SUNNY HOME CARE PRIVATE LIMITED,MUMBAI vs. DCIT CC- 6(4), MUMBAI

The brief facts of the case are that the Assessee is a private limited company engaged in the business of manufacturing and selling home cleaning solutions. For the year under consideration, it filed its return of income on 15.03.2022 declaring a total income of ₹1,47,42,960/-.

During the relevant previous year, the Assessee received an unsecured loan of ₹10,50,00,000/- from M/s Goyal Anchal Sampatti Vikas and Niyojan Nigam Limited (hereinafter referred to as "Goyal Anchal"), a registered Non-Banking Financial Company (NBFC). The Assessee also paid interest amounting to ₹30,84,822/- on the said loan after deduction of tax at source.

Subsequently, a search operation under section 132 of the Income-tax Act, 1961 ("the Act") was conducted on 05.07.2022 in the case of certain third parties, namely CA Sanjay Shah, CA Rushab Savla and three alleged entry operators. During the course of the said search, statements under section 132(4) of the Act were recorded. Based primarily upon the statement of CA Sanjay Shah, the Assessing Officer ("AO") formed a prima facie view that CA Sanjay Shah was controlling various entities engaged in providing accommodation entries and that Goyal Anchal was one such entity.

Thereafter, a survey under section 133A of the Act was carried out at the business premises of the Assessee on 23.11.2022. During the course of the survey, statements of CA Sanjay Shah and Shri Bhushannarayan Krishnakant Pandey, Director of the Assessee-company, were recorded, wherein certain admissions regarding accommodation entries were allegedly made. However, Shri Bhushannarayan Krishnakant Pandey retracted his statement by filing a sworn affidavit dated 29.11.2022, i.e., within five days of recording of the statement. Similarly, CA Sanjay Shah also executed a detailed affidavit dated 11.07.2023 retracting his earlier statement and clarifying, inter alia, that Goyal Anchal, being a registered NBFC, was not utilized for providing accommodation entries and that he was neither a director nor a shareholder thereof.

Based on the aforesaid material, proceedings under sections 148A(b) and 147 of the Act were initiated. During the reassessment proceedings, the Assessee furnished documentary evidences in support of the impugned loan transaction, including the Permanent Account Number (PAN), audited financial statements of the lender, certificate of registration as an NBFC, bank statements evidencing receipt and repayment of the loan through normal banking channels, and proof of payment of interest after deduction of tax at source. The AO, however, was not satisfied with the explanation furnished by the Assessee and passed the reassessment order dated 12.02.2025 making the following additions:

Aggrieved by the aforesaid assessment order, the Assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A), while rejecting the retraction affidavits on the ground that they were belated, held that the source of the impugned loan represented the Assessee's unaccounted cash sales. However, instead of sustaining the entire addition under section 68 of the Act, the Ld. CIT(A) restricted the addition to 8% of the loan amount. Insofar as the disallowance of interest was concerned, the Ld. CIT(A) sustained the same by invoking the provisions of section 37 of the Act instead of section 69C. Being aggrieved, both the Assessee as well as the Revenue are in appeal before us.

First of all, we take up the grounds raised by the Assessee as well as by the Department challenging the merits of the addition made under Section 68 of the Act by the AO. Accordingly, we take up Ground Nos. 5 to 10 raised by the Assessee and Ground Nos. 1 and 2 raised by the Department. Since all these grounds raised by the Assessee as well as by the Department are interrelated and interconnected and relate to challenging the order of the learned CIT(A) in restricting the additions made under Section 68 to the estimated profit at 8% of the undisclosed cash sales, we have decided to adjudicate these grounds through the present consolidated order.

We have heard the counsel for both the parties, perused the material placed on record, judgments cited before us, and also the orders passed by the Revenue authorities. From the records, we notice that one of the arguments taken up by the Assessee is that the entire additions were made by the AO merely on the basis of the statement recorded during the search and survey proceedings. It was also submitted that no corroborative evidence was found during the course of search and survey. Accordingly, it was argued that no addition could have been made solely on the basis of the statements, which were also retracted later on.

After evaluating the facts of the present case, we find that it is an admitted fact on record that additions were made in the present case merely on the basis of the statement recorded during the course of search and survey, and no corroborative evidence has been referred to by the assessing authorities. In our view also, it is well-settled law that a statement recorded during survey proceedings under Section 133A of the Act has no evidentiary value unless and until it is supported by independent incriminating material. In this regard, reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. S. Khader Khan Son (2013) 352 ITR 480 (SC).

Moreover, we also find that no cash, unaccounted assets, loose papers, or any other incriminating material whatsoever was found during the course of survey conducted at the Assessee's premises. In this regard, it was argued that the statement of the Director was retracted within five days by filing a duly sworn affidavit, whereas CA Sanjay Shah specifically retracted his statement by filing a detailed affidavit clarifying that Goyal Anchal was not used for providing accommodation entries. Even otherwise, the Revenue, at any stage, has neither disproved the retraction affidavits nor brought any independent material on record to establish that unaccounted cash had factually changed hands.

We further notice that the Assessee had placed on record the PAN, Income Tax particulars, audited financial statements of the lender, certificate of registration of the lender as an NBFC, bank statements evidencing receipt and repayment of loans through normal banking channels, and proof of payment of interest after deduction of tax at source. In our view, all these documents establish the genuineness of the transactions entered into between the Assessee and the lenders. The Assessee had discharged the initial onus cast upon him under Section 68 of the Act by establishing the identity of the lender, its creditworthiness, and the genuineness of the transaction. No defect has been found by the AO in respect of the documents placed on record and relied upon by the Assessee. Thus, we are of the view that once the Assessee has discharged the initial onus, the burden shifts upon the Revenue to bring convincing evidence on record to rebut the documentary evidence furnished by the Assessee, which has not been done in the present case.

Moreover, during the entire assessment proceedings, substantial reliance was placed upon the statement of a third party recorded during the survey proceedings, admittedly without affording the Assessee an opportunity to cross-examine the said person. In this regard, reliance is placed upon the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries Limited, wherein it was specifically held that any statement, the cross-examination of which was not provided to the Assessee, cannot be relied upon for making any addition.

On the contrary, it was specifically argued by the learned DR that the statement recorded during the search and survey proceedings clearly established that accommodation entries were being provided through various entities, including Goyal Anchal. It was submitted that the retraction affidavits were nothing but an afterthought, and the learned CIT(A) had rightly rejected the same. However, the learned DR submitted that the learned CIT(A) was not justified in restricting the additions to 8% of the unsecured loan without any supporting evidence and, therefore, supported the order of the Assessing Officer for making additions under Section 68 of the Act.

It is by now a settled proposition of law that a statement recorded during the course of survey proceedings under section 133A of the Act, by itself, does not constitute substantive evidence so as to sustain an addition unless the same is supported by independent corroborative material. The Hon'ble Supreme Court in the case of CIT vs. S. Khader Khan Sons (supra), while affirming the decision of the Hon'ble Madras High Court, has categorically held that section 133A does not empower an income-tax authority to examine any person on oath and, therefore, any confession recorded during survey, by itself, cannot constitute the sole basis for making an addition.

In the present case, it is an admitted position that no unaccounted cash, unexplained investment, books of account, loose papers or any incriminating document was found during the survey conducted at the premises of the Assessee. Except for the statements recorded during the course of search and survey proceedings, the Revenue has not brought any independent material on record to establish that the impugned loan transaction was merely an accommodation entry or that the Assessee had introduced its own unaccounted money in the guise of unsecured loan.

We further notice that the statement of Shri Bhushannarayan Krishnakant Pandey was retracted within a period of five days by filing a sworn affidavit. Likewise, CA Sanjay Shah also subsequently filed a detailed affidavit retracting his earlier statement and specifically stating that Goyal Anchal, being a registered NBFC, was not utilized for providing accommodation entries and that he had no direct role in the management of the said company. Significantly, the Revenue has not brought any material on record to establish that the contents of the retraction affidavits are factually incorrect. Equally, there is no material to indicate that any unaccounted cash had actually passed from the Assessee to the lender or vice versa.

We also find considerable force in the contention of the Ld. AR that the Assessee had duly discharged the burden cast upon it under section 68 of the Act. The Assessee has placed on record the PAN, audited financial statements and income-tax particulars of the lender, certificate evidencing registration of Goyal Anchal as an NBFC, bank statements demonstrating movement of funds through normal banking channels, evidence regarding repayment of the loan and proof of payment of interest after deduction of tax at source. Neither the AO nor the Ld. CIT(A) has pointed out any defect or discrepancy in these primary documentary evidences. Once the Assessee had discharged the initial burden by producing cogent documentary evidence, the onus shifted upon the Revenue to rebut the same by bringing positive material on record. In our considered opinion, such burden has not been discharged by the Revenue in the facts of the present case.

We also find that the approach adopted by the Ld. CIT(A) is self- contradictory. Having rejected the Assessing Officer's finding that the entire unsecured loan represented an unexplained cash credit under section 68 of the Act, the Ld. CIT(A) proceeded to hold that the source of the loan was the Assessee's unaccounted cash sales and, on that premise, restricted the addition to 8% of the loan amount. We are unable to approve such an approach. There is no material available on record to indicate that the Assessee had effected any unaccounted cash sales during the year under consideration. The finding recorded by the Ld. CIT(A) is based purely on presumptions and surmises and is not supported by any documentary evidence. It is a settled principle of law that additions under the provisions of the Act cannot be sustained on the basis of suspicion, however strong it may be.

We further find that the Assessing Officer has not disputed the receipt of loan through regular banking channels. The identity of the lender is not in dispute. The lender is a company duly incorporated under the provisions of the Companies Act and is admittedly registered as a Non-Banking Financial Company with the Reserve Bank of India. The loan transaction stands reflected in the books of account of both the lender as well as the Assessee. The interest paid thereon has also been subjected to deduction of tax at source. The repayment of the loan has likewise been made through normal banking channels. These undisputed facts lend substantial support to the genuineness of the transaction.

We also notice that except placing reliance upon the statements recorded during search and survey proceedings, no enquiry appears to have been conducted by the Assessing Officer to dislodge the documentary evidences furnished by the Assessee. No material has been brought on record to establish that the funds advanced by Goyal Anchal actually belonged to the Assessee or that the loan transaction was a mere accommodation entry. In the absence of any such material, the addition under section 68 cannot be sustained merely on the basis of conjectures.

The Revenue has also relied upon the statement of CA Sanjay Shah recorded during the course of search proceedings. Admittedly, the said statement was recorded in proceedings conducted in the case of a third party. It is well settled that where any statement of a third party is proposed to be relied upon against an assessee, such statement cannot be made the sole basis of an addition without affording an effective opportunity of cross- examination. In the present case, no such opportunity has been granted to the Assessee. Therefore, reliance placed upon the said statement, without any independent corroborative evidence, cannot be sustained.

Having regard to the totality of the facts and circumstances of the case, we are of the considered opinion that the Assessee has satisfactorily discharged the burden cast upon it under section 68 of the Act, whereas the Revenue has failed to bring on record any cogent evidence to rebut the documentary evidences produced by the Assessee. Consequently, the addition of ₹10,50,00,000/- made under section 68 of the Act deserves to be deleted.

Since we have held that the unsecured loan itself is genuine and the addition under section 68 is unsustainable, the disallowance of interest amounting to ₹30,84,822/- and the addition of ₹52,50,000/- towards alleged commission, being consequential in nature, also cannot survive. Accordingly, the same are directed to be deleted.

In the result, the appeal of the Assessee in ITA No. 2026/MUM/2026 is allowed, whereas the appeal preferred by the Revenue in ITA No. 2457/MUM/2026 is dismissed.

These are cross-appeals filed by the Assessee as well as the Revenue against the order passed by the Ld. CIT(A) for the Assessment Year 2022- 23.

During the course of hearing, both the parties fairly submitted that the facts involved in these appeals are identical to those considered by us while adjudicating ITA Nos. 2026/MUM/2026 and 2457/MUM/2026 for A.Y. 2021-22. It was pointed out that the lender continues to be M/s Goyal Anchal Sampatti Vikas and Niyojan Nigam Limited, the basis adopted by the Assessing Officer for making the addition remains the same, and the reasoning assigned by the Ld. CIT(A) is also substantially identical.

We have considered the rival submissions. We find that the issue involved in these appeals is squarely covered by our findings recorded hereinabove while disposing of the appeals for A.Y. 2021-22. Neither the 14 Revenue nor the Assessee has brought to our notice any distinguishing feature either on facts or in law so as to persuade us to take a different view.

Respectfully following our decision rendered in ITA No. 2026/MUM/2026 for A.Y. 2021-22, we hold that the addition made under section 68 of the Act amounting to ₹4,50,00,000/- is liable to be deleted. Consequently, the disallowance of interest and the addition towards alleged commission, being consequential thereto, are also directed to be deleted.

Accordingly, the appeal filed by the Assessee in ITA No. 2027/MUM/2026 is allowed, whereas the appeal preferred by the Revenue in ITA No. 2447/MUM/2026 is dismissed.

This appeal has been preferred by the Assessee against the order of the Ld. CIT(A) for the Assessment Year 2023-24.

At the time of hearing, the Ld. AR submitted that the only surviving ground pressed in the present appeal relates to the disallowance of interest amounting to ₹88,96,356/- paid on the unsecured loan obtained from M/s Goyal Anchal Sampatti Vikas and Niyojan Nigam Limited. It was submitted that the ground relating to rates and taxes was not pressed.

We have considered the rival submissions and perused the material available on record. We have already held while adjudicating the appeals for Assessment Years 2021-22 and 2022-23 that the unsecured loan obtained from M/s Goyal Anchal Sampatti Vikas and Niyojan Nigam Limited is a genuine transaction duly supported by documentary evidence and that the additions made in respect thereof are unsustainable. 15

Once the principal loan transaction has been held to be genuine, the consequential disallowance of interest paid on such loan cannot be sustained in law. The Revenue has not brought any independent material on record to establish that the interest expenditure was either fictitious or not incurred wholly and exclusively for the purposes of business. Accordingly, the disallowance of interest amounting to ₹88,96,356/- is directed to be deleted.

Insofar as the ground relating to rates and taxes is concerned, the same was expressly stated to be not pressed during the course of hearing and is, therefore, dismissed as not pressed.

In the result, the appeal of the Assessee in ITA No. 2028/MUM/2026 is partly allowed.

This appeal is directed against the order passed by the Ld. CIT(A) for the Assessment Year 2019-20.

The only issue arising for our consideration in the present appeal relates to the disallowance of interest amounting to ₹2,78,182/- and the addition of ₹36,160/- towards alleged commission under sections 69C/37 of the Act in respect of the loan obtained from M/s Aneri Fincap Ltd.

The Ld. Authorised Representative submitted that the loan from M/s Aneri Fincap Ltd. had been received during the Financial Year 2017-18 and had duly been reflected in the books of account. It was contended that the Assessing Officer had never disputed the genuineness of the principal loan in the year of its receipt. It was further submitted that once the principal loan transaction stood accepted, the consequential interest paid thereon in the 16 subsequent years could not be disallowed in the absence of any material to establish that the underlying transaction was not genuine. It was also submitted that the addition towards alleged commission was merely consequential and liable to be deleted.

Per contra, the Ld. Departmental Representative relied upon the orders of the authorities below.

We have considered the rival submissions and perused the material available on record. We find that the loan from M/s Aneri Fincap Ltd. was admittedly received during the Financial Year 2017-18. The Assessing Officer has not treated the principal amount of the loan as unexplained or non-genuine in the year of its receipt. Once the principal loan transaction has been accepted, the interest paid thereon in the subsequent years cannot be disallowed without first establishing that the underlying loan transaction itself was bogus or that the expenditure was otherwise not allowable under the provisions of the Act.

In the present case, no material has been brought on record by the Revenue to demonstrate that the loan transaction with M/s Aneri Fincap Ltd. was not genuine or that the interest expenditure incurred thereon was fictitious or otherwise inadmissible. The disallowance has been made merely on the basis of an inference without any supporting evidence. In our considered view, such a disallowance cannot be sustained.

Similarly, the addition towards alleged commission is merely consequential to the allegation that the loan represented an accommodation entry. Since the very foundation of such allegation has not been established by the Revenue, the consequential addition on account of alleged commission also cannot survive.

Accordingly, we direct the Assessing Officer to delete the disallowance of interest amounting to ₹2,78,182/- as well as the addition of ₹36,160/- towards alleged commission.

In the result, the appeal of the Assessee in ITA No. 2025/MUM/2026 is allowed.

In the result, the appeals filed by the Assessee in ITA Nos. 2026/MUM/2026, 2027/MUM/2026 and 2025/MUM/2026 are allowed; the appeal filed by the Assessee in ITA No. 2028/MUM/2026 is partly allowed; and the appeals filed by the Revenue in ITA Nos. 2457/MUM/2026 and 2447/MUM/2026 are dismissed.