KEMOX CORPORATION,BHIWANDI vs. DCIT-CC-3, THANE, THANE

O R D E R Per : Narender Kumar Choudhry, Judicial Member: These appeals have been preferred by the Assessee against the orders dated 25.11.2024, 13.12.2024 & 13.12.2024, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the 2015-16, 2019-20 & 2020-21.

. M/s. Kemox Corporation 2. All the appeals under consideration are having almost identical facts and issues and therefore for the sake of brevity, the same were heard together and disposed of by this composite order. we observe that in the A.Y. under consideration, the Assessee was engaged in the business of manufacturing and selling of chemicals and textile auxiliaries and had declared its income at a loss of Rs.20,02,611/- by filing its return of income on dated 30.09.2015, which was subsequently selected for scrutiny through CASS and accordingly various statutory notices were issued to the Assessee, against which the Assessee attended and furnished the relevant details.

3.1 The AO thereafter during the assessment proceedings observed that the Assessee had taken unsecured loans from various parties and most of family members. Some of the loans have been taken from Kolkata based companies detailed below:

Sl. PAN No. Name of Loan Providers Amount of Loan No. (Rs.) 1 AADCN2861L North East Trade Link Pvt. Ltd. 55,00,000/- 2 AAACV8700F Vinam Finance Pvt. Ltd. 2,87,50,000/- 3 AABCW0423F Wellspun Tie-Up Pvt. Ltd. 45,00,000/- 3.2 The AO in order to verify the genuineness of the aforesaid unsecured loans, issued a commission u/s 131(1)(d) of the Act to the Kolkata Investigation Wing, who sent the report through ADIT (Inv.) 2(4) Kolkata, according to which two companies namely M/s. North East Trade Link Pvt. Ltd. (in short “NETLPL”) and M/s. Wellspun Tie- up Pvt. Ltd. (in short “WTPL”) were found to be non-existent, at the given address and Director of other company M/s. Vinam Finance Pvt. Ltd. (in short “VFPL”) did not appear at the office of DDIT(Inv.), Kolkata on being summoned u/s 131 of the Act. It was also reported that this company is controlled and managed by Mr. Vijay Kumar Jain, who is entry provider.

3.3 Based on the commission report and facts available on record, the AO issued a show cause notice to the Assessee and also summoned Shri Jinesh Dodhia, partner of the firm u/s 131 of the Act to explain the circumstances and the facts, on which the loans were taken from the said companies.

3.4 The Assessee filed its reply and claimed as under:

“5.5. With regards to the same, AR of the assessee submitted following reply: "... With reference to your Notice u/s. 142 (1) & the Annexure dated 12/12/2017 regarding the unsecured loans of Rs.3,87,50,000 proposed to be taxed unexplained cash credit u/s. 68 of the Act, we hereby submit as under: 1) Ours is a partnership firm constituted in the year 2006 and engaged in the business of manufacturing and selling of Chemicals. For AY 2015- 16, the return of income disclosing the loss of Rs.20,02,611 (Loss due to Depreciation of Rs.42,80,782) was filed on 30/09/2015. 2) During the assessment year involved, we have taken unsecured loans of Rs.3,87,50,000 from following companies 1. NORTH EAST TRADE LINK PVT. LTD. (Loan Rs. 55,00,000) (PAN AADCN 2861 L) a) ROC Registration No. : CIN: U 51909 WB 2010 PTC 148252 b) Date of Incorporation 18-05-2010 c) Office Address: 52, Weston Street, Kolkata-700012 (W.B.) d) Company status as per ROC: ACTIVE e) Balance Sheet up to 31-03-2017 & AGM record upto 28-06-17 filed with ROC f) Name of Directors: 1) Gour Haldar (DIN 02503232) 2) Barun Haldar (DIN 02923854) g) Mode of Loan: The Loan was received by RTGS on 10/02/2015 (30,00,000) and on 11-02-2015 (Rs. 25,00,000) in to C.C. Account No. 1255, Saraswat Co Op. Bank, Mumbai. The Ledger of above party and Bank statements are enclosed. h) The rate of interest is 12% p.a. and we have paid interest of Rs. 89,589 (TDS 8,959) for AY 2015-16. i) The entire loan of Rs. 55,00,000 has been repaid by RTGS in the month of Sept./Oct. 2017 to the said Company. j) To prove genuineness of the loan, we have filed (1) Loan Confirmation Letter, (2) Bank statement, (3) ITR Ack. and (4) Annual Report (2014-15) vide submission Dt.31-07-17.

68. The above companies are duly registered with ROC, Kolkata and their status is shown as 'ACTIVE' as per the 'Company Master Data' enclosed. The said Companies have filed Annual Reports (FY 2016-17), AGM details up to 28/06/2017 and I.T. Returns up to AY 2017-18. Kindly note that we have received the loan of Rs. 55,00,000/- from North East Trade Link and Rs. 45,00,000 from Well Spun Tie-up through proper banking channels i.e. RTGS. During the FY 2017-18, we have also repaid the loan amounts to them by RTGS along with the Interest subject to TDS. The Ledger ACs and bank statements are enclosed. To prove the genuineness of loans, we have filed Loan confirmation Letters, PAN, Bank statements, Audited Balance sheet & ITR Ack. on your record. We have discharged our onus to prove the Identity, Credit worthiness and genuineness of loans by submitting all the details in respect of the borrowed funds. In view of above facts, the loans from above two companies are genuine loans and not unexplained cash credits u/s. 68 of the Act. b) Reg. Vinam Finance Pvt. Ltd. As per ADIT (1) Summons u/s. 131 were issued to the assessee company. The Company submitted its reply in which it was stated that company had transaction with M/s. Kemox Corporation. (2) Summons were issued to the director of the company but the director failed to appear and (3) Further, ADIT has reported that the company is in the data bank of the directorate controlled by Vijay Kumar Jain, an entry provider. As reported by Investigation wing, Kolkata, M/s. Vinam Finance Pvt. Ltd. has filed the reply in response to summons and has confirmed the loan given to Kemox Corporation. Merely because summons were issued to of the company but they have failed to appear, the loan of Rs. 2,87,50,000 received from M/s. Vinam Finance Put. Ltd. cannot be treated as unexplained cash credit u/s.

68. We have received loans through proper banking channels (RTGS) and are regularly paying interest to the company subject to TDS. We have discharged our onus to prove the genuineness of loans by submitting their confirmation letters, Bank statements, ITR Ack. and Annual Report. We have also proved the identity of the company, capacity and genuineness of the loans. As per ROC record, the status of the company is 'Active and very much in existence. 4) Regarding the ADIT report that the Company Vinam Finance Pvt. Ltd. is in data bank of the Directorate controlled by Vijay Kumar Jain, an entry provider, we have to submit that we do not know any person like Vijay Kumar Jain and the company in data bank of the Directorate. Our firm has taken the loan of Rs. 2,87,50,000 from Vinam Finance Pvt. Ltd. which is an NBFC registered with RBI vide Reg. No. 3-05.5815 and not from any person like Vijay Kumar Jain. The loan has been received by legal banking channel RTGS. The said loan is still O/s in our books of accounts till now. In view of above facts, we therefore submit that the loans of Rs. 3,87,50,000 from above 03 companies are genuine loans and the companies are Active and in existence. The loans cannot be treated as unexplained Cash Credits u/s 68 of the Act merely for the reasons that directors have failed to appear in response to summons or the Inspector has not found the company at given address."

3.5 The AO though considered the submissions of the Assessee, however, not being satisfied with the same, observed as under:

5.6. Submission of the AR of the assessee is carefully perused and discussed below: a) AR of the assessee has contended that we do not know as to when and at what address the summons were issued. It may be clarified that the enquiries were made at the addresses given by the assessee himself. During assessment proceedings, assessee had given the same address for two Companies, viz. Welspun Tieup Pvt. Ltd and North East Trade Link Pvt Ltd. which is 52, Weston Street, Kolkata-700012 (WB). It may be noted that enquiry was made at this address only. Assessee has submitted alternate address for Welspun Tieup Pvt. Ltd in his latest submission i.e. on date 15.12.2017, which is 61B, Park Street, Kolkata 700016 (WB) which was not submitted earlier. Even so, Shri Barun Haldar is common Director in these two Companies, so notices should have been served even for Welspun Tieup Pvt. Ltd at the address of North East Trade Link Pvt. Ltd. In fact, as the Director is common in both these two companies, appearance against summons u/s 131 for the North East Trade Link Pvt. Ltd would have served the purpose for Welspun Tieup Pvt. Ltd. Hence, only after full enquiry, it is being concluded that both the companies are non-existent. b) AR of the assessee has contended that merely because summons were issued to of the company but they have failed to appear, the loan of Rs. 2,87,50,000 received from M/s. Vinam Finance Put. Ltd. can not be treated as unexplained cash credit u/s.

2. Palash Baidya 16 3 Vinam Finance 1. DeokiNand Bajoria 13 28 Pvt. Ltd. 8 2. Deepak Bajoria 16 North East Trade 1. Barun Haidar 20 More than 75 Link Pvt. Ltd.

2. Gaur Haidar 20 More than 50

A person who is director in so many companies cannot be involved in genuine business activity. It may be pointed out here that large scale network of companies have been detected and exposed by the Investigation Wing of the department in many other cases where cash is routed through many companies to provide bogus entries to the beneficiaries. f) It may be brought out here that assessee has taken almost all loans from local parties from Bhiwandi & Mumbai region. The large loans which are taken by the assessee are from Kolkata Based Companies which on enquiry are found to non-existent or managed by accommodation entry provider. Shri. Jinesh M. Dodhia has failed to establish any connection or business transaction with directors of these companies. In such scenario, it is highly improbable that any genuine transactions could have taken place between the assessee and these companies. g) Further, statement of Partner of the assessee-firm, Shri Jinesh Dodhia was recorded under oath. It was noticed that partner never met the Directors of the assessee, couldn't furnish contact numbers of the company from which he has taken loans, couldn't give the circumstances and persons through which he came to know of these companies. In respect of two companies, viz, North East Trade Link Pvt Ltd and Welspun Tie Up Pvt Ltd, Shri Jinesh Dodhia has failed to substantiate the nature of their business and explain why these two companies would give loans to the Firm (the assessee) based in Bhiwandi if there is no known associates or business relationship with this Company. With respect to Vinam Finance Pvt Ltd, though it is alleged that this company is an NBFC, however, Shri Jinesh Dodhia failed to explain the circumstances and give details of persons through whom he came to know this Company and loans were arranged. Hence, in case of all three companies, circumstances and persons through whom loans were taken could not be justified. Moreover this, Commission report by the Kolkata Investigation Wing stating that two companies are non-existent at the given address and one company is controlled by an entry provider prove that these loans are not genuine loans but an accommodation entry for bogus loan. In this respect, part of statement recorded is being reproduced below: "Q13. Whom did you talk with for loans from North East Trade Link Put Ltd? Ans I talked with Gour Haldar. Q.14. Do you have his address or contact number? Ans No, I don't have his number or address. Q.15. Have you ever met him personally? Ans. No Q.16. Whom did you talk with for loans from Welspun Tie-up Pvt Ltd? Ans. Varun Haldar Q.17. Whom did you talk with for loans from Vinam Finance Pvt Ltd? Ans. I talked with Deoki Nand Bijouria. Q.18. Can you give contact number of Deoki Nand Bijouria or-Varun Haldar?

Ans. No I don't have their number. Q19. How did you get their contact numbers? Ans I got their contact number through business associates. I cannot give their numbers. Q20. Have you ever met Shri Deoki nand Bijoria, Varun Haldar, and Gaur Haldar? Ans. No." Hence, the individuals who are running the companies are not known to the assessee and these individuals failed to prove their identity on being summoned by the Department. h) Further, Shri. Jinesh M. Dodhai couldn't justify the creditworthiness of parties from whom the loans have been taken. Specific question in this regards were asked for which assessee couldn't furnish any reply. In this respect, part of statement recorded is being reproduced below: "Q.31. M/s Welspun Tie-up Pvt Ltd has shown profit of Rs. 1,272 for F.Y. 2014-15 and Rs. 3,106/- for F.Y. 2013-14. In light of this fact, please prove the creditworthiness of this company to give unsecured loans. Ans. No comments Q.32. M/s North-east Tradelink Pvt Ltd has shown profit of Rs. 4,51/- for F.Y. 2014-15 and Rs. 91/- for F.Y. 2013-14. In light of this fact, please prove the creditworthiness of this company to give unsecured loans. Ans. No comments Q.34. M/s Vinam Finance Pvt Ltd has shown losses of Rs. 4,351/- for F.Y. 2014-15 and Rs. 5,359/- for F.Y. 2013-14. In light of this fact, please prove the creditworthiness of this company to give unsecured loans. Ans. No comments" Hence, the creditworthiness of these companies have remained questionable based on the profits declared by these companies. There may be reserves with the Company but the source of these reserves have remained unexplained. Though source of source couldn't be known to the assessee but Department can enquire about the whereabouts of source of the source of the Loans. However, as Directors of the companies have failed to appear in response to notice u/s 131 issued to them, the whole transaction have remained unexplained.”

3.6 The AO thus on the aforesaid observations, has ultimately concluded that the Assessee has failed to satisfactorily explain the loans taken from above mentioned three companies and to substantiate the genuineness of the loans. Accordingly, the AO found the aforesaid loans taken from the aforesaid companies as . M/s. Kemox Corporation unexplained cash credits within the meaning of section 68 of the Act and consequently made the addition of Rs.3,87,50,000/- in total and added the same in the total income of the Assessee u/s 68 r.w.s. 115BBE of the Act.

3.7 Further, the AO also disallowed the interest expenses of Rs.2,26,418/- (Rs.89,589/- + Rs.63,678/-+ Rs.73,151 respectively paid to paid to NETPL, VFPL and WPTL) and added the same in the total income of the Assessee.

Harichand Virender Paul vs CIT 140 ITR 148 (P&H HC). CIT vs Biju Patnaik 160 ITR 674 (SC). CIT vs Precision Finance Pvt. Ltd. 208 ITR 465 (Calcutta). Dhanlaxmi Steel Re-rolling Mills vs CIT 228 ITR 780 (AP). Sanil K. M. P. vs CIT 177 Taxman 481 (Kerela). 12.1 The appellant is heavily relying on the documents such as copy of ITR, financial statement, bank statement, etc. filed by him during the assessment proceedings. In this connection, it may be mentioned that the issue of make-believe documentation in the case of accommodation entries has been discussed by the Hon'ble Delhi High Court in the case of CIT v. Nova Promoters and Fin lease (P.) Ltd. [2012] 342 ITR 169 (Delhi), wherein the Hon'ble High Court observed as under: “The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, Income-tax file numbers. their creditworthiness, share application forms and shareholders' register, share transfer register, etc., are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self- confessed 'accommodation entry providers', whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan- a smoke screen-conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio." 12.2 ……..

. M/s. Kemox Corporation …………………………….. 17. The above discussion clearly suggests that various Courts as well as Tribunal have held that in the case where accommodation entries have been provided through a well-planned mechanism, in such cases, make-believe documents filed by the appellant cannot be considered as sufficient to discharge assessee's onus as casted by section 68 of the Act.

18. In the present case, as discussed earlier in this order, the assessing officer got enquiries conducted at the addresses given by the appellant at Kolkata. Two of the companies namely M/s North East Tradelink Pvt. Limited and M/s Welspun Tie-up Pvt Limited were not found existing on the given address. The AO then found that both these companies had common director Mr. Barun Haldar who was found to be director in about 95 companies (at different point of time). These facts clearly suggest that the activities of these companies are doubtful. During the original assessment proceedings, the AO also recorded the statement of partner of the appellant firm and he could not give any satisfactory reply. The relevant portion of statements of partner of the appellant firm has been reproduced in the assessment order at page 10 and 11.

19. As regards to the loan received from M/s Vinam Finance Pvt. Limited, the report of ADIT (Inv), Kolkata clearly suggests that it was a shell company operated by an accommodation entry operator. This fact was admitted by Shri Bhadresh Dodhia (a key person of the Dodhia group) in his statement recorded u/s 132(4) of the Act. Shri Bhadresh Dodhia also admitted that M/s Vinam Finance Pvt. Limited was acquired by them and unaccounted cash of Rs. 43 crores (approx.) was routed to various entities of Dodhia group through M/s Vinam Finance Pvt. limited. The statements of two directors of said company were also recorded during the search and both of then admitted that they were only dummy directors.

20. To sum up, in the present case, the enquiries at the premises of the loan creditors were conducted during the original assessment proceedings which suggested that the loan creditor companies are shell entities. No request of any fresh enquiry is made before me. The appellant has also not stated that given a chance, it can produce the directors of these companies. The appellant is relying solely on the make-believe documentation. As discussed earlier in this order, make-believe documentation is not sufficient in order to discharge assessee's onus u/s. 68 of the Act. In the facts of the present case, the make-believe documentation in the form of ITR acknowledgement, bank statement and financial statement, are not sufficient to discharge the onus u/s. 68 of the Act. Considering the case-laws discussed earlier in this order, it is held that the findings of the AO that the unsecured loan raised from M/s. North East Trade Link Pvt Limited, M/s Welspun Tieup Pvt Limited and M/s Vinam Finance Pvt limited, are nothing but accommodation entries, does not require any interference. Therefore, the addition of Rs.3,87,50,000/- made by the AO u/s. 68 of the Act, is upheld. Accordingly, the grounds no. 1 and 2 raised by the appellant stand DISMISSED.

21. The ground no. 3 is regarding the disallowance of interest of Rs. 2,26,418/- claimed to have been incurred by the appellant of above discussed unsecured loans. Since I have already upheld the findings of the AO that the loans raised from above mentioned companies are not genuine, therefore the interest claimed to have been paid on these accommodation entries cannot be allowed as deduction. Accordingly, the action of the AO of disallowing the interest of Rs.2,26,418/- is upheld. The ground no. 3 stands DISMISSED.”

Sr Lender Loan Date Documents submitted Pg No Total Own No. Party Amount of before Assessing Officer in Funds (in (in Rs.) Loan Factual Rs.) Repay PB -ment Loan Confirmation by North 1-2 East Tradelink Private Limited along with copy of Ledger Account 20.09.2 Bank Statement of North East 3-5 017 Tradelink Private Limited Ledger Account in the book of 6 7,17,96, 217/- assessee from 01.04.20 1 4 to 3 1 .03 .20 1 5 North 1 East 55,00,000 Bank Statement of assessee 7-9 Tradel from 01. 04.20 14 to 3 1.03 .20 inks P 15 Limite 26.09.2 d 017 Loan Repayment Ledger of 10 assessee from 01. 04.20 17 to 16.12.2017 Bank Statement of assessee 11-13 showing repayment of loan.

Form 16A for TDS deducted on 14-15 Interest. Copy of PAN Card 16 Copy of ITR Acknowledgement 17 for AY 2015-16.

Copy of Audited Financials for 18-27 the year ended 3 1.03 .20 15

Master Data of the company on 28 MCA site showing Active Status.

2,87,50,00 18.03.20 Loan Confirmation by Vinam 29-30 0 16 Finance Private Limited 19.03.20 Bank Statement of Vinam 31-37 16 Finance Private Limited 22.03.20 Ledger Account in the book of 38 16 assessee from 01. 04.20 14 to 3 1.03 .20 15 23.03.20 Bank Statement of assessee 39-42 16 from 18.03.2015 to 28.03.2015

28.03.20 Form 16A for TDS deducted on 43-44 16 Interest 29.03.20 Copy of PAN Card 45 2 Vinam 16 44,29,61,648/- Finance P Limited 03.12.20 NBFC Registration Certificate of 46 18 Vinam Finance Private Limited

Copy of Audited Financials for the 47-57 year ended 3 1.03 .20 15

Copy of Summons issued to 58-59 Vinam Finance Private Limited along with its reply List of NBFC as on 31.03.2013 60-64 and 31.11.2017 showing name of Vinam Finance Private Limited

Master Data of the company on MCA site showing Active Status 65-68

Bank statement of assessee showing loan repayment on 03.12.2018.

Loan Confirmation by Welspun Tie- up Private Limited alongwith copy of Ledger Account Bank Statement of Welspun Tie-up Private Limited 14.07.20 Ledger Account in the book of 17 assessee from 01. 04.20 14 to 3 1.03. 20 15 Bank Statement of assessee from 10.02.2015 to 11.02.2015 3 Welspun 45,00,000 16,76,43, 828/- Loan Repayment Ledger of Tie-Up P assessee from 01. 04.20 17 to Limited 16.12.2017 Bank Statement of assessee 20.09.20 showing repayment of loan from 17 14.09.2017 to 20.09.2017 Form 16A for TDS deducted on Interest Copy of PAN Card Copy of ITR Acknowledgement for AY 2015-16. Copy of Audited Financials for the year ended 3 1.03. 20 15 Master Data of the company on MCA site showing Active Status 5.1 The Assessee thus by submitting aforesaid documents, has contended that identity of the lenders has duly been established on the basis of PAN numbers, returns of income and account confirmation of above mentioned parties. Further, the genuineness of the transactions has been established on the basis of account confirmations and bank statements filed before the authorities below and by demonstrating the fact that loans were taken by account payee cheques, as reflected in the bank statements. The Assessee further claimed that creditworthiness of the lenders was also established on the basis of balance sheet of above mentioned parties/lenders, from where it can be seen that the lenders had surplus funds, while carrying out their trade business activities and these funds were loaned against interest and loans were even otherwise repaid in the subsequent years and thus the Assessee has 5.2 The Assessee further claimed that even the lenders were depicting as active companies during the relevant AY on MCA site and were also making compliances before the respective jurisdictional PAN-AOs. Further, the insistence by both the authorities below to produce the Directors of third party, was well beyond the control of anybody, much less the Assessee. Whereas, it was well within the powers of the Revenue Authorities to ensure their attendance, if they so require. The Assessee further claimed that it is an undisputed fact that majority of the loans that were treated as unexplained cash credit, have already been repaid much before the search proceedings and such repayments have also not been doubted by the AO in the year(s) of repayment. Therefore, the alleged addition on account of unsecured loans u/s 68 of the Act, deserves to be deleted.

5.3 The Assessee further placed reliance on the judgment of the Tribunal in the case of Shri Bhadresh Mansukhlal Dodhia Vs. DCIT, Thane (A.Y. 2013-14) dated 22.07.2025, wherein the Hon’ble Tribunal has also dealt with the identical addition based on the same search and seizure operation carried out and the material seized in the group cases and by taking cognizance of the fact “that repayment of loan has been made subsequently and such repayment was not doubted by the Revenue Authorities and therefore in view of the judgment of the Hon’ble Gujarat High Court in the case of CIT Vs. Ayachi Chandrasekhar Narsingi (2024) taxmann.com 250 (Guj.) addition u/s 68 of the Act and interest expenses are not justifiable” ultimately deleted the identical addition.

6.1 The Ld. DR further submitted that during the original assessment proceedings, the AO also recorded the statement of Assessee’s Director, who could not give any satisfactory reply. Further, as per report of DDIT (Inv.), Kolkata, it clearly suggests that VFPL is a shell company operated by an accommodation entry operator. Further Shri Bhadresh Mansukhlal Dodhia in his statement recorded u/s 132(4) of the Act has also admitted that VFPL was acquired by them and unaccounted cash of Rs. 43 Crores approximately was routed through various entities of Dodhia group through VFPL. Further, as per enquiries conducted at the premises of loan creditors, it was suggested that the loan creditor companies are shell entities and before the Ld. Commissioner, no request of any fresh enquiry was made by the Assessee. The Ld. D.R. at last has claimed that on the aforesaid analyzations, the Ld. Commissioner has correctly affirmed the aforesaid addition and therefore in the impugned order, no interference is required.

DETERMINATION 7. We have heard the parties and perused the material available on record. Facts are already reproduced above. It appears from the orders passed by the authorities below that though they admitted that the Assessee has submitted the relevant documents, however, . M/s. Kemox Corporation both the authorities below doubted the transactions mainly on the reasons that two companies namely NETPL and WTPL were found to be non-existent at the given address and Director of VFPL did not arrive at the office of the Investigation Wing, Kolkata on being summoned u/s 131 of the Act. Further, two companies namely NETPL and WTPL having common Director, Mr. Barun Haldar, who was also found to be Director in about 95 companies (at different point of time) and these facts clearly suggest that activities of these companies are doubtful. Further, both the authorities below also relied on the statement of Shri Bhadresh Mansukhlal Dodhia u/s 132(4) of the Act and the enquiries conducted at the premises of loan creditors, which suggested that loan creditors are shell entities.

7.1 We observe that according to the provision of section 68 of the Act, the Assessee is supposed to discharge its prima-facie onus casted u/s 68 of the Act by proving the identity of the parties, genuineness of the transactions and creditworthiness of the parties/lenders. Admittedly, in the instant case, the Assessee by producing the copy of PAN card, copy of ITR acknowledgments of the lenders and copy of master data of the company/lenders on MCA site, showing active status during the AY under consideration has established the identity of the creditors. Further, by producing the loan confirmations, bank statements, ledger accounts in the books of the Assessee and loan repayment ledgers of the Assessee, bank statements showing repayment of loans, Form 16A for TDS deducted on interest, the Assessee has established the genuineness of the transaction. Further, by producing the copy of audited financials for the year ended 31.03.2015 of the lenders, the Assessee has established the creditworthiness of the lenders/parties.

7.2 Admittedly, both the authorities below have not doubted the aforesaid documents but simply on the reason that make-belief . M/s. Kemox Corporation documents filed by the Assessee cannot be considered, as sufficient to discharge Assessee’s onus as casted by section 68 of the Act, discarded the said documents. Whereas the Hon'ble Apex Court has considered the identical issue in the case of PCIT Vs. High-tech Residency Pvt. Ltd. (2018) 257 taxmann.com 335 (SC) and held as under:

“ That where an Assessee company had discharged the onus of establishing identity, genuineness of transactions and creditworthiness of investors, then no additions could be made u/s 68 of the Act”.

And therefore in view of aforesaid judgment, the addition under consideration is unsustainable, on this aspect itself.

8.1 We observe that Hon'ble Apex Court in the case of Commissioner of Income Tax, Odisha Vs. Odisha Corporation Pvt. Ltd. (1986) 159 ITR 79 (SC) has also dealt with an identical issue wherein the Revenue apart from issuing the notices u/s 131 to the creditors, did not pursue the matter further and therefore the Hon’ble Apex Court affirmed the decision of the Hon’ble High Court in affirming the conclusion of the Tribunal to the effect that the Assessee had discharged the burden that lay on it, by observing and holding as under:

“That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their . M/s. Kemox Corporation index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to refer the question sought for." 8.2 Further, the Hon'ble Jurisdictional High Court in the case of Orchid Industries Pvt. Ltd. (2017) 88 taxmann.com 502 also dealt with the identical situation, wherein the Hon’ble High Court considered the fact that only because the creditors had not appeared before the AO, would not negate the case of the Assessee, who had produced the entire records regarding the issuance of shares i.e. allotment of shares to the parties, their share application forms, allotment letters and share certificate, so also the books of account and the balance sheet and profit & loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. For brevity and ready reference, the conclusion drawn by the Hon’ble High Court is reproduced herein below:

"6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares ie. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the . M/s. Kemox Corporation Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.

8.3 Further, the Hon’ble Jurisdictional High Court in the case of Creative World Telefilm Ltd. (2011) 15 taxmann.com 183 also dealt with the identical issue, wherein the summons sent to the creditors were ultimately returned back with an endorsement “not traceable”, whereas the Assessee by filing relevant document discharged its onus casted and the Hon’ble High Court in that eventuality affirmed the decision of the Tribunal in deleting the addition by following the judgment of Hon'ble Apex Court in the case of CIT Vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC).

8.4 We further observe that Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs Dwarikadish Investement (P) Ltd. {(2010) 194 Taxman 43(Delhi} as well, has also dealt with identical situation, wherein creditors/share applicants could not be found at the address given, and therefore the Hon’ble High Court has held that it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue, which has all the power and wherewithal to trace a person. For brevity and ready reference, the conclusion drawn by Hon’ble High Court is reproduced herein below:

“8. In any matter, the onus of proof is not a static one. Though in section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or Income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the revenue.

. M/s. Kemox Corporation Just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the revenue which has all the power and wherewithal to trace an person. Moreover, it is settled law that the assessee need not to prove the 'source of source”.

Thus, non-existing the companies at the given address after a long time, can not be fatal, as it can not be ruled out that the companies may have changed their addresses and even it is also a fact as demonstrated by the Ld. AR that on MCA Website , the status of said companies was showing as 'Active' during the AY under consideration and thus , non-existing of the companies at the address given after a considerable long time , would not ipsofacto entail making the addition, specifically in view of decision of Hon'ble Delhi High Court to the effect “that just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace a person”. Therefore, the addition under consideration made by AO and affirmed by Ld. Commissioner mainly . M/s. Kemox Corporation on the reason that 02 lenders were non- existent at the address given and Director of one other lender/Company did not appear to give his statement before the DDIT, Kolkata, is unsustainable and hence liable to be deleted on this count as well.

9.2 We further observe that the Hon’ble Co-ordinate Bench of the Tribunal in the case of Vasu Pujya Filaments Vs. DCIT {ITA no. 876/M/2025 & Ors. decided on 25.08.2025} has also considered the identical search operation conducted on 29.11.2019 and the statement of Shri Bhadresh Mansukhlal Dodhia and the loan taken from VFPL as well and ultimately on merit, deleted the identical addition by observing and holding as under:

“11. From the perusal of the Ld.CIT(A)'s order, it is seen that the Ld.CIT(A) has incorporated the relevant observation and finding of the AO on merits and has dealt with each and every company separately in all the years in his consolidated order and has also referred to catena of judgments. In sum and substance, findings revolve around the fact that enquiries were conducted by the Investigation Wing and either these companies were not found in their given address or they were found to be providing bogus accommodation entries. Regarding the documents of the various documents which were filed by the assessee, he held that all are make belief documentation in the form of ITR acknowledgement, bank statement and financial statement, which is not sufficient to discharge the onus u/s. 68 of the Act. Accordingly, the Ld. CIT (A) has confirmed all the loans taken by the assessee in all the assessment years.

13. All these documents form part of the Paper Book before us. A close scrutiny of these materials leaves no room for doubt that the lenders are neither fictitious nor non-existent but are genuine entities on the tax rolls, regularly filing their income-tax returns and disclosing income accompanied by audited financials. Their balance sheets specifically record the loans advanced to the assessee, and their financial statements reveal substantial surplus funds. The bank statements show credit entries arising from normal business clearings and financial dealings. What is of significance is that neither the Assessing Officer nor the learned CIT (A) has discredited these documents, nor undertaken any enquiry to impeach the availability of funds with the lenders. The evidences, therefore, stand un-rebutted.

15. Equally significant is the fact that the third-party reports or statements relied upon by the Department contain not a whisper of allegation against the assessee. At no stage was the assessee confronted with such statements or afforded an opportunity of cross-examination. It is well settled that any material not tested in the crucible of cross-examination cannot be used against an assessee. An investigation report, at best, may justify initiation of scrutiny or reopening, but it cannot, in isolation, constitute substantive evidence to sustain an addition under section 68. In the absence of corroborative enquiry negating the evidences furnished, reliance solely upon such external reports is legally untenable.

20. Despite such evidence being available on record, we find that the Assessing Officer proceeded mainly on the basis of a general investigation report prepared in the course of search operations in cases of third parties, wherein certain persons were alleged to be engaged in providing accommodation entries. Reliance was placed on portions of their statements, and further on the fact that summons issued under section 133(6) in the case of some lenders had returned unserved or that no representative was found at the given addresses. Based on these circumstances, the Assessing Officer concluded that the loans in question represented unexplained cash credits.

. M/s. Kemox Corporation 22. In view of the above discussion, and guided by the binding precedents of the Hon'ble High Court and various decisions of this Tribunal rendered on exactly similar facts based on same investigation report wherein the additions have been deleted, we hold that the assessee has duly discharged the burden cast upon it under section 68. Once the assessee has produced material establishing the identity of the lenders, their financial capacity, and the genuineness of the transactions, the onus shifts upon the Revenue to rebut the same by bringing adverse material on record. In the present case, the Revenue has failed to do so. Therefore, the additions made under section 68 in respect of unsecured loans, as well as the consequential disallowances of interest under section 69C, have no legal or factual basis and cannot be sustained.

23. We accordingly set aside the findings of the lower authorities and direct the deletion of the additions made under section 68 and the consequential disallowance of interest. The assessee thus succeeds on this issue and the grounds of appeal are allowed on merits.”

9.3 Further the Hon'ble Co-ordinate Bench of the Tribunal at Mumbai in the Assessee’s group cases namely Dodhia Filaments Pvt. Ltd Vs DCIT, CC -3, 795/Mum/2025 to 799/Mum/2025 and others has also considered the identical search operation conducted on 29.11.2019 and the statements of Shri Bhadresh Mansukhlal Dodhia etc. and ultimately deleted the identical addition by observing and holding as under:

“28. Therefore considering the totality of the facts and circumstances as discussed by us in detail, we are inclined to follow the decisions of Hon'ble Supreme Court, Jurisdictional High Court and Jurisdictional Tribunal including the judgments of this Tribunal on identical issue on same material in group cases, that create binding precedents as regards their ratio decidendi and thus we are of the view that when once majority of loans that were treated as unexplained cash credit, have already been prepaid much before initiation of reopening proceedings and such repayment has not been doubted by the AO in the year of repayment, therefore additions on account of unsecured loan u/s 68 of the Act are not sustainable and accordingly we direct the same to be deleted. Consequently, this ground raised by the assessee stands allowed."

. M/s. Kemox Corporation 9.4 Coming to the claim of the Assessee that it is an undisputed fact that majority of the loans that were treated as unexplained cash credits have already been repaid much before the initiation of the search proceedings and such repayments have not been doubted by the Assessing Officer in the year(s) of repayment and therefore, the alleged addition on account of unsecured loans u/s 68 of the Act, is unsustainable.

9.5 We observe that the Hon’ble High Court of Gujrat in the case of PCIT vs. Ambe Tradecorp (P.) Ltd. [2022] 145 taxmann.com 27 (Guj.), has also dealt with a situation, wherein the loans were repaid and therefore the Hon'ble High Court has held that once the identity of the lenders stood proved and loans were also paid subsequently, then no addition is permissible u/sec. 68 of the Act.

9.6 Further, the Hon'ble Gujarat High Court in the case of CIT vs. Ayachi Chandrashekhar Narsangji [2014] 221 Taxman 146 (Guj.) as well, has also considered the identical issue, wherein the loan amounts have been repaid by the Assessee in the immediate next financial year and the Department has accepted the repayment of loans, without disputing it and, therefore, the Hon'ble High Court approved the decision of the Tribunal in holding that the matter is not required to be remanded, as no other view would be possible.

9.7 Thus on the aforesaid analyzations, as the Assessee has duly discharged its prima-facie onus casted u/s 68 of the Act and both the authorities below have not doubted any of the documents submitted by the Assessee and it is also a fact that statements relied on by the Authorities below have admittedly been retracted later on 08-03- 2020 though notarized affidavits and therefore in our considered view, the same lost its essence or sanctity. It is also a fact that the AO has not carried out further investigation in the cases of lenders, . M/s. Kemox Corporation except relying on investigation report and without providing copy to the Assessee and even otherwise without providing any opportunity to confront or cross examine the Inspector who visited the addresses of 02 lenders and the DDIT who conducted the investigation. And it is also an admitted fact the Loans were repaid in subsequent years and accepted by the Department without raising any objection and/or disputing the same and therefore this fact strengthens the genuineness of the loans.

9.8 The contentions raised by the Ld. DR and the judgments relied on by the Ld. Commissioner in the impugned order, are not strictly applicable to the instant case, in view of aforesaid specific circumstances, as also considered by the Hon’ble Co-ordinate Benches of the Tribunal in the aforesaid Assessee’s group cases i.e. Vasu Pujya Filaments and Dodhia Filaments Pvt. Ltd. (supra).

9.9 Thus, on the aforesaid analyzations and respectfully following the judgments of the Hon’ble Jurisdictional High Court on the issue under consideration the additions of Rs.3,87,50,000/- {in total made on account of bogus loans} and Rs.2,26,418/- (Rs.89,589/- + Rs.63,678/- + Rs.73,151 respectively paid to paid to NETPL, VFPL and WPTL) being disallowance of interest expenses, which are under consideration, are unsustainable and thus the same are deleted.

Further, a commission for enquiry u/s 131(1)(d) of the Act was issued to the Kolkata Investigation Wing for making enquiry with respect to said company. The AO further observed that the said company is incorporated/taken over only for the purpose of routing the unaccounted money in the form of providing unsecured loan or subscribing the share capital and in reality the company has not carried out any genuine business. Further, the transactions carried out are just sham transactions and to give the colour in the books of account.

11.1 Thus on the aforesaid aspects, the AO issued the notice u/s 142(1) of the Act to the Assessee and show caused to prove the identity, genuineness of transactions and creditworthiness of above said company. As per the AO the Assessee has failed to submit complete details as called for, hence the identity, genuineness of transactions and creditworthiness of the VFPL could not be established.

11.2 The AO further by considering the fact “that the Assessee has taken almost all loans from local parties from Bhiwandi and Mumbai region and large loans from Kolkata based companies which on enquiry are found to be non-existent or managed by accommodation entry provider, ” ultimately held the loan transaction of Rs.2,00,00,000/- as unexplained cash credit within the meaning of section 68 of the Act and thus added in the income of the Assessee u/s 68 r.w.s. 115BBE of the Act.

. M/s. Kemox Corporation 12. The AO also made the addition of Rs.14,54,492/- which was claimed as expenditure incurred by the Assessee for business purposes, as non-genuine expenses u/s 37 of the Act.

14. The Ld. Commissioner by considering his decision in the earlier assessment years pertaining to VFPL, affirmed the addition of Rs.2,00,00,000/- made by the AO u/s 68 of the Act and therefore the Assessee being aggrieved is in appeal before us.

16. Further, coming to the disallowance of Rs.14,54,492/- on account of disallowance of interest paid qua unsecured loan raised from VFPL, we observe that the Ld. Commissioner by considering the peculiar facts held that only an amount of Rs.14,54,492/- has been debited as interest and therefore he restricted the disallowance to the tune of Rs.14,54,492/- being the actual amount of interest debited.

17. As we have already deleted the main addition qua loan of Rs.200,00,000/- (Rupees Two crores) as made by the AO, thus the addition on account of interest expenses to the tune of Rs.14,54,492/-, would also not survive and therefore the same is also deleted.

32 ITA No.221/226/227/M/2025. M/s. Kemox Corporation 18. In the result, the Assessee’s appeal i.e. is allowed. 19. Coming to which pertains to A.Y. 2020-21 we observe that in this year the AO vide assessment order dated 28.09.2021 u/s 143(3) of the Act has made the addition of Rs.38,37,451/-, on account of disallowance being made on the interest claimed by the Assessee, having been paid to various entities as detailed in para No.5 of the assessment order.

21. We have given thoughtful considerations to the peculiar facts and circumstances of this case. As we have already deleted the addition made, on account of loan taken from VFPL during the previous assessment year and thus no addition on account of disallowance of interest u/s 37(1) of the Act to the extent of Rs.15,47,041/- is attracted and thus the same is deleted.

Order pronounced in the open court on 24.10.2025.