ITAT Mumbai Deletes ₹50 Lakh Addition Under Section 69A: Bank Records and Confirmations Establish Genuineness of Loan Transaction

Case Reference: Bansi Fashion Private Limited Vs ITO (ITAT Mumbai)

The Mumbai bench of the Income Tax Appellate Tribunal delivered a noteworthy ruling in favour of the assessee by setting aside an addition of ₹50 lakh made under Section 69A of the Income Tax Act, 1961. The Tribunal held that where loan transactions are comprehensively backed by bank statements, ledger accounts, and direct confirmation from the concerned bank, the Revenue cannot sustain an allegation of "cash loan" merely on the basis of information gathered during third-party search proceedings.

Background and Facts of the Case

Origin of the Dispute

The present appeal arose out of an order dated 08.10.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi, pertaining to Assessment Year (A.Y.) 2023-24.

The assessee, a resident individual, had filed its return of income on 09.10.2026, declaring total income of ₹2,19,50,280/-. The return was subsequently selected for scrutiny assessment.

Search Proceedings in the Surana Group

During the course of assessment, the Assessing Officer (AO) came across information emerging from a search and seizure operation conducted in the case of the Surana Group, which also covered the residential premises of one Shri Payag H. Dugar. Material unearthed during this search allegedly indicated that Shri Narendra G. Somani, proprietor of Bhagwati Marketing Co., had received loans aggregating to ₹8,03,25,000/- from various lenders. The assessee was identified as one such lender, purportedly having advanced a cash loan of ₹50 lakh to Shri Narendra G. Somani.

On this basis, the AO issued a query directing the assessee to explain the source of the alleged cash loan.

Assessee's Explanation and Evidence Submitted

Position Taken by the Assessee

The assessee firmly denied having advanced any loan in cash. It was explained that a total loan of ₹1 crore was extended to Shri Narendra G. Somani entirely through proper banking channels. Out of this total, ₹50 lakh was repaid by the borrower during the same financial year in which the loan was disbursed, while the remaining ₹50 lakh continued to remain outstanding.

The assessee further pointed out that interest income at the rate of ₹62,500/- per month was being earned on the outstanding loan amount and was being duly offered to tax — a fact that itself demonstrated the legitimacy and continuity of the lending relationship.

Documentary Evidence Produced

To substantiate its stand, the assessee placed the following evidence before the AO: