to Rs. 12,69,00,000/- found credited in the books of accounts of the assessee during the year under consideration as unsecured loans are nothing but accommodation entries.
The CIT(A) erred in allowing the appeal of the assessee despite the fact that the assessee could not prove that the entire chain of flow of funds and there is a complex layering. It is claimed that some of the funds advanced to the assessee were received from the assessee group's other entities itself. The funds could have been transferred directly from one Group Company to the other group company and the unnecessary layering and circular movement indicate mala fide intentions.
Grounds Raised by the Assessee in the Cross-Objection
The assessee's cross-objection raised the following grounds:
The Learned DDIT(Inv.), Unit-1(2), Mumbai, erred in issuing search warrant No. MUM C/U-4/18-19/06 dated 17.04.2018, led by Team-JWO-6, without having any information in its possession on the basis of which a reasonable belief can be founded that the respondent has omitted or failed to produce books of accounts or other documents before conducting search action u/s 132 of the Act or that the respondent was in possession of any money, bullion, jewellery or other valuable article which represents wholly or partly any income or property, which has not been disclosed by the respondent. In view of the same, the search warrant No. MUM C/U-4/18-19/06 dated 17.04.2018, led by Team-JWO-6, is clearly illegal, bad in law and ultra-vires the provisions of the Income Tax Act, 1961.
The Learned DDIT(Inv.), Unit-1(2), Mumbai, erred in issuing search warrant No. MUM C/U-4/18-19/06 dated 17.04.2018, led by Team-JWO-6, in the name of the respondent on the pretext of search action being actually conducted on M/s. Asuti Trading Pvt Ltd. that does not operate from the address viz. 1, Pearl Mansion [N], 91, M. Karve Road, Mumbai – 400 020.