Section 68 Addition Set Aside by ITAT Mumbai — Documentary Proof Upheld, Repayment Sent Back for AO Verification

Case Overview

Case: Rachna Kirti Doshi Vs ITO (ITAT Mumbai)
Assessment Year: 2014-15
Order Date: 12.03.2026
Forum: Income Tax Appellate Tribunal, Mumbai

In a significant ruling concerning the applicability of Section 68 of the Income Tax Act, 1961, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) set aside an addition of Rs. 17.50 lakh that had been made on account of alleged bogus unsecured loans. The Tribunal found that the assessee had comprehensively discharged the onus cast under Section 68, and that the Assessing Officer (AO) had relied solely on an Investigation Wing report without conducting any independent inquiry. However, to ensure completeness, the matter was remanded back to the AO for the limited purpose of verifying whether the loan repayments were indeed genuine.

Background and Facts of the Case

How the Matter Originated

The proceedings in this case were triggered by information forwarded to the AO from the office of the ADIT (Investigation), Mumbai. A survey action had been carried out in the case of one Mr. Shailesh M. Shah, during which certain loose papers were discovered at his residential premises. These papers allegedly indicated that the assessee had engaged in bogus financial transactions in the form of unsecured loans, which were characterised as accommodation entries.

Based on this information, the AO issued notices to the assessee, considered the replies furnished, and ultimately made additions under Section 68 of the Income Tax Act, 1961, treating the amounts received as unexplained cash credits.

Proceedings Before CIT(A)

The assessee challenged the additions before the Commissioner of Income Tax (Appeals). The National Faceless Appeal Centre (NFAC), Delhi, adjudicated the matter and, through its order dated 23.12.2024 passed under Section 250 of the Act, partially confirmed the additions — restricting them to Rs. 17.50 lakh. Aggrieved by this partial confirmation, the assessee approached the ITAT Mumbai.

Grounds of Appeal Before ITAT

The assessee raised the following grounds before the Tribunal:

  1. Ground 1: The CIT(A) erred in dismissing the challenge to the reopening of assessment. The assessee contended that the AO had wrongly reopened the assessment, and the CIT(A) erred in confirming the reopening under Section 147 of the Act.

  2. **Grounds 2 to 4 (interconnected)😗* These grounds collectively challenged the confirmation of the addition of Rs. 17,50,000/-, specifically contending that:

    • No opportunity was provided to rebut the allegations
    • No material, statements, or dispositions of the relied-upon party were shared
    • No opportunity for cross-examination of the relevant person was granted
    • The AO relied on third-party information rather than evidence from the actual lenders
    • The loans were genuine, making Section 68 inapplicable

  3. Ground 5: General reservation to add, modify, or substitute grounds.

Assessee's Submissions and Documentary Evidence

Evidence Furnished to Prove Genuineness of Loans