ACIT, NEW DELHI vs. FILATEX INDIA LIMITED, DELHI

ORDER

PER MANISH AGARWAL, AM :

4. Accordingly, the information so gathered was confronted to the assessee and the AO asked the assessee to explain and furnish the reply with respect to the loans of INR 5.90 crores with supporting documentary evidences taken from above four entities and further asked as to why not commission @ 0.25% be added as unexplained expenditure paid to obtain such accommodation entries. The AO also issued summons u/s 133(6) of the Act to these four companies from whom the loans were obtained during the year which were duly complied with.

5. After considering the submissions filed by the assessee and the compliance made by various companies, AO held that the assessee has failed to furnish the documentary evidences / explanation with respect to loans of INR 5.90 crores and made the addition of said amount of INR 5.90 crores as unexplained credits u/s 68 of the Act and further invoked the provision u/s 115BB of the Act. The interest paid of INR 1,00,53,494/- on the loans taken from four companies was disallowed by invoking the provisions of section u/s 37(1) of the Act and added , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 back to the total income of the assessee. The AO further made an addition of INR 7,87,500/- by holding the same as unexplained expenditure u/s 69C of the Act by alleging that the same was paid as commission @ 0.25% to obtain the bogus accommodation entries of INR 24.25 crores and further on the repayment of the loans of INR 7.25 crores though the addition of alleged unexplained credits was made for INR. 5.90 crores only.

6. Aggrieved by the said order, the assessee preferred the appeal before Ld. CIT(A) who vide impugned order dated 22.08.2024 in Appeal No. CIT(A), Delhi/23/10125/2012-13 passed u/s 250 of the Act has partly allowed the appeal of the assessee wherein the additions made towards unsecured loans by treating them as bogus, disallowance of interest and further addition u/s 69C of the Act towards alleged payment of commission to obtain accommodation entries were deleted by observing that the assessee has proved the identity and the creditworthiness of the parties and therefore, no addition could be made.

7. Against such order, the Revenue is in appeal before the Tribunal on the strength of following grounds of appeal:- 1. “The Ld. CIT(A) has erred in deleting the addition of Rs. 5,90,00,000/- made by Assessing Office u/s 68 of the Income-tax Act, 1961.

2. The Ld. CIT(A) has failed to appreciate that the creditors are only shell companies, created for abatement of, and legitimize, illicit means and evade taxes, and its legal identity is only a façade to hide its illegal operations.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 3. The Ld. CIT(A) has failed to appreciate that submissions of audited accounts and bank statements of alleged entry operator are necessary pre-requisite to give such entities a semblance of a genuine business. Filing of such documents does not mitigate lack of genuineness in its actual operations.

4. Ld. CIT(A) has failed to appreciate that accommodation entry operators have sufficient funds only in the form of investments in other non-genuine companies. There is hardly substantial balance in the bank account or genuine investment.

5. The Ld. CIT(A) failed to appreciate that there is no information of conduct of any audit/investigation by SEBI/RBI, while the search conducted by Investigation Wing brought out substantial evidence about actual financial conduct of these entry operators, masquerading in the guise of NBPC.

6. Whether the Ld. CIT(A) is correct in holding that the term "in evidence" used in section 132(4) of the Act cannot be treated as "as evidence" when statement u/s 132(4) made while confronting with incriminating material gathered during the search operations.

7. Ld. CIT(A) has erred in holding that the Assessing Officer should have conducted further enquiry to find about the source of fund of the entry operator, without appreciating that Ld. CIT(A) could have conducted such enquiry himself or directed the Assessing Officer to conduct requisite enquiry so as to ascertain the true nature and source of the cash credit.

8. Ld. CIT (A) has erred in not appreciating that whatsapp chats undertaken between the entry operator and promoter of the company clearly shows that cash are being exchanged and such chats are backed up by statements u/s 132(4) of respective parties.

9. Ld. CIT(A) has failed to appreciate that the evidence collected clearly reveals the cash trails and in reply to notice u/s 133(6) of the Act the entry operators are not expected to accept that the loan transactions are not genuine.

10. The Ld. CIT(A) erred in deleting the addition of Rs. 1,00,53,494/- without appreciating the fact that interest paid on account of bogus unsecured loan is also bogus in nature, therefore, the interest paid by the assessee to the tune of Rs. 1,00,53,494/- is not genuine expense.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 11. The Ld. CIT(A) erred in deleting the addition of Rs. 7,87,500/- without appreciating the fact that the accommodation entries to the tune of Rs. 5,90,00,000/- were taken during the year under consideration and commission must have paid to accommodate such entries.

8. The assessee also filed C.O. wherein the following objections are taken by the assessee:- 1. “On the facts and in the circumstances of the case and in law, the learned CIT(A) should have quashed the assessment order as illegal, not tenable, void and without jurisdiction.

3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not considering the fact that the assessment order passed by Assessing Officer had provided the new material directly in assessment order without confronting the same to the respondent company during assessment proceedings. On the basis of the principle of opportunity of being heard also, the addition was liable to be deleted.

4. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the addition simply on the ground that the Whatsapp messages relied upon by Assessing Officer is totally unrelated and irrelevant to the respondent.

5. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same.”

9. Since all the grounds taken by the Revenue are related to the deletion of additions of INR 5.90 crores made u/s 68 of the Act and further disallowance of INR 1,00,53,494/- of interest payment u/s 37(1)

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 of the Act and also addition of INR 7,87,500/- being alleged commission paid on such bogus loans u/s 69C of the Act and these grounds are inter-related, therefore, the same are taken together for consideration.

11. Before us, Ld.AR supported the order of Ld.CIT(A) and submits that during the course of search, no incriminating material whatsoever , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 was found pertaining to the transactions carried out by the assessee for the year under appeal, based on which, it could be said that the assessee has obtained accommodation entries. Solely on suspicion, the AO has concluded that the loans taken were not genuine. The assessee discharged the onus lies upon it by filing all the relevant details as required to establish the genuineness of the loans u/s 68 of the Act. He further submits that the notice u/s 133(6) were issued to the lender companies and the same were duly complied with by them and no discrepancies whatsoever was pointed out in the details filed by these companies and the AO made general observations with respect to the capacity of the lender companies. He further submits that the loans taken were partly repaid in the year itself and partly were repaid in the subsequent AYs. Which facts are fortified from the assessment order itself and therefore, no addition could be made by holding these credits as unexplained. Ld. AR also stated that the additions have been made solely based on the statement recorded of the third party which were taken under exceptional circumstances and were retracted by the respective persons through affidavits filed before the AO, therefore, such statement deserves no credence. Ld. AR further submits that none of the loans were taken in cash, and it is not the case of the revenue that the cash was deposited in the bank accounts of the lender companies immediately before the loans were given to the assessee. Ld. Also stated that the assessee has also established the source of source in the hands of the companies by submitting the assessment , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 particulars and other documents of the entities from whom the funds were received by the lender companies.

12. With respect to the payment of interest, ld.AR submits that out of total loan of INR 24.25 crores, the AO alleged the loan of INR 5.90 crores as bogus however, interest paid on the gross amount of loan was disallowed which is contrary to the findings of the AO himself. He further submits that the loans were genuine, and the interest was paid at the rate of prevalent in the market after making TDS in accordance with law and therefore, no disallowance should be made u/s 37 of the Act as the interest payment is most genuine and in connection with the genuine loans taken by the assessee. The ld.AR thus, requested to confirm the order of Ld.CIT(A) in deleting the disallowance made by the AO.

13. With regard to the deletion of commission, Ld.AR submits that once the loans were treated as genuine, no addition on account of alleged commission could be made. He further submits that the AO has taken dual approach as on the one hand, out of total loans amount of INR 24.25 crores received during the year from four entities alleged as non-existent/non capable of granting such loan, however, only INR 5.90 crores of the loans were treated as bogus accommodation entries but the commission was calculated @ 0.25% on the total of loans received and repaid during the year itself. It is thus prayed by Ld. AR that additions were rightly deleted by Ld. CIT(A) and requested for confirmation of the orders of Ld. CIT(A). He also filed a written , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 submission and reliance is placed on various judicial pronouncements. The written submission as filed by the ld. AR of the assessee is reproduced as under:-

“The assessee has raised the following arguments before the AO and CIT(A) in response to the allegations made: 1. Regarding the addition being made on suspicion Though such evidences found during the course of search does give rise to suspicion but such suspicion alone cannot be the basis to reject all the documentary evidences filed by appellant in support of loans taken by it. It is also the presumption of law that the nature of the evidence or information gathered during the search should be of such nature that it instead of only raising doubt, the evidence establishes some wrong doing. No material pertaining to appellant is found. There is no scope of extrapolation and addition should be based on material pertains to appellant. Additions made based on presumptions that all loans are bogus without concrete evidence relating to any specific loan transactions, leading to an incorrect conclusion. Decisions relied: Hon'ble Supreme court in the case of Daulatram Rawatmull, (1964) 53 ITR 574. [no matter how strong suspicion is, it cannot take place of the evidence] Following the decision of Apex Court in the case of CIT vs. Singhad Education Society [The seized incriminating material have to pertain to the AY in question and have correlation, document-wise, with the AY] Hon'ble Delhi High Court in the case of Principal CIT versus Smt. Anita Rani reported in 392 ITR 501 (Delhi) [No scope of extrapolation in assessment] Hon'ble Delhi High court in the case of PCIT Vs Pilot Industries Ltd [2023] 146 taxmann.com 233 [no incriminating material for AY under consideration] The Hon'ble Delhi High Court in the case of PCIT, Central-2, Delhi vs Meeta Gutgutia (2017) 82 taxmann.com 287 (Delhi). [no incriminating material for AY under consideration] , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 2. The assessee has completely discharged the Onus u/s 68 The assessee has submitted the following documents before the Ld. AO as well as the CIT(A) to discharge the onus u/s 68: Particulars ITAT PB Page No. ANM RMP Bhageria RKG Fincap Holdings Finance Finvest Private Private Investment Limited Limited Limited Pvt. ltd. 1 Copy of confirmation of 66.65 96 122 152 Accounts 2. Copy of Bank statements of 67-71 97-99 123 153-154 Lender 3 Audited Financials of 72-87 100-114 124-144 155-180 Lender 4 Copy of ITR 88 115 145 181 Acknowledgement of Lenders 5 133(6) responses filed by 89095 116-121 146-151 Lenders The bank statements of the lenders as well as the PAN and Bank A/c details of the persons from whom the lenders have taken the Loan (Page 14-16 of CIT Oder, Para 7.24) are duly submitted so as to prove the source as well as the source of source of funds received. Further, notices u/s 133(6) have been complied with and no specific discrepancy in such details are pointed out by Assessing Officer. Identity: Confirmations, PAN details, and income returns of all alleged entities, conclusively establishing the identity of the depositors. Creditworthiness: The annual accounts of companies show their creditworthiness. Assessee provided source of source though not required u/s 68. The loan was taken through banking channels only. Genuineness: Appellant was advanced through banking channels. All lenders accepted the transaction with assessee complying with notice u/s 133(6). Assessment order of AY 2016-17 and 2018-19 of Satsai passed after the date of search in which it was not considered as shell entity.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Decisions relied: Hon'ble Supreme Court of India in case of Commissioner of Income-tax v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 (SC) held: "..

2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961?. We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment." Hon'ble Supreme Court of India in the case of CIT v. Kamdhenu Steel & Alloys Ltd., SLP (CC) no. 15640 of 2012 (SLP Dismissed against Decision of Delhi HC): "... assessee discharged the burden in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter, in case such evidence is to be discarded or it is proved that the assessee has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act..." Hon'ble Delhi High Court in the case of CIT(A) -9 Erstwhile CIT versus Vrindavan Farms (P) Ltd, ITA 71/2015, ITA 72/2015, ITA 84/2015. (No addition can be made when details of share applicants are furnished to the Assessing Officer complying condition of section 68) 3. Regarding Self Contradictory Findings of the Assessing Officer Addition made by AO is not tenable as Ld. AO himself has accepted that out of 1235 Lakhs received from ANM Fincap Rs. 1035 Lakhs is not bogus and out of 965 Lakhs received from RMP Holdings 800 Lakhs is not bogus. (Page 46, Para 57 and 58 of CIT(A)). Then finding of Ld. AO that the lenders are bogus is itself self-contradictory 4. Regarding the loans belong repaid in the subsequent Years The unsecured Loans has been repaid in subsequent Assessment Years which has been accepted by the AO and to substantiate the same, Ledger Accounts of the above Parties was submitted before CIT(A) and the same is Attached herewith in General Paperbook-2 page number 4-17. , 5000, 2060, 4999, 4648, 3988, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024

Decisions relied upon: Decisions relied upon:  Commissioner of Income Commissioner of Income-tax vs. Shiv Dhooti Pearls & Investment Ltd. [2015] 64 tax vs. Shiv Dhooti Pearls & Investment Ltd. [2015] 64 taxmann.com 329 (Delhi)/[2016] 237 Taxman 104 (Delhi) [21 taxmann.com 329 (Delhi)/[2016] 237 Taxman 104 (Delhi) [21-12 12-2015]  Commissioner of Income Commissioner of Income-tax, Rajkot-I vs. Ayachi Chandrashekhar Narsangji [2014] Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat)/[2014] 221 Taxman 146 (Gujarat)[02 42 taxmann.com 251 (Gujarat)/[2014] 221 Taxman 146 (Gujarat)[02-12-2013] 42 taxmann.com 251 (Gujarat)/[2014] 221 Taxman 146 (Gujarat)[02  Commissioner of Income Commissioner of Income-tax, Surat-1 vs. Shri Mahavir Crimpers [2018] 95 1 vs. Shri Mahavir Crimpers [2018] 95 taxmann.com 323 (Gujarat) [13 taxmann.com 323 (Gujarat) [13-06-2018];  CIT v. Karaj Singh [2011] 15 tax CIT v. Karaj Singh [2011] 15 taxmann.com 70/203 Taxman 218 (Punj. & Har.) mann.com 70/203 Taxman 218 (Punj. & Har.)  In these judgments, the Hon'ble High Courts have held that the factum of In these judgments, the Hon'ble High Courts have held that the factum of In these judgments, the Hon'ble High Courts have held that the factum of repayment are entitled to great weight while evaluating the bona fides of loan repayment are entitled to great weight while evaluating the bona fides of loan repayment are entitled to great weight while evaluating the bona fides of loan transactions.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024  Assistant Commissioner of Income-tax, Circle-8(2) vs. Evermore Stock Brokers (P.) Ltd. [2024] 158 taxmann.com 211 (Delhi - Trib.)/[2023] 108 ITR(T) 13 (Delhi - Trib.)[19-09-2023]  Director of Income-tax vs. Modern Charitable Foundation [2012] 20 taxmann.com 693 (Delhi) [18-05-2011]

5. Regarding addition being made solely on the basis of Statements The addition made by the AO is made only on the basis of statements recorded during the course of the search and no corroborative evidence has been brought on record by the AO. Further, these statements are also not reliable due to the following reasons: Purushottam Bhageria -He was diagnosed for arteries blockage on (MD of Filatex India 28th August 2021 and coronary angioplasty Limited) was scheduled on 2nd September 2021. -He was forced to reschedule the appointment and give the statement, the angioplasty was finally conducted on 18th September 2021. - He was pressurized to sign the statement (Page 222-223 in his Affidavit of general Paper book 1) - He stated that there is no relation between unsecured loan and cash transactions in his Affidavit. (Page 225 of General PB 1) - Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant -Such statements are substantively clarified by duly notarized affidavit. Ankit Bhageria - Ankit's role was limited before passing away of his father, Vimal Bhageria in the month of April, 2021 (Q. 12). Therefore, loan taken in the year under consideration would not have any impact of his statement. - Statement was recorded in English. Ankit Bhageria could not understand the questions On 7th August 2021, doctor suggested him to go for Angiography to diagnose for any heart disease - he was pressurized and threatened to accept the allegation made by the AO to sign the statement - He could not comment on the questions as his , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 father was looking after the operations of the companies until the death of his father in April 2021. Therefore, his statement itself is not reliable as it could not be presumed of his awareness about any transaction (Q. 12 of his statement). (Page 143-144 in his Affidavit of General PB 1) - In response to Question No. 25 (Page 9 of General PB 1) of the statement of Ankit u/s. 132(4), he stated that source of unsecured loan was amount borrowed from various Body Corporate and individuals. Question No. 69 (Page 26 of General PB 1), Shri Ankit Bhageria had categorically denied of getting any direction from Purrshottam Bhageria regarding alleged cash transactions. Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant - Such statements are substantively clarified by duly notarized affidavit Jitender Kumar He was pressurized to sign the statement. (Employee of Filatex) - The statement does not show what he stated. It is the version of the Officer. (in his Affidavit Page 146 of General PB 3) Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant Such statements are substantively clarified by duly notarized affidavit Prabhakaran Pillai - He was a diabetic and Heart Patient. (Employee of Filatex) - he was put under pressure and the search was continued for 3 days - The statement does not show what he stated. It is the version of the Officer. (in his Affidavit Page 139 of General PB 3) - Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant -Such statements are substantively clarified by duly notarized affidavit , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 As explained above, though the statements are not reliable, still even otherwise the additions cannot be made merely on the basis of statement without any corroborative evidences. Sec. 132(4) specifies word "used in evidence" not "Used as evidence" The usage of the word "used in evidence" signifies that if there are any other corroborative evidence or documentary evidence, in that case the statement can be used as one of the evidences Decisions relied:  CIT Vs. Harjeev Aggarwal 70 taxmann.com 95 (Del-HC) [A statement under section 132(4) can be relied if it is corroborated by incriminating evidence]  Sambhav Buildwell (P) Ltd vs. ACIT vide (Del- ITAT)[Unsecured loan cannot be termed bogus only on the basis of statement without corroborative material]  Decision of Delhi High Court in the case of PCIT V. Pavitra Realcon Pvt. Ltd. (ITA 579/2018)  Ajay Gupta Vs. DCIT 81 Taxmann.com 462 (Del-ITAT) [Incriminating material must have been found to correlate the undisclosed income with such statement.]

6. The AO could not find any corroborative evidence to prove that the contents of the Whatsapp Messages were true and linked with the unsecured loan taken by the assessee.

7. Further, no cash trail was established by the AO to prove that unsecured loans were taken in exchange of Cash Payments.

8. During the course of recording of statement of Shri Purshottam Bhageria, no independent witnesses remained present during the recording of the statement of Shri Purshottam Bhageria. The 2 witnesses required by Rule 112 were the drivers of the car in which the Search party came at the place of search. They were neither independent nor literate enough to understand the language in which the statements were recorded. 9. The statement of various employees as referred to in assessment order cannot be applied to facts of the appellant's case as such statements are general in nature and admission is not with reference to any specific transaction of loan by the appellant. 10. The A.O. has not doubted the utilization of such loans by appellant and such loan has been repaid in the same year or subsequent Assessment Years.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Ld. CIT(A) on Page 62-Para 130 of the CIT(A) order has considered the submission of the assessee and summarily held that appellant has proved identity, creditworthiness, Capacity and Genuineness, AO has not doubted the utilization and repayment of such loans, TDS has been deducted on interest payments, 133(6) summons have been complied by the parties and details asked by Ld. AO were filed. Further, in the same Para point (vi) it was held by Ld. CIT(A) that WhatsApp chats relied upon by Ld. AO does gives rise to suspicion but the same nowhere proves that cash has been exchanged against any specific loan taken by appellant. This ground is in relation to the consequent Interest disallowance made by AO as the unsecured Loans were held bogus by Ld. AO. Since, the Loans were held genuine by CIT(A) and TDS has been deducted on the interest expenses claimed, the disallowance of the same made by AO was deleted by CIT(A). Ld. AO also made addition of alleged commission expense incurred by assessee for obtaining accommodation entries @0.25% on total credits as well as repayments i.e 0.25% of Rs. 3150 Lakhs (2425L +725L) which comes to Rs. 7,87,500/-. Since, the Loans were held genuine by CIT(A), the alleged unexplained expenditure for taking accommodation entries was also deleted by Ld. CIT(A).”

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 130. “In view of above discussion, and considering relevant facts on record, it is observed as under: (i) The appellant has proved identity of the creditor which is not disputed by Assessing Officer in assessment order. (ii) The appellant has also proved creditworthiness of the creditor by submitting its audited annual account along with relevant bank statement of depositors. The Assessing Officer has not proved that any cash has been deposited prior to giving cheque to appellant even though appellant was not required to prove sources of source, the bank statement submitted by appellant clearly reflects such sources which is not doubted by A.O. nor any inquiry has been made by A.O. for concluding that loan received by appellant is accommodative loan from shell companies. As discussed herein above, when appellant was asked to further explain sources of source, the appellant has provided such details, availability of funds with depositors who have transferred funds to ANM, RMP, Bhageria Finance and RKG who have in turn transferred funds to appellant and their sources are mainly from sale of shares, fixed assets, redemption of mutual fund or unsecured loan taken from group entities or third parties. The appellant had also submitted relevant return of income of depositors of ANM, RMP, Bhageria Finance and RKG to prove that they have disclosed income arising from such transactions in return of income. The Assessing Officer has observed that relevant documents submitted by appellant prove creditworthiness of depositors. (iii) The appellant has taken loan from ANM, RMP, Bhageria Finance and RKG who are having sufficient funds as on 31st March, 2012 and 2013 and same is duly disclosed in audited annual accounts of such company. Thus, the capacity of depositor is proved by the appellant. (iv) The A.O. has not doubted the utilisation of such loans by appellant and such loan has been repaid in subsequent Assessment Years after making payment of interest and deducting TDS on such interest payment. (v) During the course of assessment proceedings, notice u/s 133(6) was issued ANM, RMP, Bhageria Finance and RKG and in response to such notice they have filed relevant details. If the Assessing Officer had any doubt about sources of funds either in balance sheet or sources of funds in their bank statement, he could have made further inquiries either under Section 133(6) or 131 of the Act. (vi) While making the addition Assessing Officer has relied upon various WhatsApp chats but such chats nowhere prove that those cash has been , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 exchanged against any specific loan taken by appellant. Though such evidences found during the course of search does give rise to suspicion but such suspicion alone cannot be the basis to reject all the documentary evidences filed by appellant in support of loans taken by it. (vii) Though according to Assessing Officer, Shri. Ankit Bhageria is an entry provider or he is operating shell companies, but what is required to be seen is whether in the case of Assessee the documents found during the course of search at their premises or from the premises of Shri. Ankit Bhageria or otherwise show that Assessee was beneficiary of any accommodation entry or not. In the present case, the A.O. sans any specific link about loan taken from ANM, RMP, Bhageria Finance and RKG with any cash trail and on the contrary ANM, RMP, Bhageria Finance and RKG in reply to notice u/s 133(6) has accepted that genuine loan was given to appellant. The A.O. has failed to prove any direct nexus linking the Assessee with accommodation entries from SFPL or Ankit Bhageria group entities.”

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”

30. The Co-ordinate Bench of ITAT, Delhi in the case of ITO Vs. Alpha Contech Pvt. Ltd. in vide order dt. 28.07.2023 under identical circumstances while deleting the additions made by AO by alleging the loan creditors as bogus, has held as under: 7. On careful consideration of above rival submission, first of all, we note that the Assessing Officer made addition u/s. 68 of the Act, by observing that despite several opportunity the assessee failed to prove creditworthiness of lender and genuineness of transaction and thus could not discharge onus as per requirement of sec 68 of the Act. The assessee carried the matter before ld. CIT(A) and filed additional evidence under rule 46A of the Rules on which remand report was , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 called wherein the Assessing Officer did not made any adverse comment on the additional documentary evidence of assessee and also admitted that the lender company received amount of Rs. 7,30,62,000/- as share premium reserve during immediately preceding assessment year and amount of loan of Rs. 3.60 crore advanced to the assessee during present assessment year was from the said reserve amount. The remand report of the Assessing Officer supported the case of assessee which was based on the strength of additional evidence filed by the assessee without raising any doubt or discrepancy therein.

8. We also find and appropriate to reproduce the relevant operative part of first appellate order as follows:- The appellant company has received Rs.3,60,00,000/- from M/s Fennie Commercial Pvt. Ltd. as unsecured loan / share application money during the year. The same was added by the AO on the ground that appellant has failed to file confirmation as well as other supporting documents of the lender party before AO to prove identity, genuineness and creditworthiness of the party. During the course of appellate proceedings, appellant filed an application under Rule 46A and filed following documents to prove identity, genuineness and creditworthiness of the party:

i. Copy of Acknowledgement of IT. Paper Book page no. 48. ii. Copy of Audited Financial Statements along with all the annexures. Paper Book page no. 49-60. iii. Copy of Confirmed ledger account. Paper Book page no. 61. iv. Copy of Bank Statements reflecting the amount given to the assessee company. Paper Book page no. 62-63. v. Copy of confirmation. Paper Book page no. 64.

These documents were forwarded to the A for carrying out necessary enquiry with reference to the lender party. The Assessing Officer after conducting enquiries with reference to the lender party has submitted remand report vide his letter dated 2.03.2016 which was forwarded by the Addl. CIT, Range 2 vide his letter dated 08.03.2016. The relevant part of the remand report is submitted as under:

"4. As per directions received, the submissions made by the assessee before your good self as well as additional evidence submitted by it for admission at the appellate stage have been , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 carefully perused. Besides, the additional evidence furnished by the assessee has also been independently verified from this Office by way of issue of letter us 133(6) of the Income Tax Act, 1961, to the third party concerned, i.e., to Ms Fennie Commercial Private Limited, 96-AV9, Neelkanth Apartments, Kishan Ganj, Vasant Kunj, New Delhi - 110070.

7. As regards the present position of the said money advanced by MIs Fennie Commercial Pvt. Ltd. to the appellant company, it has been stated that they have not received any shares from M/s Alfa Contech Private Limited till date and the said Sum is lying as Loans & Advances in their books. However, this company has not furnished copy of its latest IT filed as well as copy of Audit , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Report, Balance Sheet and P & L Account despite being specifically called for in the letter issued us 133(6) to it.

8. It is also submitted here that as per the Balance Sheet of the appellant company for the AY 2011-12, it has shown a sum of Rs.3.60 crores as "Loans from Body Corporate", as per Schedule 3 annexed to the Balance Sheet and not as Share Application Money. Also, as per details filed by the appellant vide its letter dated 03.02.2014 during the course of the assessment proceedings in its case for AY 2011-12, it has furnished the name of Ms Fennie Commercial Private Limited, PAN AAACF9549A, from whom it had allegedly received unsecured loan of Rs.3.60 crores whereas the said party is showing this Loan & Advance as "Share Application Money". It is seen from the remand report that Assessing Officer has carried out enquiry with the lender party us 133(6) of the I.T. Act. The said party furnished the detailed reply vide its letter dated 08.01.2016. It has been reported by the AO that Ms Fennie Commercial Pvt. Ltd. has confirmed that it has given share application money of Rs.3.60 crore which has been accounted for by the appellant as unsecured loan in its balance sheet. The AO has also examined the ledger account of the appellant company from the lender party's books of accounts. The lender party has also filed copy of its return of income, audit report, balance sheet, profit & loss account and annexures. It has been observed by the AO from the annexures of the audit report that lender has shown loans and advances totalling Rs.7,41,00,000/- in its balance sheet. The appellant's name is also appearing in the loan and advances and has been shown as share application money of Rs.3.60 crore in the name of appellant. AO has also verified the balance sheet of the lender company and it is seen that said company has shown share premium reserve in its balance sheet in A.Y. 2010-11 out of which the amount has been given to the appellant. All these facts establish the identity, creditworthiness and genuineness of the transactions. It is seen that the said party has confirmed the transactions with the appellant and source of the money is also explained. M/s Fennie Commercial Pvt. Ltd. is assessed to tax with Ward 9(1). New Delhi and filing its return of income.

The appellant company has filed copies of their bank statement, balance sheets and profit & loss a/c of the lender company before me to prove the identity, creditworthiness and genuineness of the transaction. These facts have been verified by the AO in the remand proceedings and has submitted report in this regard. It is seen that name of the appellant , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 company is appearing in the balance sheet of the lender company. In view of the documents filed by the above named lender company before me as well as AO, it is established that the identity, source, creditworthiness of the lender company and genuineness of the transactions has been established.

I find that the AO has not been able to bring on record any evidence to negate the genuineness of the transaction done by the appellant. Therefore, the addition cannot be sustained only on suspicion and surmises. Considering the fact that the identity, genuineness and creditworthiness of the lender company duly established, the addition made by the A cannot be upheld and hence the AO is directed to delete the addition of Rs.3,60,00,000/- made on account of unexplained income us 68 of the I.T. Act. In support of my above decision, reliance is placed on following judicial pronouncements: a. CIT Vs. Fair finvest Itd. [ 2014 ] 44 taxmann.com 356 (Delhi) HIGH COURT OF DELHI "Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2002-03 - Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application and affidavits of directors, Assessing Officer could not make addition on account of share application money solely on basis of investigation report [In favour of assessee.

Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on report of investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc., Assessing Officer was not justified in making addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report. The least that Assessing Officer ought to have done was to enquire into matter by, if necessary, invoking his powers under section 131 summoning the share applicants or directors.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 b. Commissioner of Income-tax v. Mark Hospitals (P.) Ltd. [ 2015 ] 58 taxmann.com 226 (Madras) HIGH COURT OF MADRAS "Section 68 of the Income-tax Act, 1961 - Cash credit (Burden of proof - Assessment year 2006-07 - Assessee had obtained unsecured loans from agriculturists and submitted their names and addresses, but did not provide their PAN cards - Assessing Officer made addition under section 68 - It was found that loans were given to assessee through cheques and all creditors had confirmed that they had advanced loans mentioned against their names to assessee and, thus, identity of creditors could not be disputed - Further, all creditors were agriculturists and therefore, they did not have PAN card - Whether, on facts, no addition could be made - Held, yes [Para 6] [In favour of assessee]" c. ITO Vs. Neelkanth Finbuild Ltd., [2015] 61 taxmann.com 132 (Delhi - Trib.), held that "6. Keeping in view the findings given so the Assessing Officer as well as the learned first appellate authority and the documentary finding by the assessee before us, we are of the considered view that the learned first appellate authority has deleted the addition in dispute on the basis of various documentary evidence filed by the assessee before the Assessing Officer as well as before him. The hon'ble Supreme Court of India (sic.) in the case of CIT v. Lovely Exports (P.) Ltd. [2008] 299 ITR 268 (Delhi) which has confirmed the order of the hon'ble Delhi High Court has held that once the identity of the shareholder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. The learned first appellate authority has examined the documentary evidence filed by the assessee before the Assessing Officer as well as before him and held that the assessee has provided confirmations from all the parties as well as various evidences to establish the genuineness of the transaction, the assessee has also relied upon the judgment of Nemi Chand Kothari v. CIT [2003] 264 IT 254/[2004] 136 Taxman 213 (Gau.) wherein it has been held that it is a certain law that the assessee is to prove the genuineness of transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of the assessee to find out the source of money of creditors. Similar observation has also been given in the case of S. Hastimal v. CIT [1963] 49 ITR 273 (Mad.) and CIT v. Daulat Ram Rawatmull [1973] 87 IT 349 (SC). The learned first , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 appellate authority has cited various decisions rendered by the hon'ble Supreme Court of India as well as the hon'ble jurisdictional High Court in the impugned order and finally has held that the assessee has substantiated the transaction regarding share application money received by it was genuine transaction and the same were not accommodation entries. He did not find any evidence collected by the Assessing Officer which could prove otherwise and deleted the additions in dispute. As regard the addition of Rs. 12,500 made on account of commission which was presumed to have been allowed by the assessee for obtaining the hawala entry in dispute, the learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer was not able to bring anything on record that it was the assessee's own money which was routed in the form of share application money and has rightly deleted the same.

d. Honorable Supreme Court of India in the case of CIT v. Kamdhenu Steel & Alloys Ltd., SLP (CC) no. 15640 of 2012, dated 17-09-2012 (Supreme Court), wherein the Hon'ble Supreme Court has dismissed the Special Leave Petition filed by the Revenue against the decision of Hon'ble Delhi High Court in the case CIT v. Kamdhenu Steel & Alloys Ltd. in which it has been held by Hon'ble Court that once adequate evidence/material given by the assessee, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter, in case such evidence is to be discarded or it is proved that the assessee has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act." e. Commissioner of Income Tax -9 Erstwhile CIT-VI v. Vrindavan Farms (P) Ltd, ITA 71/2015, ITA 72/2015, ITA 84/2015, the High Court of Delhi held as under :

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 "3. The ITAT has in the impugned order noticed that in the present case the Revenue has not doubted the identity of the share applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the A by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders.

5. In the facts and circumstances of the present appeals, the Court is satisfied that no substantial question of law arises. The appeals are dismissed."

The facts of the above cited judicial pronouncements are identical with the facts of the appellant case, therefore, the ratio of the above cited judicial pronouncements is squarely applicable to the facts of the appellant case, hence, unsecured loan received by the appellant from M/s Fennie Commercial Pvt. Ltd. cannot be termed as unexplained income of the appellant and cannot be added u/s 68 of the I.T. Act. Therefore, the unsecured loan received from the above mentioned party is treated as , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 genuine transaction and cannot be added us 68 of the I.T. Act. Therefore, the addition of Rs.3,60,00,000/- is deleted.

31. Further on the issue of discharging of onus, the Hon'ble Jurisdictional High Court in the case of Mod. Creations (P.) Ltd. v. ITO reported in [2013] 354 ITR 282, has been held as under: "It will have to be kept in mind that Section 68 of the I.T. Act only sets up a presumption against the Assessee whenever unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors.

32. It was further observed by the Hon’ble court as under: 14. With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the ASSESSING OFFICER that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala Ride. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.0. had any doubt about the material placed on record, which was largely bank statements or the creditors and their income tax returns, it could gather the necessary information from the sources to , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Etd (20092-229-178.268 (Delhi) and CIT v. Lovely Exports (P.) Ltd. 2006) 215 CTR 495 (SC).*

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 35. Regarding the additions made u/s 68 of the Act towards the unsecured loans though they were repaid subsequently, the Hon’ble Gujarat High Court in the case of PCIT vs Ojas Tarmake 150 taxmann.com 75 has observed as under: “where the appellant showed unsecured loans received during the relevant AY and AO made addition on the ground that appellant failed to discharge onus of liability as laid down u/s 68 of the Act since amount of loan received by the appellant was returned to the loan period during the year itself and all the transactions were carried out through banking channel, impugned addition was to be deleted.”

taken by the revenue, the objections raised in the C.O. of the assessee become academic and thus not adjudicated and is dismissed. , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024

42. In the result, appeal of the Revenue in and C.O.No.11/Del/2025 of the assessee are dismissed.

C.O.No.-32/Del/2025 (AY 2015-16) M/s Filatax India 43. In this year, an addition of INR 9.00 crores was made by holding the same as accommodation entries u/s 68 of the Act out of total loan amount of INR 17.75 crores received during the year from six companies tabulated at page 101 of the assessment order. The AO further observed that the assessee had paid interest of INR 5,13,00,543/- on the said loans which was further disallowed. Besides this, an addition of INR 8,76,250/- was made on account of alleged commission on the loans received at INR 17.75 crores and repaid at INR 17.30 crores during the year (though addition was made of INR 9 crores of loan as accommodation entry).

& C.O.No.89/Del/2024 (AY-2016-17)

1.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) should have quashed the assessment order as illegal, not tenable, void and without jurisdiction. 1.2 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in ignoring that no independent reason for re- opening was recorded, as the notice was issued on the basis of report of received from TDS ward 1(3)(1), International Taxation, Delhi. 1.3 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the assessment order was passed without following the principle of natural justice by not providing the copies of statement of various persons relied upon by Assessing , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Officer. On the ground of principle of natural justice also, the addition was liable to be deleted.

2. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the addition simply on the ground that the material relied upon by Assessing Officer is totally unrelated and irrelevant to the respondent.

3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not considering the fact that the assessment order passed by Assessing Officer had provided the new material directly in assessment order without confronting the same to the respondent company during assessment proceedings. On the basis of the principle of opportunity of being heard also, the addition was liable to be deleted.

4. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same.

& CO No.-33/Del/2025(AY 2017-18)

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 61. The facts and circumstances existed in the year under appeal and the observations and allegations made by the AO while making the additions/disallowance are the same, as were made in the assessment order passed for AY 2013-14. Further, Ld. CIT(A) also made similar observation as were made in AY 2013-14 while deleting the additions/disallowances.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024

1. On the facts and in the circumstances and in law, the learned CIT(Appeals) has erred in enhancing the income of Appellant by Rs.9,65,00,000 on account of unexplained money by invoking the provisions of ser on 69A of the Act.

2. On the facts and in the circumstances and in law, the learned CIT(A) has erred in invoking provisions of Section 115BBE of the Act with regard to above enhancement and charging tax and surcharges at higher rates. When the addition on which such tax and surcharge were charged itself is unsustainable, the CIT(A) may be directed to delete the same.

3. On the facts and in the circumstances and in law, the learned CIT(A) has erred in levying consequent interest u/s 234A, 234B, 234 of the Act. The appellant denies its liability to pay such interest. 4. On the facts and in the circumstances and in law, the learned CIT(A) has erred in initiating penalty proceedings u/s 274 r.w.s 271AAC(1) of the Act in respect of enhancement of Rs.9,65,00,000/- u/s 69A of the Act. The AO may be directed to not to initiate any such penalty proceedings. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.

The CIT(A) has relied on the statement of Shri Purushottam Bhageria taken u/s 132(4) and stated that all the amounts mentioned in the chats are "Rs. in lakhs". (100 KG denotes 100 Lakhs; 165 Sarees denote 165 Lakhs; and 30 Files denote 30 Lakhs). Accordingly the CIT(A) concluded that the assessee was the owner of cash amounting to Rs. 965 Lakhs which was not recorded in the books of accounts.

The summary of chats relied upon by the CIT(A) to make the enhancement are as follows:

AY 2019-20 (Screenshots of the Chat are reproduced at Paper book Page 2-5)

, 5000, 2060, 4999, 4648, 3988, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 , 5000, 2060, 4999, 4648, 3988, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024

The enhancement cannot be sustained based on these messages due to the The enhancement cannot be sustained based on these messages due to the The enhancement cannot be sustained based on these messages due to the following reasons:

1. 1. The WhatsApp messages do not clearly indicate whether any alleged cash 1. The WhatsApp messages do not clearly indicate whether any alleged cash 1. The WhatsApp messages do not clearly indicate whether any alleged cash transaction actually took place transaction actually took place.

2. Shri Purshottam Bhageria, in his affidavit (Page 227, Para 8 of General PB 1) Shri Purshottam Bhageria, in his affidavit (Page 227, Para 8 of General PB 1) Shri Purshottam Bhageria, in his affidavit (Page 227, Para 8 of General PB 1) clarified that the WhatsApp messages bear no correlation to the unsecured loan clarified that the WhatsApp messages bear no correlation to the unsecured loan clarified that the WhatsApp messages bear no correlation to the unsecured loan taken by the appellant during the relevant financial year. taken by the appellant during the relevant financial year.

3. The name of the appellant does not a 3. The name of the appellant does not appear in any of the said WhatsApp ppear in any of the said WhatsApp messages.

4. The chats do not mention that the appellant was involved in any alleged 4. The chats do not mention that the appellant was involved in any alleged 4. The chats do not mention that the appellant was involved in any alleged cash transaction, nor does it establish that the said amount belonged to the cash transaction, nor does it establish that the said amount belonged to the cash transaction, nor does it establish that the said amount belonged to the appellant.

5. There is no evidence to substantiate that t 5. There is no evidence to substantiate that the appellant was in possession of he appellant was in possession of the cash or that any such amount changed hands as inferred from the chat. the cash or that any such amount changed hands as inferred from the chat. the cash or that any such amount changed hands as inferred from the chat.

6. No concrete evidence links the contents of the chat to the appellant. The mere 6. No concrete evidence links the contents of the chat to the appellant. The mere 6. No concrete evidence links the contents of the chat to the appellant. The mere existence of a WhatsApp conversation without supporting corrobora existence of a WhatsApp conversation without supporting corroborative existence of a WhatsApp conversation without supporting corrobora evidence cannot be considered proof of any financial transaction. evidence cannot be considered proof of any financial transaction. evidence cannot be considered proof of any financial transaction.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 7. The ld. CIT(A) has failed to ascertain against which transactions such cash transactions even after such detailed search and taking statements of so many people, including Shri Sudhir Bhimrajaka and Shri Prabhakaran Pillar (the parties with whom Shri Purushottam Bhageria has done the chats).

8. Further, the CIT(A) has also failed to ascertain against which transactions such cash alleged cash payments/receipts made. And therefore the addition merely on the basis presumptions, without any corroborative evidence and without any link with the actual transaction.

10. Even after the detailed search, the AO could not find any cash trail which could justify that the alleged cash transactions actually took place.

1. 1. The Hon'ble Supreme Court in A2Z Infraservices Ltd. v. Quippo Infrastructure Ltd. has held that WhatsApp messages lack evidentiary value, as digital content can easily be created or deleted.

2. Even if the strict provisions of the Indian Evidence Act do not apply to income tax proceedings, allegations must be supported by independent and corroborative evidence, as held by the Hon'ble Madras High Court in Saravana Selvarathnam Retails (P.) Ltd. v. CIT(A). [W.P. No. 9753, 9757 of 2023] 3. The Hon'ble Delhi ITAT in Designers Point (India) P. Ltd. ruled that WhatsApp chats alone do not constitute valid evidence to support legal action. [ITA 2517/DEL/2022] 4. Decision of ITAT Jaipur in the case of Virendra Singh Ratnawat v. ACIT IT (ITA 179 to 181 (JP) of 2022)

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 5. Decision of in the case of Asstt CIT v. Shri Manchukonda Shyam (ITA 87 (Viz) of 2020) 6. Decision of in the case of A. Johnkumar v. DCIT CC 1(4) [ITA 3028 (Chny) of 2019] 7. A. Johnkumar v. DCIT CC 1(4) [IT Appeal 3028 (Chny) of 2019, dated 13-5- 2022. 8. Decision of Hon'ble Kolkata ITAT in the case of Atul Tatia [ITA 492/Kol/2021].”

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 81. It is further seen that the assessee before Ld. CIT(A), has categorically contended that the evidences so collected are without following the procedure laid down in section 65 of the Indian Evidence Act. The assessee also placed reliance on the judgment of Hon’ble Supreme Court in the case of Anvar P.V vs P.K.Basheer & Ors (2014) 10 SSC 473 wherein the Hon’ble Supreme Court has held that “where addition is made on the basis of electronic record like Excel Sheet, WhatsApp chat etc, conditions of section 65B of the Income Evidence Act, has to be complied with otherwise rendered the documents admissible in the eyes of law”. The relevant observations made by the Hon’ble Supreme Court are as under:- 14. “Any documentary evidence by way of an electronic record under the Evidence Act, in view of sections 59 and 65A, can be proved only in accordance with the procedure prescribed under section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify, secondary evidence in electronic form, generated by a computer. It may be noted that the section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any Information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e. electronic record which is called as computer output, depends on the satisfaction of the four conditions under section 65B(2). Following are the specified conditions under section 65B(2) of the Evidence Act: (1) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process Information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; , 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the sald period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents, and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity 15. Under section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, It is permissible provided the following conditions are satisfied: (i) There must be a certificate which identifies the electronic record containing the statement (ii) The certificate must describe the manner in which the electronic record was produced (iii) The certificate must furnish the particulars of the device involved in the production of that record; (iv) The certificate must deal with the applicable conditions mentioned under section 65B(2) of the Evidence Act (v) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device 16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most Importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of Justice"

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 82. Ld.CIT(A) while making the enhancements has ignored such observations of the Hon’ble Supreme Court and made the addition on preponderance of probabilities and surrendering circumstances and ignored the fact that opportunities of cross-examination were not provided to the assessee. Once the assessee has objected to the transactions, it cannot be said that the presumption lies upon him u/s 132(4A) of the Act is not rebutted. The provisions of section 132(4A) are reproduced herein below:-

132(4A): Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed - (i) That such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) That the contents of such books of account and other documents are true; and (iii) That the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Besides this, an addition of INR 4,35,000/- was made on account of alleged commission @ 0.25% on the loans received of INR 9,60,00,000/- and repayment of INR 7,80,00,000/- made by holding the same as unexplained transactions.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 1. On the facts and in the circumstances and in law, the learned CIT(Appeals) has erred in making disallowance of Rs. 1,98,692/- u/s 40(a)ii) on account of Health and education cess. When such disallowance is not called for, the AO may be directed to delete the same.

2. On the facts and in the circumstances and in law, the learned CIT(A) has erred in making disallowance of Rs.21,56,755/- u/s 36(1)(va) on account of employee's contribution after the due date specified in the said section but before the due date of filing of Return of Income. When such disallowance is not called for, the AO may be directed to delete the same.

3. On the facts and in the circumstances and in law, the learned CIT(Appeals) has erred in enhancing the income of Appellant by Rs.35,00,000 on account of unexplained money by invoking the provisions of section 69A of the Act. When such disallowance is not called for, the AO may be directed to delete the same.

4. On the facts and in the circumstances and in law, the learned CIT(A) has erred in invoking provisions of Section 115BBE of the Act with regard to above enhancement and charging tax and surcharges at higher rates. When the addition on which such tax and surcharge were charged itself is unsustainable, the CIT(A) may be directed to delete the same.

5. On the facts and in the circumstances and in law, the learned CIT(A) has erred in levying consequent interest u/s 234A, 234B, 234C of the Act. The appellant denies its liability to pay such interest.

6. On the facts and in the circumstances and in law, the learned CIT(A) has erred in initiating penalty proceedings u/s 270A and 271AAC of the Act. The AO may be directed to not to initiate any such penalty proceedings.

7. On the facts and in the circumstances and in law, the learned CIT(A) has erred in initiating penalty proceedings u/s 271AAB(1A) of the Act in respect of enhancement of Rs.35,00,000/- u/s 69A of the Act. The AO may be directed to not to initiate any such penalty proceedings.

8. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.

97. Ground No.1 is with respect to disallowance of claim of education cess of INR 1,98,692/- u/s 40(a)(ii) of the Act. It is seen that Ld.CIT(A)

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 has dismissed the claim of the assessee by relying upon the judgement of Hon’ble Supreme Court in the case of Sesa Goa Ltd. vs Joint Commissioner of Income Tax reported in 155 taxmann.com 342 (SC) wherein the Hon’ble Supreme Court has held that “education and Health Cess cannot be allowed as deduction while computing the income under head business or profession”. The Hon’ble apex Court further observed that the amendment made by Finance Act, 2022 is retrospective in nature.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 100. In Ground of appeal No. 3, assessee has challenged the enhancement of income of the assessee by Rs. 35,00,000/- by ld. CIT(A) based on WhatsApp chats found in the mobile phone of Shri Purushottam Bhageria, Managing Director of the company as unexplained money of the assessee company u/s 69A of the Act.

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 104. Grounds of appeal No. 5 is in respect of interest u/s 234A, 234B and 234C which is consequential and therefore, AO is directed to charge the interest as per law on the income computed after giving effect to the order of the Tribunal. This ground of appeal is partly allowed.

2. On the facts and in the circumstances and in law, the learned CIT(A) has erred in invoking provisions of Section 115BBE of the Act with regard to above enhancement and charging tax and surcharges at higher rates. When the addition on which such tax and surcharge were charged itself is unsustainable, the CIT(A) may be directed to delete the same.

3. On the facts and in the circumstances and in law, the learned CIT(A) has erred in levying consequent interest u/s 234A, 234B, 234C of the Act. The appellant denies its liability to pay such interest.

4. On the facts and in the circumstances and in law, the learned CIT(A) has erred in initiating penalty proceedings u/s 271AAB(1A) of the Act in respect of enhancement of Rs.1,50,00,000/- u/s 69A of the Act. The AO may be directed to not to initiate any such penalty proceedings.

5. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”

, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024

Order pronounced in the open Court on 30.06.2025.