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Facts
The assessee received Rs. 1Cr from Minaxi Suppliers Pvt. Ltd. through banking channels. The AO made an addition on the grounds that the funds were from accommodation entries provided by shell companies, based on an investigation wing report.
Held
The Tribunal held that the assessee had discharged the initial onus by establishing the identity and genuineness of the transaction, and the lender's capacity through financial statements. Relying on coordinate benches' decisions, the Tribunal found no merit in the addition.
Key Issues
Whether the addition made under Section 68 for funds received from a third party is sustainable when the assessee has provided documentary evidence regarding the transaction's genuineness and the lender's capacity.
Sections Cited
68, 143(1), 143(3)
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Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT & SHRI ANIKESH BANERJEE
Date of Hearing 09.10.2025 Date of Pronouncement 14.10.2025 आदेश / O R D E R PER NARENDRA KUMAR BILLAIYA [A.M.] :-
This appeal by the assessee is preferred against the order dated 13.02.2025 by NFAC Delhi pertaining to A.Y. 2011-12.
The solitary grievance of the assessee is that the CIT(A) erred in confirming the addition of Rs. 1Cr made by the AO u/s. 68 of the Act on account of money received from Minaxi Suppliers Pvt. Ltd.
Briefly stated the facts of the case are that the assessee filed his return of income on 25.09.2011, declaring total income at Rs. 2021530/-. The return was processed u/s. 143(1) of the Act. Subsequently an information was received from the ADIT information unit-21 Kolkata from which the AO came to know that several beneficiaries brought back unaccounted money into their books of accounts using banking channels after laying the funds through bank accounts of inexistent entity and shell company.
Minaxi Supplier Pvt. Ltd. was one of the beneficiary of such accommodation entries from whom the assessee has received money. 5. Taking a leaf out of the information received the assessment of the assessee was reopened and accordingly statutory notices was issued and served upon the assessee. 6. The AO also came to know that the ultimate source of funds of Minaxi Suppliers Pvt. Ltd. is by way of cash deposits made by 19 persons/entities which is routed through various intermediate companies/entity which are non-existence and paper company. 7. The assessee was asked to explain the transaction within the parameters of section 68 of the Act. In its reply the assessee explained that the amount received from MSPL is through the banking channel fully accounted in the books of accounts and reflected in the balance sheet.
The assessee also submitted the audited financial statements of MSPL income tax return confirmation for the transaction, copy of income tax scrutiny order u/s. 143(3) of the Act for A.Y. 2010-11. Further copy of income tax scrutiny assessment u/s. 143(3) for A.Y. 2012-13.
The submissions of the assessee alongwith documentary evidences did not find any favour of the AO who was of the firm belief that the transaction is not genuine and the assessee has failed to discharge the onus cast upon him by the provisions of section 68 of the Act and made the addition of Rs. 1Cr.
Assessee carried the matter before ld. CIT(A) but without any success.
Representatives of both the parties were heard at length and record carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT rules.
At the very outset, we find that for the relevant assessment year the assessee was required to discharge the onus cast upon him by the provisions of section 68 of the Act by establishing identity, genuineness of the transaction, capacity of the lender. We find that the assessee has successfully discharged the initial onus cast upon him in as much as the identity is not in doubt. The entire transaction is through banking channel and the capacity of the lender is established from its financial statement of accounts, confirmation and income tax return.
The entire basis of making the addition by the AO is the report received from the investigation wing Kolkata that MSPL is one of the beneficiaries of the accommodation entry provider. However, for the relevant assessment year under consideration the assessee is not required to prove the source of the source. Further we find that the co-ordinate bench in the case of Shri Ravi Shankar Shendge in has accepted the genuineness of the loan transaction from the same Minaxi Supplier Pvt. Ltd., wherein also the addition were made on the basis of the investigation report.
The co-ordinate Benches again in the case of Barcelona Mercantile for the same assessment year had the occasion to consider for similar assessment year on account of money borrowed from Minaxi Supplier Pvt. Ltd. and deleted the same on similar set of facts. Again in the case of Nextgen Constructions Pvt. the co-ordinate bench on identical set of facts where money was borrowed from Minaxi Supplier Pvt. Ltd. and the additions were made basis the report of investigation wing Kolkata has deleted the addition.
Considering the facts of the case in totality in the light of the decisions of the co-ordinate benches (supra), we do not find any merit in the impugned addition direct the AO to delete the same.
In the result, the appeal of the assessee is allowed.
Order Pronounced in Open Court on 14.10.2025