O R D E R
Per Arun Khodpia, AM:
1. This appeal is instituted by the revenue, directed against the order of Commissioner of Income Tax Appeals/ National Faceless Appeal Centre, Delhi ["the Ld. CIT(A)] dated 27.05.2025 for the assessment year 2017-18, arises from assessment order u/s 143(3) r.w.s 144B of the Income Tax Act, 1961 ("the Act"). Grounds of appeal are as under:
i. Whether on the facts and circumstances of the case and Law the Ld. CIT (Appeal) was justified in allowing the addition of Rs. 1,51,90,000/-, on account of unsubstantiated loan taken from Core Education Technologies P. Ltd as The assessee has not furnished supporting evidence in support of its claim that rectification entries made in the transactions. The
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assessee has not furnished the details of loan taken from the struck off company and The assessee did not submit any new evidence. Instead, the same evidence that was originally submitted during the assessment proceedings was resubmitted with the CIT(A).
ii. Whether on the facts and circumstances of the case and Law the Ld. CIT (Appeal) was justified in allowing repayment of loan of Rs 30,00,000/- to Core Education Infratech Ltd. as it was a strike off company and the genuineness and creditworthiness could not be established Only filing copy of letter from payee company is not a sufficient proof.
iii. Whether on the facts and circumstances of the case and Law the Ld. CIT (Appeal) was justified in allowing addition of Rs. 1,97,45,600/- in respect of repayment of loan to Core Education Technologies Pvt. Ltd. as the genuineness and creditworthiness has not been established and Only filing copy of letter from payee company is not sufficient proof. The company failed to provide conclusive proof substantiating these claims.
iv. Whether on the facts and circumstances of the case and Law the Ld. CIT (Appeal) was justified in allowing the addition of Rs. 12,00,000/- in respect of repayment of loan to Core Steel & Power Ltd. as The Payee Company is Struck off company and its genuineness and creditworthiness of loan cannot be accepted as transactions that lacked substantial proof regarding their authenticity.
v. Whether on the facts and circumstances of the case and Law the Ld. CIT (Appeal) was justified in allowing the addition of Rs. 9,90,000/- in respect of repayment of loan to Soham Health Awareness Pvt. Ltd. as The Payee Company is Struck off company and its genuineness and creditworthiness of loan cannot be accepted.
vi. Whether on the facts and circumstances of the case and Law the Ld. CII (Appeal) was justified in allowing the addition of Rs. 1,98,38,000/- in respect of loan repayment to Wisdom Global Enterprises Ltd. Only mentioning that the journal entry has been passed wrongly. Only filing copy of letter from payee company is not sufficient proof, and hence cannot be accepted. The assessee did not submit any new evidence. Instead, the same evidence that was originally submitted during the assessment proceedings was resubmitted with the CIMA).
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vii. Whether on the facts and circumstances of the case and Law the Ld. CIT (Appeal) was justified in allowing the addition of Rs. 41,66,667/-in respect of loan repayment to Vireet Investment on behalf of Core Education & Technologies Ltd transactions that lacked substantial proof regarding their authenticity. The company failed to provide conclusive proof substantiating these claims.
2. The assessee is a domestic company engaged in the business of SPA, providing service of wellness related to activities in the nature of treatments/therapies/health. During the year under consideration, the assessee has shown income of Rs.1,97,425/-. The case has been selected for scrutiny for three issues:
i. Investments/Advances/Loans
ii. Transactions with company whose registration cancelled by MCA.
iii. iii. Default in TDS & Disallowance for such default.
3. Notice u/s. 143(2) and u/s. 142(1) of the I.T. Act, were issued calling for details as per Annexure attached with the notice. The assessee has not responded to the said notice. Again, notice u/s. 142(1) of the I.T. Act, was issued on 06.01.2021 along with questionnaire. In response to this notice, the assessee has submitted part submission.
4. From the information on records, Ld. AO observed that during the year under consideration, the assessee had received loans as well as repaid certain loans from / to various parties. The assessee was specifically asked to furnish the details of Loans and Advances and also repayments made to the companies whose registration had been cancelled. In response to the notice,
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the assessee filed its reply. In the instant case, it was seen on perusal of Form 3CD that the assessee has taken unsecured loan of Rs.1,51,90,000/- from M/s. Core Education Infratech Limited and of Rs.1,49,72,933 /- from M/s. Vireet Investment P. Ltd. On further verification of Audit Report, it was seen that during the year the appellant has repaid loan to various companies during the year under consideration. In order to verify the genuineness of transaction of unsecured loan, notice u/s. 133(6) of the Act was issued and served to the lender companies for furnishing of details. Subsequently, the AO completed the assessment order u/s 143(3) r.w.s 144B of the Act on 24.04.2021 by making addition of Rs.4,47,73,600/- on account of unexplained expenditure, addition of Rs.1,51,90,000/- on accounts of loan taken from struck off companies and disallowance of Rs.41,66,667/- on accounts of repayment of loan paid by the assessee on behalf of Core Education Technologies Ltd.
5. Being aggrieved, the assessee has preferred the appeal before Ld. CIT(A), wherein the assessee had furnished various additional evidence, which were send for a remand report to the AO, a remand report was furnished which was rebutted by the assessee in due course, after considering all such aspects, Ld. CIT(A) decided the issue in favour of assessee, with following observations:
7. Decision: I have carefully considered the assessment order, statement of facts, grounds of appeal, submissions furnished by the appellant during the appellate proceedings and the remand report submitted by the AO.
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7.1 In Ground of appeal number 1, the appellant has challenged that the AO has made various additions totalling Rs. 6,41,30,267/- in respect of various accounting entries passed by the appellant. This ground being general in nature, does not require adjudication and is dealt with subsequently while adjudicating remaining grounds of appeal.
7.2 In Ground of appeal number2, the appellant has challenged the addition of Rs. 1,51,90,000/-, on account of unsubstantiated loan taken from Core Education Technologies P. Ltd. During the course of assessment proceedings, the appellant submitted that the loan is rectification entry and such loan has not been taken by actual inflow of money. 7.2.1 AO issued notice u/s. 133(6) of the Act to Core Education Technologies P. Ltd. for confirmation of transaction, capacity of the company to lend loan and genuineness of payment. However, no reply was received from the lender company and since, there was no response from the lender, the AO made addition of the same. The appellant during the course of assessment proceedings, has submitted that the Credit reflected in ledger account of Rs.1,51,90,000/- represents the rectification of wrong journal entry passed in the ledger in FY 2016-2017. Hence it submitted that there is no fresh loan taken during the year. It is only rectification entry passed through Journal. In support of its contention, the appellant has submitted the correspondence letter from Core Education Technologies P. Ltd. which states that "We request to rectify the entry passed in FY 2016-17 of Rs. 1,51,90,000/- payable to us through journal which was wrongly passed as payable to M/s. Wisdom Global Enterprises Ltd."
7.2.2 During the course of appellate proceedings, the appellant submitted that it has passed several accounting entries to rectify specific transactions as per the instructions provided by the Lender Company, which comprises entities that are sister concerns of the Appellant. These rectifications were made to ensure the accuracy of the financial records and to reflect the actual financial obligations between the Appellant and the Lender Company.
7.2.3 During the entire appellate proceedings, the Appellant repeatedly emphasized that the accounting rectifications and payments made on behalf of the Lender Company did not constitute income. These adjustments were corrective in nature and did not result in any actual inflow of revenue or economic benefit to the Appellant. 7.2.4 Further the appellant has also submitted vide letter dated 06.01.2025 that in the assessment order, the AO has made an addition of 1,51,90,000/- to the Appellant's income on the grounds that the amount was shown as a loan taken from M/s Core Education Technologies Ltd., a company that has been struck off from the records of the Registrar of Companies (ROC). The AO has relied on the fact that the lender company did not respond to a notice issued u/s 133(6) of the Income Tax Act, 1961. The appellant also submitted that specifically, during FY 2016-17, an incorrect debit of 1,51,90,000/- was made to the account of M/s Core Education Technologies Pvt. Ltd. in the ledger of M/s Wisdom Global Enterprises Limited. To correct this mistake, the Appellant recorded a rectification journal entry in the current financial year.
7.2.5 In support of its contention, the appellant submitted the ledger account for FY 2016- 17 and 2017-18 and letter from M/s. Core Education Technologies Ltd. addressed to appellant company requesting to pass the necessary rectification entry. 7.2.6 It is worthwhile to note that the assessment for AY 2016-17 was completed u/s. 143(3) of the Act. Loan transactions have been clearly scrutinized by the AO and erroneous entry of loan taken was passed in FY 2016-17 and no addition was made by the AO in that year.
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There is no case for the addition in the subsequent year, i.e. AY 2018-19 (AY under consideration), when the error has been rectified by the appellant. It is observed that M/s Wisdom Global Enterprises Ltd is the ultimate holding company of the appellant company, Core Education Technologies Ltd, Core Education Infra Ltd and Core Steel and Power Limited and entry of Rs. 1.51 crores passed in the ledger accounts of the appellant is merely a journal entry between the group companies and there is no actual inflow or outflow of money. There is absolutely no monetary transaction between the appellant and its group company.
7.2.7 Though AO has not mentioned specifically, it can be inferred that AO has taken recourse to section 68 of the IT Act as loan entry is found to be credited in the books of the appellant. It has been held in various decisions that the provisions of section 68 can be applied only if there is an actual receipt of money by the assessee whether by cash or cheque during the accounting year relevant to the assessment year under consideration. It has been held in these decisions that when the cash did not pass at any stage and when the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and, therefore, the question of inclusion of the amount of the entry as unexplained cash credit u/s 68 could not arise. Following decisions strengthen the issue in favour of the appellant.
7.2.8 V. R. Global Energy Pvt. Ltd. vs. ITO, 407 ITR 145 (Madras),the Hon'ble Madras High Court has held that where the assessee allotted shares to a company in settlement of pre-existing liability of assessee to the said company by way of adjustment and since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credit u/s 68 of the Act. It was held that since the cash credits towards share capital were only by way of book adjustment and not actual receipts, therefore, the same could not be treated as receipt towards share subscription money. Since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits u/s 68 of the IT Act. It is observed that the decision cited supra was challenged before the Hon'ble Supreme Court and the Hon'bleSupreme Court dismissed the SLP filed by the Revenue reported in 268 taxmann.com 392.
7.2.9 Jatia Investment Company vs. CIT, 206 ITR 718, Hon'ble Calcutta High Court, held that when the cash did not pass at any stage and since neither the respective parties received any cash nor paid any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise.
7.2.10 ACIT vs. Shri SurenGoel, ITA No.1767/Del/2011, order dated 1st December, 2011, the Delhi Bench of the Tribunal has held that where the assessee has received loan of Rs.20 lakhs from his father through a journal entry in the books of account and there was no physical transfer of money from the account of his father, addition of the same u/s 68 of the Act is not justified and accordingly the Tribunal dismissed the appeal filed by the Revenue against the order of the CIT(A) deleting the addition made by the AO u/s 68 of the IT Act on account of the journal entry.
7.2.11 ITO vs. Anand Enterprises Ltd., ITA No.1614/Kol/2016, In this case, the assessee company purchased shares of another company from various parties. The assessee company did not pay any cash consideration for making these investments in shares and, instead, issued shares from its company to the aforesaid shareholders in lieu of purchase consideration for investment in shares. In other words, the shares were issued by the assessee company to the tune of Rs.20,07,60,000/- for consideration other than cash in lieu of making investment in shares of another company. The AO, however, observed that there
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was no receipt of cash consideration of share capital and the transaction had happened for the same only through book entries. According to the AO, the assessee had actually introduced unaccounted money in its company through issue of bogus shares to various shareholders. According to him, the entire set of transactions entered into by the assessee shareholder, the assessee or company in which the assessee has invested has a pre- designed set of transactions executed to introduce unaccounted money in garb of share capital and share premium. Applying the provisions of section 68 of the IT Act, the AO made addition of Rs.20,07,60,000/- to the total income of the assessee. In appeal, the ld. CIT(A) deleted the addition. On further appeal by the Revenue, the Tribunal upheld the order of the CIT(A) and dismissed the appeal filed by the Revenue by observing as under:
"4. We have heard the rival submissions. At the outset, we find that the assessee had not raised any share capital by receipt of cash consideration in the instant case. The shares were issued for consideration other than cash in lieu of assessee company making investment in shares in some other company. Effectively, the assessee purchased certain shares from the aforesaid six shareholders and instead of paying cash to them, the assessee company issued shares in its own company to those shareholders. Hence the assessee had made investments in shares of another company for which consideration was settled through issuance of its shares to those shareholders. Now the crucial point is whether the provisions of section 68 could be invoked in the instant case for making investment towards share capital. There was no receipt of any sum as provided u/s 68 of the Act in the instant case. It would be pertinent here to refer to the decision of Hon'ble Supreme Court in the case of Shri H.H. Rama Varma vs. CIT reported in 187 ITR 308 (SC) wherein it was held that 'any sum' means 'sum of money'. We find that ld. CIT(A) had deleted the addition by observing as under:
"6. On consideration of the AR's submission, especially the portion reproduced above, it is seen that section 68 of I.T. Act, 1961 does not apply to cases of purchase of share assets and allotment of shares by the appellant when purchase and allotment are under a barter system. The AO has not refuted the appellant's claim that shares were allotted in exchange for acquisition of shares by the appellant from the companies which surrendered such shares to the appellant. Though as per the AO to apply section 68 to make the said addition in the appellant's hand. Transactions purportedly executed by entry operators involve multiple layers and other complexities, introducing delays in introduction of unaccounted cash/money and multiple players being incorporated entities. Measures taken by the AO in the course of the assessment proceeding falls much short of what is required to be done in such case laws, which have evolved on this issue, call for concerted actions on the part of the AO pinpointing utilization of unexplained/unaccounted/untaxed money and the players and the beneficiaries effectively using the weblike scheme to plunder black money. For example introduction and use of black money in the present case may be at a different point of time and in different hands. The AO's action in the present case cannot be upheld in law. I, therefore, delete the additions and grounds of appeal Nos. 3 & 4 are allowed."
7.2.12 ACIT vs. Mahendra Kumar Agarwal, 23 taxmann.com 285, the Jaipur Bench of the Tribunal in the case of ACIT vs. Mahendra Kumar Agrawal has held that in provisions of section 68, the words used are "where any sum is found credited in the books of an assessee." In this connection, the word 'sum' is of paramount importance. The words "any sum" cannot be taken as parallel to "any entry." The provisions of section 68 are deeming provisions and therefore, onus is on the Department to prove that any sum was credited to the books of the assessee.
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7.2.12 ITO vs. Bhagawat Marcom Pvt. Ltd., 109 taxman.com 350, In this case, it has been held that where the assessee company, during the year under consideration issued shares at premium to certain companies in lieu of shares held by the said companies and the said transactions were entered in the books of account of the assessee company by way of journal entries and it did not involve any credit to cash account, therefore, the amount of entry could not be treated as unexplained cash credit u/s 68 of the IT Act. 7.2.13 H.H. Sri Rama Verma vs. CIT, 57 taxmann 149 (SC), It has been held by the Hon'ble Supreme Court that 'any sum' means 'sum of money'.
7.2.14 In view of the aforesaid observations, in the facts and circumstances of the case and respectfully following the aforesaid judicial precedents relied upon hereinabove, I hold that the AO had erroneously invoked the provisions of section 68 of the Act to the facts of the instant case, which, in my considered opinion, are not at all applicable herein. This is a simple case of rectifying the entries passed without paying any cash consideration. The question of cash credit does not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere book entries. Hence, the undersigned holds that provisions of section 68 of the Act are not applicable in the instant case and accordingly the entire addition deserves to be deleted.
7.2.15 Further, in its submissions, the appellant also argued that the AO has failed to specify the section of the Income Tax Act under which the additions have been made to the Appellant's income and thus, it has stated that the assessment order is void ab initio, meaning it is null and void from the outset.
7.2.16 It is seen from the assessment order that AO has failed to explicitly mention the section under which the addition is being made. However, while making the addition, the assessment order speaks about the identity, genuineness and creditworthiness of the lenders which indirectly implies application of section 68 of the Act. 7.2.17 Further, Appellant has produced documentary evidences to establish its contention. Thus, relying on the above judicial pronouncement of the higher authorities and facts on record, it is held that the addition made by the AO ought to be deleted. Ground of appeal number 2 is hereby allowed.
6. Similarly, the other grounds of appeal were also adjudicated by the Ld. CIT(A), observing as under:
i Regarding, the addition of Rs. 30,00,000/- made by the AO in respect of repayment of loan to Core Education Infratech Ltd by holding the same as unexplained on the basis that MCA has striken off the name of Core
Education Infratech Ltd. Ld CIT(A) holds that the transaction of Rs. 30,00,000/- represents the repayment of financial obligation of the appellant and advancing the money to group company. This transaction represents the
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normal business transaction between the group companies. Thus, the addition of Rs. 30,00,000/- made by the AO by holding the same as unexplained, is hereby deleted.
ii Regarding, the addition of Rs. 1,97,45,600/- in respect of repayment of loan to Core Education Technologies Pvt. Ltd., Rs. 12,00,000/- repayment of loan to Core Steel & Power Ltd., Rs. 9,90,000/- repayment of loan to Soham Health Awareness Pvt. Ltd. and Rs. 1,51,90,000/- for loan repayment to Wisdom Global Enterprises Ltd. by holding that the genuineness and creditworthiness has not been established, Ld. CIT(A) decided that In the present case appellant has repaid the loan taken from the holding company. Even if the procedure of repayment of loan is not convincing to the AO, it cannot partake the nature of credit entry as it is not a credit entry in the books of the appellant. The appellant has made repayment of loan. It is not the case that the appellant has accepted the loan which requires the appellant to prove the genuineness and creditworthiness. Thus, the addition made by the AO is bereft of any logical reasoning. In view of the above stated facts, the undersigned directs to delete the addition of Rs. 1,97,45,600/- made by the AO.
iii Regarding, addition of Rs. 41,66,667/- in respect of loan repayment to Vireet Investment on behalf of Core Education & Technologies Ltd., Ld. CIT(A) observed that, it has not been elaborated either in the body of the
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assessment order or final computation as to how repayment of loan would amount to income in the hands of the appellant. I am of the view that such addition cannot be sustained as there is no element of income in such transaction. The addition made by the AO is hereby deleted.
7. From the aforesaid findings by the Ld. CIT(A), it is apparent that the additions made by the AO are not sustainable for the reasons that it is a case of simple rectification of the entries passed without paying any cash consideration, the transactions represents the repayment of financial obligation of the assessee and advancing the money to group company, in the course of normal business between the group companies, repayment of loan cannot partake the nature of credit entry in the books of the assessee to invoke provisions of section 68.
8. Ld. AR of the assessee supported and placed reliance on the findings of Ld. CIT(A), whereas Ld. Sr DR representing the revenue vehemently supported the order of AO.
9. We have considered the rival submissions, perused the material available on records and jurisprudence relevant to the issues. The findings of Ld. CIT(A) considering the view point of the AO as well as the contentions and rebuttal of assessee are found to be logical, justified and in accordance with the law. The revenue did not come up with any contrary fact, decision or argument to dislodge the same. In view of such facts and circumstances,
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we are inclined to upheld the findings of Ld. CIT(A), which in our opinion needs no further modification or interference at this stage. Consequently, we reject the grounds of appeal raised by the revenue in present appeal, being bereft of merits.
10. In result the appeal of Revenue stands dismissed, in terms of our aforesaid observations.
Order pronounced in the open court on 29-04-2026.
Sd/- Sd/-
(BEENA PILLAI) (ARUN KHODPIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated : 29-04-2026. Zu, PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. DR, ITAT, Mumbai
4. Guard File
5. CIT
BY ORDER,
(Dy./Asstt. Registrar)
ITAT, Mumbai
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