SATISH SAWARMAL SARAF,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CC-4(3), MUMBAI

ITA 5540/MUM/2025Status: DisposedITAT Mumbai12 November 2025AY 2018-1924 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal decided to first address the grounds challenging the addition made under section 69A. The assessee had provided documentary evidence to establish the identity of AFL, including PAN card, confirmation of accounts, MOA, AOA, and RBI registration. For creditworthiness, the assessee submitted AFL's ITR for AY 2018-19 showing income of Rs. 67,25,587, audited financial statements showing revenue of Rs. 22.16 crores in FY 2017-18, long-term borrowings of Rs. 913 crores, equity of Rs. 5 crores, and fixed deposits of Rs. 8 crores as of March 31, 2018. These figures were considered multiple times the loan amount, proving creditworthiness. For genuineness, it was noted that AFL is an NBFC regulated by the RBI, the payment was through banking channels, and the loan was repaid within 113 days. AFL's business of lending was evident from its balance sheet. The Tribunal also noted that similar loan transactions from AFL had been treated as genuine by coordinate benches of the ITAT. Therefore, the addition of Rs. 25 lakhs made by the AO under section 69A was ordered to be deleted, as the assessee had discharged its onus. The Tribunal also noted that the issue of reassessment legality was not adjudicated as the primary ground for addition was deleted. The appeal was partly allowed.

What were the facts?

The assessee, Satish Sawarmal Saraf, filed an appeal against the order dated 08.07.2025 passed by the National Faceless Appeal Centre (NFAC) / CIT(A) for Assessment Year 2018-19. The appeal challenges the addition of Rs. 25,00,000 under section 69A of the Income Tax Act, 1961, which was made on account of an alleged bogus accommodation entry in the form of an unsecured loan from M/s. Aneri Fincap Limited (AFL). The Assessing Officer (AO) treated the loan as an accommodation entry, considering AFL to be a paper company. The assessee contended that the loan was genuine and provided documentary evidence to establish the identity, creditworthiness, and genuineness of the transaction. The AO also made an addition of Rs. 2,00,00,000 under section 68 and Rs. 1,08,000 as commission, based on information from a search at a third party and a statement recorded from Shri Rajesh Mehta, CEO of AFL, who allegedly admitted to providing accommodation entries.

What were the issues?

1. Whether there was a valid reason to believe that income escaped assessment, making the reassessment order illegal, as there was no live link between the information received and the assessee, and no application of mind by the AO? (Section 147/148 of the Income Tax Act, 1961) 2. Whether the addition of Rs. 25,00,000 under section 69A was justified, considering the assessee provided documentary evidence to establish the identity, creditworthiness, and genuineness of the loan transaction with Aneri Fincap Limited? 3. Whether the addition based on the statement of Shri Rajesh Mehta was valid, given that the assessee was not provided an opportunity to cross-examine him, his statement did not specifically mention accommodation entries for loan transactions, and he lacked directorship or shareholding in AFL? Assessee's Contentions: - The reassessment was illegal due to lack of nexus and non-application of mind by the AO. - The loan of Rs. 25,00,000 from AFL was genuine, supported by documentary evidence of identity, creditworthiness, and transaction genuineness. - The addition based on Shri Rajesh Mehta's statement was invalid as there was no cross-examination, his statement was not specific to loan transactions, and he had no directorship/shareholding in AFL. - The CIT(A) erred in ignoring documentary evidence filed by the assessee and relying on the third-party statement and lack of response from AFL directors to a notice under section 133(6). Revenue's Contentions: - The revenue relied on the orders passed by the revenue authorities.

Which sections of the Income-tax Act were involved?

Section 69A,Section 68,Section 250

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SANDEEP GOSAIN & SHRI GIRISH AGRAWAL

For Appellant: Shri Virag Shah
For Respondent: Shri Sourabh S. Agrawal, Sr. DR
Hearing: 06.11.2025Pronounced: 13.11.2025

PER SANDEEP GOSAIN, JM: This appeal has been filed by the assessee challenging the impugned order dated 08.07.2025 passed under section 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2018-19. The assessee has raised the following grounds of appeal:

1.

The learnedCIT(A) failed to appreciate that there was no reason to believe that any income has escaped assessment and that the reassessment order passed was illegal and bad in law as: There was no live link between the information received and provided in the reasons recorded with that of the appellant as there was no mention of the appellant in any part of t

The order continues below.

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