INCOMETAX OFFICER 7(2)(1), MUMBAI vs. MEENA REALTY PRIVATE LIMITED, DADAR, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.3395/MUM/2026 (A.Y. 2009-10) Income Tax Officer, Ward – v/s. Meena Realty Private 7(2)(1) बनाम Limited Room No. 126-H, 1st Floor, 7/8, Madhavwadi, Middle Aayakar Bhavan, M.K. Road, Bungalow, Naigaum X Road, Mumbai – 400020, Dadar(CR), Mumbai – 400 Maharashtra 014, Maharashtra स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No: AABCM8571C Appellant/अपीलार्थी .. Respondent/प्रतिवादी

Assessee by : Shri Gunjan H. Kaddad, AR Revenue by: Shri Shivaji V., Sr. DR

Date of Hearing 09.07.2026 Date of Pronouncement 07.09.2026 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The instant appeal emanating from the appellate order dated 12.01.2026 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3)of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 22.12.2016 for the Assessment Year [A.Y.] 2009-10.

P a g e | 2 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited 2. The grounds of appeal are as under: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,00,00,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 on account of unexplained share application money received by the assessee. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) in deleting the addition made by the assessing officer, without appreciating the findings of the Investigation Wing indicating that the lender Vipul Vidur Bhatt was part of a network providing accommodation entries and the assessee was a beneficiary of such accommodation entry in the form of share application money. 3. Relevant facts of the case are that the assessee, a private limited company primarily engaged in the business of real estate development filed its return of income declaring Nil income. The case was reopened u/s 148 of the Act based on information received from the Investigation Wing of the Department alleging that the assessee had received accommodation entries in the form of share application money from five entities controlled by one Shri Vipul Vidur Bhatt, who was allegedly an entry operator providing bogus accommodation entries to various beneficiaries. In response to the notice issued under Section 148, it filed its return declaring nil income. The Assessing Officer, vide assessment order made an addition of Rs. 1,00,00,000/- under section 68 of the Act, treating the share application money received from six parties as unexplained cash credit on the ground that the assessee had

P a g e | 3 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited failed to establish the identity, creditworthiness, and genuineness of the shareholders.

4.1 Regarding the creditworthiness, audited financial statements of all shareholders showing positive net worth were submitted before the Assessing Officer. Bank statements of all shareholders showing sufficient balances were submitted. The investments made by the shareholders were duly reflected in their respective Balance sheets. All

P a g e | 4 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited shareholders had the financial capacity to make the investments. The same shareholders' creditworthiness was accepted in the AY 2006-07 assessment proceedings.

4.2 As regard the genuineness of transactions, all payments were made through account payee cheques through banking channels. Cheque copies and bank statements of both parties reflecting the transactions were submitted. Confirmations from all shareholders acknowledging the investments were submitted. Share certificates were duly issued with distinctive numbers. Form 2 (Return of Allotment) was filed with the Registrar of Companies on 29/04/2009. Form 5 for increase in authorized capital was filed with the Registrar of Companies on 26/11/2008. The same parties had made investments in the AY 2006-07, which were accepted as genuine. The parties were continuing shareholders and not one-time investors.

4.3 It was further stated that the AO erred in law in applying the amended provisions of Section 68 of the Act retrospectively, which require proof of “source of source,” to the Assessment Year 2009- 10. The amended provisions came into effect from 01/04/2013, applicable to AY 2013-14 onwards. The Hon'ble Bombay High Court in the case of Gagandeep Infrastructure Pvt. Ltd., reported in 394 ITR 680,

P a g e | 5 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited has categorically held that the proviso to Section 68 of the Act is prospective and not retrospective. The Hon'ble Bombay High Court in the case of Orchid Industries Pvt. Ltd., in ITA No. 1433 of 2014, has followed the same principle. The Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Lovely Exports Pvt. Ltd., reported in 216 CTR 195, has held that if shareholders are bogus, the Revenue should proceed against them and not the assessee company.

4.4 Further, the AO erred in relying on the statement of Shri Vipul Vidur Bhatt dated 09/02/2016 without providing an opportunity to it to cross-examine him. This constituted violation of principles of natural justice as laid down by the Hon'ble Supreme Court in the cases of Kishanchand Chellaram vs. Commissioner of Income Tax, reported in 125 ITR 713, and Andaman Timber Industries vs. Commissioner of Central Excise, in Civil Appeal No. 4228 of 2006. He did not provide copies of the information or report received from the Assistant Director of Income Tax (Investigation) to the assessee. He did not confront the assessee with the allegations before making the addition. The AO dismissed the retraction affidavits of Shri Vipul Vidur Bhatt without any inquiry or investigation. The AO drew adverse inference from the non- response of shareholders to notice under Section 133(6). All documentary evidence was already on record. The assessee could not be

P a g e | 6 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited held responsible for third parties' non-compliance. The Hon'ble Bombay High Court in the case of Commissioner of Income Tax vs. Orchid Industries Pvt. Ltd. has held that non-appearance of parties is not fatal when voluminous documentary evidence is provided.

4.5 The AO erred in making addition in respect of M/s. Conart Securities Ltd. amounting to Rs. 10,00,000/- which was not mentioned in the reasons recorded for reopening, thereby exceeding his jurisdiction. The reasons recorded for reopening mentioned only fiveparties, namely Lunkad Textiles, Victory Sales, Shyam Alcohol, B.K. Dyeing, and P. Saji Textiles. The addition in respect of Conart Securities Ltd. was beyond the scope of the reasons recorded and is therefore without jurisdiction.

4.6 The AO erred in not considering that the same 5 shareholders had invested Rs. 61,00,000/- in the AY 2006-07. The assessment was completed under Section 143(3) vide order dated 18/09/2008, accepting the genuineness of these shareholders. The fresh investments in the AY 2009-10 were by the same continuing shareholders. Once accepted as genuine, the same parties could not be treated as bogus in subsequent years without fresh material.

P a g e | 7 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited 4.7 The AO erred in not following the binding precedent of the Coordinate Bench of the Income Tax Appellate Tribunal, Mumbai, in the case of M/s. Moraj Realty Pvt. Ltd. vs. Income Tax Officer, in ITA Nos. 708 & 709/Mum/2019, dated 08/12/2020. The case involved identical facts and circumstances, the same basis of reopening based on the Vipul Vidur Bhatt group, and four common shareholders, namely Lunkad Textiles, Victory Sales, Shyam Alcohol, and B.K. Dyeing. The addition under Section 68 of the Act was deleted, holding that the assessee had discharged the onus. The AOalso erred in not following the decisions in the cases of M/s. Mayuresh Logistics Pvt. Ltd., in ITA No. 6691/Mum/2017, dated 24/06/2019, accepting Victory Sales Pvt. Ltd. as genuine, and M/s. Celebrity Lifespace Pvt. Ltd., dated 05/12/2019, accepting P. Saji Textiles and Shyam Alcohol as genuine. The statement of Shri Vipul Vidur Bhatt did not mention the name of the assessee. Shri Bhatt mentioned various companies in his statement, but the assessee was not one of them.

4.8 Further, Shri Vipul Vidur Bhatt filed an affidavit dated 07/09/2016 retracting his statement dated 09/02/2016. Another detailed affidavit dated 08/09/2017 was filed explaining the circumstances under which the earlier statement was recorded. The

P a g e | 8 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited Assessing Officer dismissed the retraction as “not believable” without any inquiry or investigation. If the retraction was false, the Assessing Officer should have taken action against Shri Vipul Vidur Bhatt for filing false affidavits. No such action was taken.

4.9 For each of the five shareholders, the assessee submitted before the Assessing Officer i.e. Permanent Account Number cards as proof of tax registration, Corporate Identification Numbers as proof of corporate registration, Certificates of Incorporation as proof of legal existence Memorandum of Association and Articles of Association as corporate constitution documents, Income Tax Return acknowledgements as proof of tax compliance, Registrar of Companies annual returns as proof of regulatory compliance, Ministry of Corporate Affairs master data as proof of active status.It also submitted Audited balance sheets showing the financial position of the shareholders Audited profit and loss accounts showing the income and profit of the shareholders, Bank statements showing the availability of funds with the shareholders Investment schedules showing the disclosure of investments in the books of the shareholders who all shareholders had positive net worth as evidenced by their audited financial statements. Bank statements showed sufficient balances to make the investments.

P a g e | 9 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited The investments were duly reflected in the balance sheets of the shareholders.

P a g e | 10 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited 7.1 With regard to creditworthiness of the companies, assessee had submitted bank statements and other financial statements of the investors had a capacity to invest in the assessee company. From the analysis made, it is clear that the above said companies were having sufficient turnover and margins. It was brought to our notice by the ld. AR that these companies were still in existence in the records of Registrar of Companies. From the Balance Sheet, it is noticed that available of funds in the business clearly suggest that investors had the capacity to make the investments in shares issued by the assessee. It is not necessary that the investors should have earning capacity to substantiate the investments in the other companies. It is enough that if they have enough funds at their disposal to make the investments. In this case, the investments were made only to the extent of face value. As regard the genuineness of the transactions, the assessee submitted the confirmations from them. It is also evident from the records that no cross examination was allowed to the assessee in respect of statement of Sri Vipul Jain which have been heavily relied upon by the AO. Moreover, there is not an iota of any independent enquiry made by the AO. He failed to point out any infirmity in the voluminous evidences submitted by the assessee to demonstrate the identity, creditworthiness of the share applicants and the genuineness of the transactions. Therefore, we

P a g e | 11 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited are of the considered view that the assessee has fully discharged its primary onus to establish that the amounts was received by the assessee from the share applicants as share application money were genuine transactions.

7.2 We also find that case of the assessee is covered by the judgment of the Division Bench of hon’ble jurisdictional Bombay High Court in case of Commissioner of Income Tax vs. Gagandeep Infrastructure (P.) Ltd.[2017] 80 Taxmann 272 as also the order of the Apex Court in case of Commissioner of Income Tax vs. Lovely Exports (P.) Ltd., reported in [2008] 216 CTR 195 (SC),apart from the cited decisions of Mumbai ITAT in a plethora of orders wherein the very same share applicants were found to be genuine and no adverse inference was drawn in deleting similar additions. Moreover, nothing is brought on record by the tax authorities that assessee was involved in any manipulation transaction or cash transactions which suggest that assessee had derived any directly or indirect benefit out of this transaction.

7.3 In the instant case, the AO has not brought forth any evidence but has based his conclusions on suspicion. It is trite law that on suspicion of the highest degree cannot take place of evidence. There

P a g e | 12 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law. This position is strongly supported by the decisions in CIT V Roman & Co (1968) 67 ITR 11 (SC),CIT v Calcutta Discount Co Ltd (1973) 91 ITR 8 (SC) and Omar Salay Mohamed Saitvs CIT 1959 37ITR151 (SC).

7.4 The expression “nature and source” in section 68 of the Act has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The law on the subject has been illustrated in a number of decisions. The Hon. Supreme Court, in Kale Khan Mohd. Man Vs. CIT, pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. The law under section 68 is no different. If the prima facie inference on the facts is that the assessee's explanation is probable, the onus will shift to the Revenue. In this case, the assessee had shown the impugned amount as share application. The evidences were not disputed by the AO. Thus, prima facie, the explanation is probable. The AO has not shown anything that could dispute the fact of share application into assessee's books, from an identifiable source, through banking channels. The Hon'ble Supreme Court in case of P.

P a g e | 13 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited Mohanakala [2007] 291 ITR 278/161 Taxman 169 held that the expression “assessee offers no explanation” means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books maintained by the assessee. It further held that the opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the AO is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. In the instant case, the assessee filed all reasonable and acceptable explanation and the AO has not even mentioned them or explained why he had rejected them.

7.5 Admittedly, there are various judgments of the Hon'ble Co- ordinate Benches of the Tribunal wherein they had occasion to deal with the identical additions deleted the addition on merit as well,

7.6 Considering the above discussion, in our considered opinion, the assessee has duly discharged the onus cast upon him under Section 68 of the Act by submitting all relevant documentary evidence, which have neither been discredited nor rejected by the revenue. The AO, instead of conducting any independent enquiry or verification, merely

P a g e | 14 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited relied upon the report of the Investigation wing and the statement of Shri Vipul Jain, which was subsequently retracted. No opportunity for cross-examination was granted to the assessee, and such adverse material was used without adhering to the principles of natural justice. The ld. DR has also not brought any material on record to controvert the submissions made by him the ld.AR.

Order pronounced in the open court on 07/09/2026.

Sd/- Sd/-

(CHALLA NAGENDRA PRASAD) (PRABHASH SHANKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: म ुंबई/Mumbai ददनाुंक /Date 07.09.2026 Lubhna Shaikh / Steno

P a g e | 15 ITA No. 3395/Mum/2026 A.Y. 2009-10 Meena Realty Private Limited आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai गार्ड फाईल / Guard file. 5. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतधकरण/ ITAT, Bench, Mumbai.