Income Tax and Loans : Applicability of S.68 of Income-tax Act, 1961 Explained in a Recent Decision of June 2026

Income Tax and Loans : Applicability of Section 68 of Income-tax Act, 1961 Explained in a Recent Decision of June 2026

In a recent decision, it was "observed that assessee has filed the certificate of incorporation, PAN Nos, financial statements and the bank statements of the lender companies and thus has duly discharged the burden casted upon it u/s 68 of the Income-tax Act, 1961 of establishing the identity, creditworthiness of the lender companies and since the loans were taken through banking channels, the genuineness is also established. It is observed that both the loans were repaid in subsequent assessment year where no doubts were raised by the revenue. Once the assessee has established that the lender company has sufficient creditworthiness which was never in dispute merely on assumption that there were circular transactions, addition cannot be made." 

CIT(A) has deleted the addition by observing that the assessee has furnished comprehensive evidence as stated above, to establish the identity and creditworthiness and genuineness of the creditors and transactions. CIT(A) has further observed that the loans were repaid and additions were made on mere suspicion and on conjecture without any direct or corroborative evidence to demonstrate that the loans taken were bogus or represent undisclosed income. 

Accordingly, assessee was able to obtain relief. Case reference is Cinflex Infotech Pvt Ltd v. ACIT [2026] GCtR 383 (ITAT, Delhi).