ZOHER ABBAS KARACHIWALA,MUMBAI vs. DCIT CIRCLE 6(1)(2), MUMBAI, MUMBAI

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ITA 2061/MUM/2026Status: DisposedITAT Mumbai18 August 2026AY 2019-20209 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the lower authorities did not adjudicate the issues properly and that the CIT(A) likely did not grant a hearing. Therefore, the matter was remanded for de novo assessment.

What were the facts?

The assessee's income was assessed with an addition of Rs. 42,41,389/- as unexplained credit, allegedly from accommodation entries. The assessee contended that no loans were taken and that the CIT(A) passed the order without granting a hearing.

What were the issues?

Whether the addition under Section 68 was justified without proper adjudication and opportunity of hearing. Whether the reassessment proceedings were validly initiated.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 68,Section 148A,Section 148,Section 143(2),Section 142(1),Section 144B

AI-generated summary — verify with the full judgment below

Before: HON’BLE JUSTICE (RETD.) C. V. BHADANG & SHRI PRABHASH SHANKAR

For Appellant: Shri Siddharth Srivastava, AR
For Respondent: Shri Rajgopal Parthasarathi, Sr.DR
Hearing: 25.06.2026Pronounced: 18.08.2026

PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 26.12.2025 is preferred by the assessee 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 the assessment order passed u/s. 147 r.w.s 144 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 19.03.2024 for the Assessment Year [A.Y.] 2019-20. P a g e | 2 A.Y. 2019-20 Zoher Abbas Karachiwala 2. The grounds of appeal are as under: 1(a) The learned Commissioner of Income Tax (Appeals), NFAC has passed the appeal order without granting an opportunity of being heard. (b) The learned Commissioner of Income Tax (Appeals) has not granted any hearing to the appellant and has confirmed the order of the Assessing Officer and the addition made of Rs. 4241389 as loan taken without appreciating the fact that no loans were taken from the 2 parties in the Assessment Year under consideration and the addition deserved to be deleted. (c) The appellant prays that such an appeal order passed be deemed to be against the principles of natural justice.

3.

Briefly stated facts of the case are that the assessee filed return of income declaring total income of Rs. 15,40,190/- for the year under reference. The assessee is an individual and his main source of income is from salary working in M/s. B. K Polimex India P Ltd., short term capital gain and other sources.During the year, the assessee is stated to have taken Unsecured loan of Rs.42,41,389/-. In response to the notice u/S. 148 of the Act, he filed return of income. Search and Seizure and Survey action was undertaken on 15-02-2022 in the case of Shri Ramesh Chaurasia, Sri Achal Chaurasi and the ARC group and it was gathered that cash was being routed in the books of accounts of more than 35 group concerns through various types of accommodation entries which were being sourced against cash. On the basis of their connections with the ARC group, Search & Seizure action was conducted in the case of two

P a g e | 3 A.Y. 2019-20 Zoher Abbas Karachiwala Chartered accountant. One Mr Lokesh Kumar Khabhya accepted that they were providing accommodation entries to several entities and gave statement. During the scrutiny proceedings the assesse has provided the copy of ledger and income tax return copy which was prepared and submitted during the year 2019. The search operation was conducted during the year 2022 and the directors of the company Lokesh Kumar Khabya and others gave statement for providing the accommodation entries against cash and are earning commission for the same. On the basis of information, the unsecured loan from Rs. 40,15,528/- from Aarohi Creation LLP and Rs. 2,25,861/- from R. K. Exports were considered unexplained and proposed to added back to his income. During the course of search action, evidence in the form of loose sheets bills and invoices, whatapp chat conversations, and other digital evidence were found and seized and a statement was recorded from Lokesh Kumar Khabya and Sri Sourabh Sethi were business associated and together they were running and operating various concerns for providing accommodation entries of bogus sale purchase and unsecured loan. Being the directors of the said firms they had given fictitious loan to the assessee.For the said loans, the assesse was questioned regarding the genuineness of the loan but no information was furnished. Hence, on the basis information available on the record the assessment was P a g e | 4 A.Y. 2019-20 Zoher Abbas Karachiwala completed with addition of Rs. 42,41,389/- for unexplained credit u/s 68 of the Act.

4.

In the subsequent appeal before the ld.CIT(A), the assessee contested the said addition contending that the Assessment Unit erred in making the addition of Rs.42,41,389/- claiming that the submissions and evidences furnished by the appellant were ignored and that the amounts represented loans taken from entities, namely Arshi Creations LLP and R.K. Exports, on which only interest payments were made during the relevant assessment year. The assessee also alleged that the statement relied upon by the Assessing Officer was subsequently retracted and therefore could not form the basis of addition. It was pleaded that he had taken genuine loans for the business of B.K. Polimers India Pvt. Ltd., wherein he was a director and that the interest was paid to the said lenders.

4.

1 The ld.CIT(A), however, observed that during the reassessment proceedings, the appellant failed to substantiate the nature and genuineness of the credits with cogent documentary evidence such as confirmations, creditworthiness of the lenders and proof of genuineness of the transactions. Mere assertions that the amounts represented loans, without supporting evidence, did not discharge the onus cast upon the assessee under the Act. The Hon’ble Supreme Court in CIT v. P.

P a g e | 5 A.Y. 2019-20 Zoher Abbas Karachiwala Mohanakala (291 ITR 278) has held that where the explanation offered by the assessee is not satisfactory, the Assessing Officer is justified in treating such sums as income under the deeming provisions. Similarly, the Hon’ble Delhi High Court in CIT v. Nova Promoters & Finlease (P) Ltd. (342 ITR 169) has held that the assessee must establish identity, creditworthiness and genuineness of transactions to escape addition. In the present case, these essential ingredients have not been conclusively established. As regards the plea that statements relied upon were later retracted, he observed that it is a settled position of law that a mere retraction, without independent corroborative evidence, does not render the original statement unreliable. Reliance in this regard may be placed on the decision of the Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18), wherein it has been held that a statement is an important piece of evidence and the burden lies on the maker to show that it is incorrect. In so far as the contention that the loans were taken for business purposes of another company is concerned, it was observed that the assessment proceedings pertained to the appellant in his individual capacity. The assessee did not demonstrate how the impugned amounts ceased to be taxable in his hands or how the statutory onus stood discharged. In the absence of satisfactory evidence, the ld.CIT(A) held that the Assessing Officer was P a g e | 6 A.Y. 2019-20 Zoher Abbas Karachiwala justified in drawing adverse inference. Accordingly, the addition of Rs.42,41,389/- was upheld by him.

5.

Before us, the ld.AR has contented that the assessee objected to the information relied upon by the AO for reopening the assessment and also highlighted the fact that the information relied upon was factually incorrect.Further, no order had been passed by the AO under section 148A(d) of the Act prior to issuing such notice under section 148 of the Act. Hence, the proceedings are bad in law. Without prejudice, in reply to the notice under section 148 of the Act, the assessee filed his Return of Income. Thereafter, during the assessment proceedings, statutory notice under section 143(2) and section 142(1) of the Act was issued by the AO and he filed timely response by giving detailed explanation along with all the supporting documentary evidences. Despite the submissions made, the AO issued show-cause notice proposing to make variation to the income of the assessee.During the reassessment proceeding, the assessee categorically denied having been engaged in any accommodation entry transactions with Shri Lokesh Kumar Khabya or any of his alleged associates. No material had been brought on record to establish that the said transactions were fictitious, non-genuine, or in the nature of accommodation entries. Further, in the present case, there was no credit entry whatsoever in the books of account of the assessee

P a g e | 7 A.Y. 2019-20 Zoher Abbas Karachiwala during the year under consideration in respect of the amounts alleged by the AO. In the absence of any such credit entry, the very foundation for invoking section 68 of the Act fails, rendering the impugned addition without jurisdiction and void ab initio. The addition is stated to have been made merely on the basis of third-party information without any independent verification or corroborative evidence. Ultimately, the AO erroneously made addition of Rs. 42,41,389/- as unexplained credit under section 68 of the Act and assessed the income at Rs. 57,81,579/- in the assessment order passed under section 147 r.w.s 144B of the Act. Aggrieved by the assessment order, the assessee preferred an appeal before the ld.CIT(A) challenging the additions made therein. However, he erred in confirming the additions u/s 68 of the Act without appreciating the facts of the case in the right perspective.

5.

1 The ld.DR on the other hand relied on the orders of the lower authorities.

6.

We have considered the relevant aspects of the case,heard rival arguments and perused the records.We find that the whole issue has not been adjudicated by the lower authorities in proper perspective.The contentions made before us,have neither been discussed nor adjudicated by them and more specifically by the appellate authority who affirmed

P a g e | 8 A.Y. 2019-20 Zoher Abbas Karachiwala the addition without making any observations on the contentions of the assesseee. It appears that no opportunity of hearing was also allowed to the assessee by the ld.CIT(A). The AO has also made the addition stating that no reply was furnished by the assessee to the show cause notice issued by him leading to framing of assessment order u/s 144 of the Act.

6.

1 Considering the entirety of the matter, we are of the considered opinion that the whole issue requires proper adjudication and consideration at the level of the AO. Therefore, in the interest of justice and fairplay, the assessee deserves to be reheard and allowed opportunity of hearing to buttress his case.Accordingly,we set aside the orders passed by the lower authorities and remand the entire matter to the file of the JAO for making de novo assessment after allowing adequate opportunity of hearing to the assessee. Consequently, the grounds are allowed for statistical purposes.

7.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 18/08/2026. [Justice (Retd.)C. V. BHADANG] [PRABHASH SHANKAR] PRESIDENT ACCOUNTANT MEMBER

P a g e | 9 A.Y. 2019-20 Zoher Abbas Karachiwala Place: म ुंबई/Mumbai ददनाुंक /Date 18.08.2026 Lubhna Shaikh / Steno

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 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //// आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.

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