INCOME TAX OFFICER, AAYAKAR BHAWAN KHARGONE vs. IBRAHIM ABBASALI BOHRA, BARWAHA
Facts
The Revenue is aggrieved by the order of the CIT(A) who allowed the assessee's appeal. The CIT(A) had deleted an addition of Rs. 34,00,000/- made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, which represented unsecured loans from M/s Jayant Securities & Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd.
Held
The Tribunal noted that both parties agreed on the existence of several past orders where similar loans from these companies were held to be genuine by the ITAT. Following these precedents, the Tribunal upheld the CIT(A)'s order deleting the addition.
Key Issues
Whether the unsecured loans from M/s Jayant Securities & Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. were genuine, and whether the reassessment proceedings were validly initiated.
Sections Cited
68, 147, 148, 250, 253
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M JOSHI
Per Paresh M Joshi, J.M.:
(I)ITA No:-119/Ind/2025 AY-2013-14
This is an Appeal filed by the Revenue under section 253 of
the income tax Act 1961, [herein after referred to as the Act
for the sake of brevity] before this tribunal. The Revenue is
aggrieved by the order bearing No:-ITBA/NFAC/S/250/2024-
25/1071290772(1) dated 17.12.2024 passed by the Ld. CIT
(A) u/s 250 of the Act, which is herein after referred to as the
“Impugned order”. The Relevant Assessment year is 2013-
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14 and the corresponding previous year period is from
01.04.2012 to 31.03.2013.
Factual Matrix
2.1 That as and by way of an Assessment order made u/s
147 rws 144B of the Act, the total income of the Assessee
was computed & assessed at Rs. 35,89,290/-[round off]. The
total income as per the return of income was at Rs.
2,90,382/-. The addition u/s 68 of the act as discussed in
Para 16 of the aforesaid order was at Rs. 34, 00,000/-. That
the aforesaid Assessment order bears no: -
ITBA/AST/S/147/2021-22/1035945344(1) dated
27.09.2021. Which is herein after referred to as the
“Impugned Assessment Order”.
2.2 That the Assessee being Aggrieved by the aforesaid
“Impugned Assessment Order” prefers the first appeal u/s
246A of the Act before the Ld. CIT (A) who by the “Impugned
Order” has allowed the first appeal of the Assessee on the
grounds & reasons stated therein. The core grounds &
reasons for allowing the first appeal were as under:-
“I have gone through the facts of the case.
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The moot point here is the fact that the appellant has failed to prove the identity, creditworthiness and genuineness of the transactions during the course of assessment proceedings in respect of M/s Jayant Securities & Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. The jurisdictional ITAT order in the case of ACIT(Central)-, Indore vs. Aakash Shukla (ITA No.43/Ind/2022 dated 31.05.2023) may be referred to. In respect of M/s Jayant Securities & Finance India Pvt. Ltd., the ITAT concludes as: 12.5. As regards the loan taken from Jayant Security and Finance Ltd. Badodara at Rs. 1.25 crores and interest paid thereon at Rs.8,79,041/-, we find that the alleged cash creditor is a limited company, Permanent Account No. and address has been provided. Loan taken through proper banking channel Confirmation of account is on record. Jayant Security and Finance Ltd. is a non- banking financial company having experience of 26 years. This company is regularly assessed to tax and has also been subjected to scrutiny assessment and the additions made thereon have traveled before Coordinate Bench Ahmedabad in the case of M/s. Jayant Security and Finance Ltd. in ITANo.753/Ahd/2012. We also find that the loan taken from alleged company has been treated as genuine and the additions made in the hands of other loan receivers have been deleted by this Tribunal in the case of M/s Tirupati Construction ITANo.533/Ind/2014 and M/s K.K. Patel Finance Ltd. ITANo.440/Ind/2010. We, therefore, find no reason to doubt the genuineness and creditworthiness of Jayant Security and Finance Ltd. and identity is well proved which has been rightly appreciated by Ld. CIT(A) in order to delete the addition made u/s 68 of the Act at Rs.1.25 cr and interest disallowance at Rs.8,79,041/- 12.6. As regards the cash creditor namely M/s Jay Jyoti India Pvt. Ltd. Mumbai we find that this company was incorporated in 1999. As on 31.03.2013 it had share capital of Rs. 6,33,50,500/- and net reserves and surplus of Rs. 1,08,62,25,646/-, Bank statement, confirmation of account, ledger statement, audited financial statement, Memorandum of Association and tax deducted at source certificate are placed on record which in totality are sufficient to prove identity of this company, genuineness of the transaction and creditworthiness of this company It is further proved with the fact that it had merely advanced 0.75% of the funds which it was capable of i.e. it had financial capacity of advancing 133 times more than the loan given to the assessee company. Thus, Ld. CIT (A) has rightly appreciated these facts for deleting addition for made u/s 68 of the Act as well as the interest disallowance.
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In view of the fact that the jurisdictional ITAT has treated the entities under reference as satisfying the three limbs of identity, genuineness and creditworthiness, I have no hesitation in directing the AO to delete the addition. APPEAL IS ALLOWED.”
2.3 That the Revenue being Aggrieved by the “Impugned Order”
has preferred the instant appeal before this Tribunal and has
raised the following grounds of appeal in the form No. 36
against the “Impugned Order” which are as under:-
“1. That on the facts and circumstances of the case Ld. Assessing Officer /NFAC erred in initiation of re assessment proceedings under section 147/148 of the Income Tax Act. 2. That on the facts and circumstances of the case Ld. Assessing Officer /NFAC erred in initiation of re assessment proceedings merely on the basis of alleged statement of one of director of the loan creditor companies. 3. That Ld. AO has further erred in reopening the instant case of appellant merely based on the information received from the Investigation wing and thereafter not made any effort to discuss the material on the basis of which he has formed prima facie view.”
Record of Hearing
3.1 The hearing in the matter took place on 23.03.2026
before this Tribunal when the Ld. DR for & on behalf of the
Revenue appeared before us & interalia contended that the
“Impugned Assessment Order” of the Ld. AO is proper and
correct. The reliance was placed on Para 17 of the impugned
assessment order which is reproduced by us as below:-
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“17. In this case, the assessee has failed to prove the identity of the creditors, creditworthiness of the creditors, ie. their capacity to advance the money and genuineness of the transactions during the course of assessment proceedings. Therefore, the unsecured loans of Rs.34,00,000/- (Rs.26,00,000/- and Rs.8,00,000/-raised from M/s Jayant Securities & Finance Ltd. and M/s Jay Jyoti India Pvt. Ltd. respectively) is treated as income from undisclosed source u/s 68 of the Income Tax Act, 1961 and added back to the total income of the assessee. As the assessee has concealed the particulars of his income, therefore, penalty proceedings 271(1)(c) are being initiated separately.”
It was then submitted that the “Impugned Order” is bad in
law, illegal and not proper. It was prayed that basis grounds
raised in the instant appeal the “Impugned order” should be
Set Aside.
3.2 Per contra Ld. AR appearing for and on behalf of the
assessee contended that this tribunal in number of cases
have held that M/s Jayant Securities & finance Ltd. and Jay
Jyoti India P. Ltd. and other company of Sharad Darak
Group have not been held to be bogus entities. They are not
paper Co.’s too. In this regard the Ld. AR has placed on the
record of this tribunal a brief synopsis of three pages which
we reproduce as below:-
Following addition in respect of unsecured loan received during year is under appeal: Name of lender Addition based on alleged loan
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M/s Jayant Securities & 26,00,000/- Finance Ltd. Jay Jyoti India P Ltd. 8,00,000/- (Unsecured loan) Total 34,00,000/-
Primary onus u/s 68 of Act discharged by Appellant as follows:
Name of PAN Amount Confirmati ITR Bank Audited lender received on stateme Financials during nt of the year lender M/s Jayant AAACJ4848G 26.00 Lakh Y Y Y Y Securities & Finance Ltd. Jay Jyoti AAACJ8822E 8.00 Lakh Y Y Y Y India P.
Creditworthiness of lenders (Rs. in Lakhs) Lender Share Net Share Total Loan Capacity to capital Reserves & application Investible advanc advance [A] Surplus money and surplus ed to loan [B] loans [C] [A+B+C] Appell (Investible ant surplus/Loa n) approx. Jayant 284.18 (1866.24) 16536.70 14954.64 26 575 times Security Jay Jyoti 633.50 10862.25 5123.10 16618.85 8 2077 times
That the lender company is ‘active’ company in ROC records till date.
Only reason for making the addition is borrowed satisfaction of AO relying on findings of investigation in different cases related to Shri Sharad Darak. However, no report of investigation wing or statement of Shri Sharad Darak, if any, has not been confronted to Appellant therefore the addition based thereon is not permissible in law. Reliance is placed on decision of SC in C. Vasantlal [1962] 45 ITR 206 (SC)
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Attention is invited to the decision in case of CIT v. Metachem Industries [2000] 245 ITR 160 (MP) where it is held that the assessee-firm cannot ask that person who makes the investment whether the money invested is properly taxed or not. The assessee is only to explain that this investment has been made by the particular individual, and it is the responsibility of that individual to account for the investment made by him. If that person owns that transaction, then the burden of the assessee-firm is discharged. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount.
Further any material based on which investigation wing has made report (which has not been confronted) has not been subjected to cross examination has been provided. In absence of such cross examination the addition made by AO based on statement is not tenable in law. Reliance is placed on decision of SC in Andaman Timber Industries vs. CCE [2015] 62 taxmann.com 3 (SC)[02-09-2015]
The Appellant has discharged its primary onus by proving identity, credit worthiness and genuineness of the loans however learned AO has merely relied on the investigation wing report without any application of mind and conducting any enquiry in assessment on borrowed satisfaction which is not permissible. See. PCIT v. Shodiman Investments (P.) Ltd.
In following cases the loans from the above company have been held to be genuine by Hon’ble ITAT in case of : a. Sanjay Shukla [ITA No. 333/Ind/2020] b. Akash Shukla [ITA No.43/Ind/2022] c. Sanjeev Agrawal [899/Ind/2024] d. Shivkripa Devcon [594/Ind/2024]
It is a settled position in law that once the assessee has discharged the initial onus by furnishing documentary evidence of identity, creditworthiness, and genuineness — especially when the transactions are routed through banking channels — the burden shifts to the Revenue. In the present case, no independent enquiry has been conducted, and no material has been put to the assessee for rebuttal, violating the principles laid down in Andaman Timber Industries and Metachem Industries.
In view of above it is submitted that the reopening be held as without jurisdiction, based on incorrect information, made on borrowed satisfaction in violation to
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principles of natural justice. It be further held that the loans are genuine and proved and the consequent addition be deleted.
3.3 At the end of the hearing both the Ld. DR as well as Ld.
AR were at least were ad idem on the issue that there are
several orders and decisions of this tribunal where
unsecured loans taken by various assessee from group co’s
of Sharad Darak are not accommodation entries and reliefs
have been granted to several assesses in this regard. In this
regard Ld. AR invited our attention to the synopsis Para 9
wherein such orders are quoted. Hearing was then concluded
and closed.
Observations Findings & conclusions
4.1 We have to decide the legality, validity and proprietary of the
“impugned order” basis records of the case & the rival
submission canvassed before us.
4.2 We have carefully perused the records of the case and have
heard the submissions.
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4.3 We basis records of the case & after hearing & upon
examining the rival contentions of the Ld. DR & the Ld. AR
canvassed before us, are of the considered opinion that both
are ad idem on the issue that now there are several orders
and decisions of this tribunal which are in favour of the
assessee that M/s Jayant Securities and finance Ltd. and
Jay Jyoti P. Ltd. are not paper company ’s. Loans advanced
by them to assessee borrowers are not in the form of
accommodation entries. Accordingly following the below
mentioned decisions:-
(i) Shivkripa Devcons Private Ltd. vs. ITO, ITANo.594/Ind/2024 order dated 16.10.2025 (ii) Sanjay Shukla V/s ACIT Central Circle-2, Indore. ITA No. 333&49/Ind/2020 order dated 15.03.2022 (iii) M/s Hi Link City Homes Pvt. Ltd V/s ITO 21), Indore. ITA No.2/Ind/2021 order dated 19.09.2022. (iv) ACIT, Central-2, Indore V/s Shri Sanjay Shukla. ITA No.333/Ind/2020 order dated 15.03.2022. (v) ACIT, Central-1, Indore V/s Shri Krishna Devcon Ltd. ITA No. 8 to 10/Ind/2022, IT(SS)A No.11&3/Ind/2022, C.O. No.03/Ind/2022 order dated 21.08.2023. (vi)Joint CIT (OSD)-CC-7(4) V/s M/s. Shalimar Housing & Finance Ltd. ITA No.4079/Mum/2019 order dated 01.06.2021. (vii) ACIT,3(1), Indore V/s Shri Pramod Kumar Sethi. ITA No.382 & 383/Ind/2014 order dated 06.11.2018. (viii) Sanjeev Kumar Agrawal V/s ACIT(Cntral)-2, Bhopal ITA No.899/Ind/2024 order dated 24.06.2025 (ix) Globus Housing V/s Assessment Unit, NFAC, Delhi ITA No.872/Ind/2024 order dated 10.10.2025
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We upheld the “Impugned Order” and dismiss the
Revenue’s appeal.
4.4 In view of the above, we upheld the “Impugned Order”
and dismiss the appeal of the Revenue.
5 Order
5.1 The appeal of the Revenue is dismissed.
5.2. ITA No: - 120/Ind/2025 AY- 2014-15 In this appeal the facts and circumstances are identical and
similar. Accordingly “Impugned Order” in the said appeal is
upheld. The Revenue appeal is dismissed mutatis- mutandis ITA
No: - 119/Ind/2025.
5.3 In result both the appeals are dismissed. Ordered accordingly.
Pronounced in open court on 27.03.2026.
Sd/- Sd/-
(BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER
Indore Dated : 27/03/2026 Patel/Sr. PS
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Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
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