MANBA FINANCE LTD,MULUND (WEST) vs. THE ACIT, CENTRAL CIRCLE 5(2), MUMBAI, BANDRA KURLA COMPLEX, BANDRA

Both the appeals involve identical facts, common issues, and pertain to the same assessee. Accordingly, they were heard together and are being disposed of by this common order for the sake of convenience and to avoid repetition. ITA No. 531/Mum/2026 for AY 2018–19 has been taken as the lead case, and the decision rendered therein shall apply mutatis mutandis to the other appeal. ITA No.531/Mum/2026, A.Y. 2018-19 3. Brief facts of the case are that the assessee e-filed its return of income declaring a total income of Rs.12,38,39,510/-. The return was selected for scrutiny, and the assessment was completed under Section 143(3) of the Act on 21.04.2021, determining the total income at Rs.12,66,77,296/-, inter alia, by disallowing the interest expenditure claimed under Section 37 of the Act amounting to Rs.28,37,786/-. Subsequently, a search and seizure operation under Section 132 of the Act was conducted on 05.07.2022 in the case of CA Shri Sanjay Shah. During the course of the search, it was found that the books of account of M/s. Shivom Investments and Consultancy Ltd. (SICL) were being maintained at the office premises of Shri Sanjay Shah. Various incriminating materials, including Excel workbooks, PDF files, loose papers, and WhatsApp chats, were seized during the search. Based on these materials and the statement of Shri Sanjay Shah, the Revenue alleged that SICL was a shell company engaged in providing accommodation entries in the nature of unsecured loans, sale of investments/shares, amortization of goodwill, and other similar transactions. During the search proceedings, the search team also found data relating to the assessee, including the ledger account of the assessee appearing in the books of account of M/s. Shivom Investments and Consultancy Ltd. On the basis of the said information, the assessment was reopened by issuance of a notice under Section 148 of the Act on 30.08.2024. In response thereto, the assessee filed its return of income. Thereafter, the reassessment was completed under Section 148 of the Act by making the following additions: (i) Rs.4,05,00,000/- under Section 68 of the Act on account of the unsecured loan received from M/s. Shivom Investments and Consultancy Ltd.; (ii) Rs.1,90,603/- on account of interest allegedly paid in respect of the said loan; and (iii) Rs.12,15,000/-, being 3% of the loan amount, as unexplained expenditure towards the alleged cash commission paid for obtaining the accommodation entry. Accordingly, the total income of the assessee was assessed at Rs.16,85,82,899/- under Section 148 of the Act. Aggrieved by the reassessment order, the assessee preferred an appeal before the Ld. CIT(A). However, the Ld. CIT(A)

The Ld. AR filed a paper book comprising pages 1 to 404, which has been taken on record. The Ld. AR contended that, during the course of the assessment proceedings as well as the appellate proceedings, the assessee had furnished all relevant documentary evidence to establish the identity and creditworthiness of the lender, namely M/s. Shivom Investments and Consultancy Pvt. Ltd., and the genuineness of the loan transaction. It was submitted that the Ld. AO, without properly appreciating the documentary evidence placed on record, merely relied upon the statement of Shri Sanjay Shah recorded during the search proceedings and, on that basis alone, made an addition of the loan amount together with the corresponding interest and alleged commission to the total income of the assessee. The Ld. AR invited our attention to page 12 of the impugned assessment order, wherein the Ld. AO himself recorded that the assessee had furnished the following documents: (i) Copies of the ledger account and confirmation from the loan creditor; and (ii) Copies of the contract notes, financial statements, and bank statements evidencing the loan transaction. The Ld. AR submitted that these documents were duly acknowledged in the assessment order. It was further contended that the assessee has also placed on record before the Bench all the relevant documentary evidence in the paper book at pages 58 to 314 in support of its claim. The list of documents furnished before the Bench is reproduced below:

The Ld. AR further contended that, to establish the creditworthiness of the lender, our attention was invited to the financial statements of M/s. Shivom Investments and Consultancy Pvt. Ltd., enclosed in the APB at pages 250 to 307. Particular reference was made to page 294 of the APB, containing the balance sheet of the lender as on 31.03.2018. It was submitted that the lender had an equity share capital and other equity aggregating to Rs.60,87,46,952/-, whereas the loan advanced to the assessee was only Rs.4.05crore. Accordingly, it was argued that the lender possessed sufficient financial capacity to advance the loan, thereby fully establishing its creditworthiness.

The Ld. AR further submitted that a search and seizure action under the Act was conducted on 05.07.2022 in the case of CA Shri Sanjay Shah, who was maintaining the books of account of M/s. Shivom Investments and Consultancy Pvt. Ltd. During the course of the search, it was noticed that the assessee had 5 received a loan from the said company. However, the Ld. AR pointed out that the assessee had already repaid the entire loan during F.Y. 2020-21 through normal banking channels, much prior to the date of the search. In support of this contention, the ledger account and bank statements of the assessee evidencing the repayment were placed on record. It was therefore argued that, once the loan had been duly repaid through banking channels, the genuineness of the transaction could not be doubted merely on the basis of a third-party statement recorded during the search. In support of this proposition, the Ld. AR placed reliance on the judgment of the Hon'ble Bombay High Court in PCIT v. M/s. Skylark Build, ITA No. 616 of 2016, order dated 24.10.2018. The relevant observations of the Hon'ble High Court are reproduced in the following paragraphs. “6. It is in these circumstances, he concludes that the creditworthiness of the cash creditor is fully vouched and hence the action of the Assessing Officer in rejecting the explanation of the assessee was not tenable in the eyes of law. We do not think that in endorsing this finding of fact, the Tribunal has not performed its obligation and duty as a last fact-finding authority. When such detailed findings of the Commissioner were on record supported by case laws, then, every single line in this 31 page order of the Commissioner was not required to be reproduced by the Tribunal. The Tribunal found that the Commissioner's order cannot be faulted for he applied the correct legal principles that were applicable to the facts and circumstances of the assessee's case. In addition, there is a subsequent development and namely that each of these creditors from whom the assessee borrowed moneys or who advanced it the moneys, were repaid the sums borrowed. This would establish that there were indeed real creditors; that they had indeed the funds available with them and that the transactions were genuine. In the circumstances, the finding of fact by the Commissioner was endorsed by the Tribunal. Instead of endorsing it fully and dismissing the Revenue's appeal in its entirety, the Tribunal, in paragraph 7, deems it fit and proper to send the matter back to the Assessing Officer so as to verify and examine whether indeed there is any repayment.”

The Ld. AR further contended that the entire addition had been made solely on the basis of the statement of Shri Sanjay Shah recorded during the course of the search proceedings, without bringing any independent material on record to disprove the documentary evidence furnished by the assessee. It was submitted that an identical issue had recently been considered by the Coordinate Bench of the ITAT, Mumbai, in JCIT v. Rakesh Virendra Singh, ITA Nos. 689 to 691, 790 & 1000/Mum/2026, pronounced on 11.06.2026. The relevant observations of the Coordinate Bench are reproduced in the following paragraphs.

The transactions were conducted entirely through proper banking channels and were supported by loan confirmations, details of interest payments along with TDS deductions, ledger accounts, and repayment details, all of which were submitted during the assessment proceedings.

The mere fact that the lenders were allegedly related to tainted entities or that their directors were alleged entry operators cannot, by itself, render the transactions non-genuine, particularly in the face of voluminous documentary evidence supporting the transactions. There is no adverse material on record to controvert the documentary evidence submitted by the assessee. It is a well-settled principle that once the assessee discharges the initial onus of proof, the burden shifts upon the AO.

It is noted that once the assessee had discharged its initial onus, nothing further was brought on record by the AO to challenge or contradict the assessee's claims. Furthermore, there is no finding indicating that the evidence submitted by the assessee was unreliable or lacked credibility. The AO also failed to carry out any meaningful independent inquiries under Sections 133(6) or 131 of the Act, after the assessee had discharged the initial burden of proof. Therefore, as held by various Courts, the additions are not sustainable in the eyes of law.

Thus, relying upon the judgments of the Coordinate Benches of the ITAT in the cases of SKA Tech Infra Pvt. Ltd. and ACIT, Central Circle-2(1) vs. Fancy Devi (supra), wherein similar additions on account of alleged bogus loans from M/s. AFL on identical facts were deleted, and considering the fact that the Ld. CIT(A) has passed a well-reasoned order, we find no infirmity in the same.

No new facts, circumstances, or documents have been brought on record by the Ld. DR in order to controvert or rebut the findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings recorded by the Ld. CIT(A). Accordingly, the grounds raised by the Revenue are dismissed and the order of the Ld. CIT(A) is upheld.”

The Ld. DR argued and contended that Shri Sanjay Shah was an accommodation entry provider and that the assessee had obtained an accommodation loan entry from M/s. Shivom Investments and Consultancy Pvt. Ltd. It was further submitted that the Ld. AO had issued a notice under Section 133(6) of the Act to the lender at its Kolkata address; however, the reply was received from its Mumbai office. According to the Ld. DR, this circumstance cast serious doubt on the genuineness of the transaction and supported the revenue's case that the loan was merely an accommodation entry. Accordingly, the Ld. DR placed reliance on the orders of the Revenue authorities and submitted that the addition had been rightly made by the Ld. AO. In support of the Revenue's case, the Ld. DR invited our attention to the observations recorded by the Ld. AO in paragraphs 13 to 15 of the impugned assessment order, which are reproduced below:

We have heard the rival submissions and carefully considered the material available on record. The assessee has challenged the addition of unsecured loan of Rs.4,05,00,000/- received from M/s. Shivom Investments and Consultancy Pvt. Ltd. under Section 68 of the Act, along with the consequential additions on account of interest and alleged commission. The record reveals that, during the assessment proceedings, the assessee had furnished complete documentary evidence in support of the impugned loan transaction, including the confirmation of the lender, ledger account, bank statements, financial statements, income-tax returns, and other supporting documents to establish the identity of the lender, its creditworthiness, and the genuineness of the transaction. These documents have not been found to be false or fabricated by the Ld. AO. The addition has been made primarily on the basis of the statement of Shri Sanjay Shah recorded during the course of the search proceedings, without bringing any independent material on record to discredit the documentary evidence furnished by the assessee. It is also an undisputed fact that the loan had been repaid through normal banking channels during F.Y. 2020-21, much prior to the date of search, thereby lending further credence to the genuineness of the transaction. The assessee has also demonstrated that the lender possessed substantial net worth of more than Rs.60.87 crore, whereas the loan advanced was only Rs.4.05 crore, sufficiently establishing its financial capacity. We further find that the Coordinate Bench of the Tribunal, on identical facts involving the very same search operation and the statement of Shri Sanjay Shah, in the case of Rakesh Virendra Singh (supra), held that once the assessee had discharged the initial burden cast under Section 68 by producing confirmations, financial statements, bank statements, loan confirmations, interest details, and repayment evidence, the burden shifted upon the revenue. In the absence of any independent enquiry, corroborative evidence, or an effective opportunity of cross-examination, additions made merely on the basis of third-party statements could not be sustained. The Coordinate Bench further held that the mere allegation that the lender was an accommodation entry provider was insufficient to disregard voluminous documentary evidence supporting the loan transaction. The facts of the present case are materially identical. The revenue has not brought any distinguishing feature or contrary material to justify a different view. Accordingly, we hold that the addition of Rs.4,05,00,000/- made under Section 68 of the Act is unsustainable and is accordingly directed to be deleted. Consequently, the additions made towards the alleged commission for obtaining the accommodation entry and the interest expenditure attributable to the said loan, being merely consequential in nature, are also directed to be deleted.

Since ITA No. 531/Mum/2026 for A.Y. 2018-19 has been treated as the lead case, the above findings shall apply mutatis mutandis to the connected appeal for the subsequent assessment year. Accordingly, in the connected appeal, the disallowance of interest payment of Rs.33,67,053/- paid to M/s. Shivom Investments and Consultancy Pvt. Ltd is also deleted. 11. In the result, the appeal of the assessee bearing ITA No.531 and 591/Mum/2026 are allowed. Order pronounced in the open court on 17th day of July 2026 Sd/- Sd/- (BIJAYANANDA PRUSETH) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 17/07/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI