ITAT Mumbai Upholds Deletion of ₹15.85 Crore Section 68 Addition in Intra-Group Loan Restructuring

The Mumbai “G” Bench of the Income Tax Appellate Tribunal has dismissed the Revenue’s appeal in the case of Geopreneur Realty Private Limited for Assessment Year 2018–19, affirming the deletion of additions made under Section 68 of the Income Tax Act, 1961.

Loan Substitution by Holding Company Not a Cash Credit

The primary issue concerned an addition of ₹15.85 crore made under Section 68 in respect of loans reflected in the books of the assessee from its holding company, Geopreneur Corp Pvt. Ltd. (GCPL). The Assessing Officer treated the transaction as unexplained, alleging failure to establish creditworthiness and genuineness. The Tribunal noted that the assessee was a wholly owned subsidiary of GCPL and that the impugned loan arose due to a loan restructuring exercise. Earlier secured loans availed by the assessee from NBFCs DMI Finance Pvt. Ltd. and Ambit Finvest Pvt. Ltd. were repaid by GCPL through funds borrowed by it from another NBFC, Altico. As a result, the original loans stood extinguished and were replaced by a corresponding loan liability in favour of GCPL. The Tribunal recorded that the assessee had furnished extensive documentary evidence, including lender ledgers, bank statements, no-dues certificates from NBFCs, audited financials, PAN details, and confirmations from all parties involved. These documents, the Bench held, clearly explained the source, movement, and restructuring of funds. Rejecting the Revenue’s allegation of accommodation entries, the Tribunal observed that all parties had confirmed their respective transactions and no material was brought on record to controvert the evidence or establish that the arrangement was sham or colourable.

No Addition for Reclassified Partnership Transactions

The Revenue had also challenged the deletion of a ₹10 lakh addition relating to a loan from a partnership firm. The Tribunal noted that the assessee had already maintained opening balances with the firm and that the impugned amount was received through banking channels. Further, the loan was repaid in subsequent years, and no adverse inference had been drawn in earlier assessments.

The Tribunal accepted the assessee’s explanation that certain balances were merely reclassified through journal entries without any fresh inflow of funds. It found no basis to sustain the addition under Section 68.