ANUNAY FAB LIMITED,AHMEDABAD vs. DCIT, CIRCLE 1(1)(1), AHMEDABAD., AHMEDABAD

Ld. CIT(A) erred in law and on facts in confirming the addition of Rs. 4,00,00,536/- made by the AO u/s 68 of the Act on account of unsecured loan taken from M/s Gurumukh Mercantile Pvt Ltd.

Ld. CIT(A) erred in law and on facts in confirming the addition made in respect of unsecured loan obtained from M/s Gurumukh Mercantile Pvt Ltd. of Rs. 4,00,00,536/- despite the fact that the appellant provided - 2– documentary evidences proving the source of the same and even the source of source, the interest was duly charged on the said loan after deduction of TDS thereon and the said loan was duly repaid before the date of search action conducted in case of Banka Group.”

The brief facts of the case are that the assessee-company filed its return of income on 28.10.2017 declaring total income of Rs.79,64,160/-. The return was processed under section 143(1) of the Act. Subsequently, information was received from the Investigation Wing, Kolkata, pursuant to search proceedings conducted in the case of Shri Mukesh Banka and Banka Group, alleging that certain entities controlled by the said group were engaged in providing accommodation entries in the form of unsecured loans. Based on such information, the Assessing Officer recorded reasons and issued notice under section 148 of the Act on 31.03.2021. During reassessment proceedings, the Assessing Officer observed that the assessee had received unsecured loan aggregating to Rs.4,00,00,536/- from M/s Gurumukh Mercantile Pvt. Ltd. which is controlled and managed by Mr. Mukesh Bnaka. The assessee-company furnished confirmations, bank statements, audited financial statements, income- tax returns of the lender, details of source of funds and submitted that the entire transaction was routed through banking channels. It was further submitted that interest was paid after deduction of tax at source and the entire loan stood repaid prior to the date of search in the case of Banka Group. The Assessing Officer, however, treated the impugned amount as unexplained cash credit u/s 68 of the Act and added to the income of the assessee.

Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the Ld. CIT(A), who upheld the reopening as well as the addition made u/s 68 of the Act.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

Before us, the Ld. AR submitted that the reassessment proceedings were initiated merely on the basis of information received from the Investigation Wing without any independent enquiry or application of mind by the Assessing Officer. Reliance was placed on the decisions in Kantibhai Dharamshibhai Narola vs ACIT [321 CTR 595 (Guj.), PCIT vs Meenakshi Overseas Pvt. Ltd. Kantibhai Dharamshibhai Narola vs ACIT [321 CTR 595 (Guj.), PCIT vs Meenakshi Overseas Pvt. Ltd. and South Yarra Holdings and South Yarra Holdings vs. ITO ([2019] 104 taxmann.com 216).

1 On merits, the Ld. AR submitted that the assessee had discharged the onus cast upon it u/s 68 by furnishing complete documentary evidence establishing (i) identity of the lender; (ii) creditworthiness of the lender and (iii) genuineness of the transaction. The Ld. AR submitted that the assessee had furnished confirmation of account, PAN, income-tax return, audited financial statements and bank statements of M/s Gurumukh Mercantile Pvt. Ltd. It was further submitted that even the source of source was explained through a detailed confirmation demonstrating availability of funds with the lender before each advance made to the assessee. The Ld. AR drew our attention to the fact that interest was regularly paid on the loan after deduction of tax at source and the entire loan amount was repaid before 21.05.2018, being the date of search in the case of Banka Group. Reliance was placed on the decisions of the Ahmedabad Bench of the Tribunal in DCIT vs Gopi Synthetics Pvt. Ltd. (ITA No.1586/Ahd/2024 dated 19.12.2024), DCIT vs Shreem Construction [IT(SS)A Nos. 57-58/Ahd/2019], as well as the judgments of the Hon'ble Gujarat High - 4–

The Ld. DR, on the other hand, relied upon the orders of the Assessing Officer and the Ld. CIT(A). The Ld. DR submitted that M/s Gurumukh Mercantile Pvt. Ltd. was identified by the Investigation Wing as an accommodation entry provider belonging to Banka Group. The Ld. DR submitted that the lender had negligible income and insignificant business activity and therefore lacked the financial capacity to advance loans of Rs.4 crores. It was also argued that the bank statements clearly showed that funds were received from other entities and immediately routed to the assessee, indicating that the lender was merely a conduit entity.

We have heard the rival submissions and perused the material available on record.

We have considered the rival submissions and perused the material available on record. The reassessment proceedings were initiated on the basis of specific information received from the Investigation Wing regarding accommodation entries allegedly received by the assessee from M/s Gurumukh Mercantile Pvt. Ltd. The original return of income filed by the assessee was processed u/s 143(1) of the Act and, thereafter, on the basis of the information received by the Assessing Officer, reasons were recorded and notice u/s 148 of the Act was issued.

1 In the facts of the present case, we find that the Assessing Officer had tangible material before him which provided a live nexus between the information received and the transaction entered into by the assessee with M/s Gurumukh Mercantile Pvt. Ltd. We, therefore, do not find merit in the contention of the assessee that the reopening was based merely on borrowed satisfaction or that there was no independent application of mind on the part of Anunay Fab Ltd Vs. DCIT - 5– the Assessing Officer. Accordingly, we uphold the validity of the reassessment proceedings. Ground No. 1 of the assessee’s appeal is, therefore, dismissed.

We shall now advert to the merits of the addition of Rs.4,00,00,536/- made under section 68 of the Act in respect of the unsecured loan received by the assessee from M/s Gurumukh Mercantile Pvt. Ltd.

1 It is an undisputed position that the assessee furnished confirmation, PAN, ITR, audited financial statements and bank statements of the lender company, namely M/s Gurumukh Mercantile Pvt. Ltd. The loan was duly received, interest was paid after deduction of TDS and the entire loan was repaid prior to the search conducted in the case of Banka Group. No material has been brought on record by the Revenue to establish that the assessee had paid cash in lieu of the impugned loan or that the funds advanced by the lender belonged to the assessee. The addition has been made primarily on the basis of investigation carried out in the case of a third party without any independent incriminating material against the assessee.

2 Further, we find that in the case of DCIT v. Gopi Synthetics Pvt. Ltd., ITA No.1586/Ahd/2024, order dated 19.12.2024, the Coordinate Bench of the Tribunal considered a substantially similar issue involving the very same lender. In that case also, the loans received from M/s Gurumukh Mercantile Pvt. Ltd. were examined in the backdrop of the investigation concerning the Banka Group. The Coordinate Bench, after considering the documentary evidence, payment of interest with deduction of tax at source and repayment of the loans, deleted a similar addition made under section 68 of the Act.