SAVITA HOMEMAKERS LLP,MUMBAI vs. WARD 20(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER

ITA Nos.2677, 2678 & 2679/Mum/2025 (Assessment Years: 2013-14, 2014-15 & 2015-16) Savita Homemakers LLP, Income Tax Officer, Bhairaav House, Muthaliya Ward 20(3)(1), Residency, Dattaram Lad Marg, Opp. Vs. Mumbai - 400012 Hakoba Centre, Off Lalbaug, Mumbai - 400033 (Appellant) : (Respondent) PAN: ABYFS 2195M Appellant by : Shri Rakesh Joshi Respondent by : Shri Amit Kumar Singh, CIT- DR

Date of Hearing : 09.04.2026 Date of Pronouncement : 29.05.2026 O R D E R Per Saktijit Dey, Vice President: The captioned appeals by the assessee arise out of separate orders of learned Commissioner of Income Tax Appeals, Mumbai, pertaining to assessment years 2013-14, 2014-15 and 2015-16. 2. The common issue arising in all these appeals relates to additions made under section 68 of the Income Tax Act, 1961, (in short “the Act”), by treating certain unsecured loans as unexplained cash credit. Of course, assessee has also challenged the validity of reopening of assessments under Section 147 of the Act. Since facts involved and issues arising in the appeals are more or less

2 ITA No. 2677/Mum/2025 Savita Homemakers LLP

identical, we propose to take up ITA No. 2677/MUM/2025 for Assessment Year 2013-14 as the lead appeal. 3. Briefly, the facts are, the assessee, a resident corporate entity is stated to be engaged in the business of construction of residential and commercial complexes. For the assessment year under dispute, assessee filed its return of income 25-9-2013, declaring NIL income. The return of income filed by the assessee was selected for scrutiny. Ultimately, assessment was completed under section 143(3) of the Act vide order dated 21-3-2016, determining the total income at Rs. NIL after setting off brought forward losses. Subsequently, as stated by the Assessing Officer, an oral representation made by one R. Sangani on 26.08.2017 in the Prime Minister's Office (PMO) was received, wherein, the concerned person had made allegations regarding evasion of income tax by Mr. Madan Jain and family and his Associate firms, including the present assessee, who allegedly received unsecured loans from various entities. Based on such information, the Assessing Officer reopened the assessment under Section 147 of the Act. In response to the notice issued under section 148 of the Act, assessee raised objections challenging the validity of reopening. However, through a separate order, the Assessing Officer disposed of the objections and rejected the objections raised by the assessee. In course of assessment proceedings, the Assessing Officer found that in the year under consideration, the assessee had availed unsecured loan from eight entities

3 ITA No. 2677/Mum/2025 Savita Homemakers LLP

aggregating to Rs.67,08,06,000/-. He, therefore, called upon the assessee to prove the identity, creditworthiness of the lenders and the genuineness of the loan transactions. In response to the queries raised, the assessee furnished supporting documentary evidences to justify its claim that the loans are genuine. After verifying the documentary evidences, the Assessing Officer observed that part of the loan advanced by the lenders were sourced from various other parties who have typical characteristics of accommodation entry provider. After noting down his comments in respect of loan amounts which, according to him, did not appear to be genuine, the Assessing Officer, ultimately, concluded that out of the total loan availed by the assessee amounting to Rs.67,08,06,000/-. from eight lenders, loan amounting to Rs.17,08,00,000/- is non-genuine. Accordingly, he treated the said amount as unexplained cash credit under section 68 of the Act. Based on such decision, the Assessing Officer also disallowed proportionate interest payment corresponding to such loan and added back an amount of Rs.2,04,96,000/- under section 69C of the Act. Further, loan taken of Rs.50,00,000/- from another party, namely, M/s. Priyanka Gems was disallowed and added back under Section 68 of the Act. 4. Against the assessment order so passed, assessee filed an appeal before learned First Appellate Authority, both, on issues relating to the validity of reopening of assessment under section 147 of the Act as also on the merits of

4 ITA No. 2677/Mum/2025 Savita Homemakers LLP

the additions made. However, learned First Appellate Authority not only held the reopening of assessment to be valid but also sustained the additions. 5. Before us, learned counsel appearing for the assessee submitted that reopening of assessment under section 147 of the Act is invalid, as it has been made merely on a change of opinion without any fresh tangible material. He submitted, in course of original assessment proceedings, the Assessing Officer had specifically enquired into all loan transactions by issuing notice under section 142(1) of the Act. In this context, he drew our attention to copy of the said notice placed in the paper book. He submitted, in response to the said notice, the assessee furnished all supporting evidences to establish the genuineness of the loan transactions. He submitted, after making enquiries and thoroughly verifying the documentary evidences, the Assessing Officer completed the assessment accepting the loan transactions. He submitted, in the reassessment proceeding, no fresh and tangible material was available before the Assessing Officer with regard to loan transactions. He submitted. merely based on a letter/representation made by a third party, though the reopening of assessment was after expiry of four years from the end of the relevant assessment year, however, the Assessing Officer failed to establish that escapement of income was on account of failure and non-disclosure of material/information by the assessee in terms with proviso to Section 147 of the Act. He submitted, before reopening the assessment, the Assessing Officer

5 ITA No. 2677/Mum/2025 Savita Homemakers LLP

has not conducted any independent enquiry to verify whether the allegations made by the third party makes out a case of escapement of income. Thus, he submitted, reopening of assessment under section 147 of the Act has to be declared as invalid. In support of such contentions, he relied upon the following decision:

(i) PCIT vs. Paradise Inland Shipping (P) Ltd. [2017] 400 ITR 439 (Bombay). (ii) PCIT vs. Veedhata Tower Pvt. Ltd. [2018] 403 ITR 0415 (Bom). (iii) Jainam Investment vs. ACIT, 131 taxmann.com 327 (Bombay). (iv) Vapi Infrastructure & Industrial Township LLP vs. ITO, 139 taxmann.com 412 (Bombay). (v) Bhagawati Polyfilms Ltd. vs. ACIT 157 taxmann.com 356 (Gujarat).

6 ITA No. 2677/Mum/2025 Savita Homemakers LLP

as also the genuineness of the transactions, loans having been made routed through proper banking channel and supported by all documentary evidences, including confirmations by lenders, the Assessing Officer cannot raise any further doubt regarding the loan transactions by questioning the source from which the lenders arranged the money. He submitted, as per the provisions contained under Section 68 of the Act prior to its amendment with the insertion of first proviso by Finance Act, 2022 with effect from 1-4-2023. He submitted, if at all the source from which the lenders arranged the money is doubtful or non-genuine, addition can be considered at the hands of the lenders but not at the hands of the assessee. He submitted, the Department has failed to establish on record that any such addition has been made at the hands of the lenders doubting the source. He submitted, once the loan transactions are accepted at the hands of the creditors, they cannot be treated as unexplained cash credit in case of the assessee. He submitted, in course of assessment proceedings, though the assessee had furnished all supporting evidences to prove the loan transaction, the Assessing Officer did not conduct any independent enquiry by issuing notice under Section 133(6) or summons under Section 131 of the Act to the lenders to verify the genuineness of the loan transactions. He submitted, merely relying upon the allegations made by a third party, the Assessing Officer has added back a part of the loans, that too, without providing an opportunity to cross-examine such third party, though specifically requested for by the

7 ITA No. 2677/Mum/2025 Savita Homemakers LLP

assessee. Proceeding further, he submitted, the loan transactions are genuine and can be proved from the fact that the repayment of the loans were made either in the same year in which loan was availed or in subsequent years. He submitted, on the date of reopening of assessment, most of the loan accounts stood squared off. He submitted, the assessee has not only paid interest on the loans but has deducted tax. Thus, he submitted, in these circumstances the loans availed cannot be treated as non-genuine for invoking the provisions of Section 68 of the Act. In support of such contention, he relied upon the following decisions: (i) Gaurav Triyogi Singh vs. ITO, 121 taxmann.com 86 (Bombay). (ii) PCIT vs. KRBL Infra Ltd. 180 taxmann.com 502 (Delhi). 7. Per contra, learned Departmental Representative (DR) submitted, the Department received specific information from the PMO regarding the allegations made in respect of evasion of tax by certain entities, including the assessee. He submitted, based on such allegations, investigation was undertaken by the Investigation Wing of the Department and the result of such investigation was intimated to the Assessing Officer. Thus, he submitted, after completion of assessment under Section 143(3) of the Act, the AO had in his possession fresh tangible material, based on which assessment was reopened. He submitted, though, in course of original assessment proceedings, the Assessing Officer might have conducted some general enquiries, still the

8 ITA No. 2677/Mum/2025 Savita Homemakers LLP

assessment order does not reveal that he has properly applied his mind to the issue of genuineness of the loan transactions. Therefore, there is no change of opinion while reopening the assessment. He submitted, the observations of the Assessing Officer in the assessment order indicate that circular transactions were undertaken for providing loan to the assesses. He submitted, the lender companies have availed loan from tainted entities to provide loan to the assesses. Therefore, he submitted, the Assessing Officer having found the source of loan availed by the lender entities for providing loan to the assesses to be non-genuine, has treated part of the loan provided as unexplained cash credit under Section 68 of the Act. He submitted, neither carrying out the transactions through banking channel or repayment of loan can change characteristics of accommodation entries. Thus, he submitted, the additions made by the Assessing Officer deserve to be sustained.

9 ITA No. 2677/Mum/2025 Savita Homemakers LLP

iv. Crossroad Trading Company Pvt. Ltd. Rs.5,07,30,000/-. v. Whitemoon Infrastructure Pvt. Ltd. Rs.14,97,15,000/-. vi. Whitemoon Exports Pvt. Ltd. Rs.5,43,00,000/-. vii. Sharpskill Trading Pvt. Ltd. Rs.8,65,01,000/-. viii. Newlook Mercantile Company Pvt. Ltd. Rs.4,96,35,000/-. 9. It is a fact on record that these entities are group companies of the assessee. Further, in course of assessment proceedings, the assessee had furnished all supporting evidences, including loan confirmations and income- tax returns, copies of bank statements, ledger copies, etc. both of the lenders and the assessee. The financial statements of lender companies were also furnished to prove the creditworthiness. After verifying the details furnished by the assessee, the Assessing Officer noted that all the lender companies have a common address. Further, he has stated that the lender companies themselves have availed unsecured loans from other shell companies and provided loan to the assessee. He has stated that the lender entities though have huge turnover but profit is negligible. Thus, based on the aforesaid factual analysis, the Assessing Officer had expressed doubts regarding the genuineness of part of the loan transactions and ultimately treated them as non-genuine. The lender- wise details of loan transactions treated as non-genuine are as under: i. Marudhar Homemakers Pvt. Ltd. Rs.4,10,00,000/- ii. M/s. Clear Property Pvt. Ltd. Rs.2,45,00,000 /-.

10 ITA No. 2677/Mum/2025 Savita Homemakers LLP

iii. Crossroad Trading Company Pvt. Ltd. Rs.,165,00,000 /-. iv. Reward Trading Company Pvt. Ltd. Rs.1,00,00,000/-. v. Newlook Mercantile Company Pvt. Ltd. Rs.90,00,000/-. vi. Sharpskill Trading Pvt. Ltd. Rs.3,65,00,000/-. vii. Whitemoon Exports Pvt. Ltd. Rs.80,00,000/-. viii. Whitemoon Infrastructure Pvt. Ltd. Rs.2,53,00,000/-.

11 ITA No. 2677/Mum/2025 Savita Homemakers LLP

the loan transactions. If the AO had any doubt regarding the genuineness of the lender companies, as according to him, the lender companies were operating out of a common address, he could not have accepted major part of the loan transaction. The very action of the Assessing Officer in accepting major part of the loan transaction as genuine establishes that there is no material in possession of the department to prove that loan transactions are non-genuine. 11. It is the worth mentioning, in course of the present proceedings, the bench had directed the Department to furnish a report on certain factual aspects, including the nature of the enquiry conducted by the Assessing Officer and the status of the assessments in case of the lender entities. Pertinently, in compliance to the direction of the bench, the Department has furnished report dated 21.01.2026. A perusal of the said report clearly demonstrates that the nature of enquiry conducted by the Assessing Officer in course of the assessment proceedings of the assessee is not available as details of issuance of notices under Section 133(6) and summon u/s. 131(1) to the loan creditors as also the outcome thereof are not available on record. As regards the status of the assessment made in case of the lender entities, the report clearly states that no such record is available. However, the report acknowledges that in course of assessment proceedings, copies of loan confirmation, financial statements etc. were furnished by the assessee. Thus, the aforesaid facts clearly demonstrate that no purposeful enquiry was conducted by the Assessing Officer

12 ITA No. 2677/Mum/2025 Savita Homemakers LLP

to prove that the supporting evidences furnished by the assessee to prove the loan transactions are false or fabricated. The department is not even in a position to controvert assessee’s contention that in the case of lender entities, loan transactions have been accepted as genuine. 12. Be that as it may, in course of hearing before us, on a query from the bench, learned counsel for the assessee has submitted the following tabular chart showing the status of loan availed from various entities:

13 ITA No. 2677/Mum/2025 Savita Homemakers LLP

at source. It is well known that in case of loan transactions found credited in the books of account of the assessee, initial burden is on the assessee to satisfy three ingredients in terms with section 68 of the Act. The three ingredients are, identity of the creator, creditworthiness and genuineness of the loan transactions. So far as the identity of the creators are concerned, there cannot be any doubt as all the lender companies are found to be existing entities, which fact has also been accepted by the Assessing Officer himself. So far as creditworthiness is concerned, the assessee has proved them by furnishing the financial statements of the lender entities. The Assessing Officer himself has accepted that the lenders entities have shown huge turnover. In the context of a loan transaction, what is required to be examined is whether the lender has capacity to finance the loan or not. The financial statements suggested that the lenders had capacity to finance the loans advanced to the assessee. So far as genuineness of the transactions are concerned, the assessee has sufficiently discharged its onus by furnishing income tax returns, loan confirmations, ledger copies, bank statements reflecting the loan transactions through proper banking channels. Even, it is a fact on record that the assessee has regularly paid interest on the unsecured loans and deducted tax at source. Once the assessee has discharged its onus, the onus shifts to the Assessing Officer to disprove the claim of the assessee. Apparently, there is nothing on record to suggest that the

14 ITA No. 2677/Mum/2025 Savita Homemakers LLP

Assessing Officer has been able to bring material on record to disprove the documentary evidences brought on record by the assessee. 15. The very fact that the Assessing Officer has accepted major part of the loan transactions gives credence to assessee's claim that the loan transactions are genuine. Mere disallowance of part of loan transactions because the Assessing Officer had doubts regarding the source from which the lenders got the money, in our view, cannot fasten liability on the assessee. As per the provisions contained under Section 68 of the Act applicable to the assessment year under dispute, there is no obligation cast on the assessee to prove the “source of source”. In any case of the matter, the allegation of the Assessing Officer regarding the source of source, as it appears is not based any cogent material, but merely on general observations. We may further note that assessment in case of the assessee was originally completed under section 143(3) of the Act. In course of the original assessment proceedings, in response to specific queries raised by the Assessing Officer regarding the loan transactions, the assessee had furnished all supporting evidences to prove the loan transactions. While completing the assessment, the Assessing Officer has accepted the loan transactions. Though, it may not be the only determinative factor for the genuineness of the loan transactions, however, it demonstrates that the loan transactions were not examined for the first time in course of the reassessment proceeding. Thus, on overall consideration of the factual matrix

15 ITA No. 2677/Mum/2025 Savita Homemakers LLP

and other related factors, we conclude that the addition made under section 68 of the Act for an amount of Rs.17,08,00,000/- is unsustainable. As a natural corollary, the proportionate disallowance of interest corresponding to such loans is also unsustainable. Thus, the Assessing Officer is directed to delete the additions. 16. In so far as loan of Rs.50,00,000/- from M/s Priyanka Gems, the addition has been made on the allegation that the concerned lender had received the amount from another entity, namely M/s MD Enterprises, allegedly in violation of FEMA provisions for making remittances without actual import of goods. It is the further allegation that the bank account through which the loan transaction was made was not reflected in the return of income. However, learned counsel appearing for the assessee has factually demonstrated before us that the allegation made by the AO regarding non furnishing of bank account details in the return of income is contrary to the material on record. Even otherwise also, the assessee has furnished all supporting documentary evidences in respect of the said loan transaction as well. Whereas, the Assessing Officer has not been able to point out any deficiency in the documentary evidences furnished by the assessee. In view of the aforesaid, the loan transaction of Rs.50,00,000/- and corresponding interest payment cannot be treated as unexplained cash credit under Section 68 and unexplained

16 ITA No. 2677/Mum/2025 Savita Homemakers LLP

expenditure under section 69 of the Act. Accordingly, we direct the Assessing Officer to delete the additions. 17. Having decided the issue on merits, we refrain from going into the issue of validity of reopening of assessment, as it has become academic. Insofar as the other two appeals, being ITA No. 2678 and 2679/MUM/2025 are concerned, both the parties have agreed that the view taken in Assessment Year 2013-14 would be applicable to these two appeals, as the facts involved therein are more or less identical. In fact, a perusal of the common order passed by learned First Appellate Authority demonstrates that the appeals for the subsequent assessment years have been decided based on the observations made in AY 2013-14. In view of the above, we hold that our reasoning in Assessment Year 2013-14 would apply mutatis mutandis to other two appeals as well. Hence, the additions made under Sections 68 and 69C of the Act in other two appeals are also deleted. 18. In the result, all the appeals are partly allowed.

Order pronounced in the open court on 29/05/2026.

Sd/- Sd/- (Prabhash Shankar) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 29/05/2026 Aks/-

17 ITA No. 2677/Mum/2025 Savita Homemakers LLP

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai