ITAT Delhi: Addition u/s 68 Cannot Survive When Seized Ledger & Receipts Prove Loan Repayment – New Link Overseas Finance Ltd vs DCIT (AY 2011-12)

 

Sections Involved

Income-tax Act, 1961

  • Section 68 – Unexplained Cash Credit
  • Section 131 – Powers to call evidence / statement
  • Section 153A – Search Assessment Proceedings


Case Law Summary

Case

New Link Overseas Finance Ltd vs DCIT
ITAT Delhi Bench ‘B’
Assessment Year: 2011-12
Order Date: 04.02.2020

 

Facts of the Case

  • A search and seizure operation was conducted on the assessee on 06.01.2011.
  • During search, receipts amounting to ₹27,50,000 were found.
  • Assessee explained that the amount represented repayment of loan earlier advanced to M/s Irfan Carpets.
  • Ledger account showing debit balance and repayment entries was produced.
  • The Assessing Officer treated the amount as unexplained cash credit.
  • CIT(A) confirmed the addition on the ground of non-establishment of creditworthiness.

 

Issues Involved

  1. Whether loan repayment appearing in seized records can be treated as unexplained cash credit u/s 68.
  2. Whether addition can be sustained despite matching seized documents and books of account.
  3. Evidentiary value of seized material in search assessment.

 

Petitioner’s Arguments

  • The amount was genuine repayment of loan given earlier.
  • Entries were recorded in books and matched with seized documents.
  • Confirmations were submitted.
  • Therefore provisions of Section 68 are not attracted.

 

Respondent’s Arguments

  • Transaction appeared doubtful.
  • Creditworthiness of the payer was not satisfactorily proved.
  • Hence addition was justified under Section 68.

 

Court Order / Findings

  • Seized receipts tallied with ledger accounts.
  • Department failed to disprove the documentary evidence.
  • Addition cannot be made merely on suspicion.
  • Once transaction stands corroborated by seized material, Section 68 cannot be invoked.
  • Addition deleted and appeal allowed.

 

Important Clarification

Where seized documents corroborate the books of account, the burden shifts to the department to bring contrary evidence. Mere doubt about creditworthiness does not justify addition under Section 68.

 

Key Legal Principle

Documentary evidence discovered during search proceedings carries strong evidentiary value and cannot be disregarded without proper investigation or rebuttal.

 

Separate Link (For Reference Only)

https://itat.gov.in/public/files/upload/1580890375-5501%20New%20Link%20Overseas%20Finance%20Ltd.pdf

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