DCIT, CC-2(2), KOLKATA, KOLKATA vs. NISHANT GARODIA, ASSAM

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No.511/KOL/2026 Assessment Year: 2018-19 DCIT, CC-2(2),................................................................Appellant Office of the DCIT, CC-2(2), Aayakar Bhawan Poorva, 4th Floor, 110 Shantipally, E.M. Bypass, Kolkata- 700107 [PAN No. AJSPG6638H] Vs. Nishant Garodia, ..…………..…………………....…….................................….Respondent Garodia Industries Makum Road, Tinsukia- 786125, Assam Assam- 786125 Appearances by: P.J. Bhide, SR, appeared on behalf of the Appellant. Pradeep dung Dung, Sr. DR ,appeared on behalf of the Respondent. Date of concluding the hearing : July 15 , 2026 Date of pronouncing the order :August 21 ,2026 ORDER Per Pradip Kumar Choubey, Judicial Member: This appeal filed by the assessee is directed against the order dated 12.12.2025 of the Office of the Commissioner of Income Tax, passed under Section 147 of the Assessment Year 2018-19 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).

ITA No.511/Kol/2026 Assessment Year- 2018-19 132 of the IT Act, 1961 was conducted on Prithvi Group and its associates by the Directorate of Investigation, Kolkata on 16/11/2021 and on subsequent dates. Being one of the associate members of the above group, the assessee was covered in search by executing a warrant. Accordingly, notice u/s 148 of the Act was issued and assessment completed u/s 147/143(3) of the Act on a total income of Rs. 1.82 34,328/- after making the following additions:

(i) Addition u/s 68 of the Act :Rs. 25,00,000/-

(ii) Disallowance of interest paid u/s 37(1) of the Act : Rs. 2,05,808/-

2.7. Perusal of the assessment order reveals that the Assessing Officer has not rendered any adverse comments on the documents which have been produced by the assessee. Further, it has been observed that the lender companies are income tax assessee, these are regularly filing income tax returns, the loan was advanced through account payee cheque, details of bank accounts and statements were available. The appellant had submitted copy of ITR as well as ledger account of the loan creditors, loan confirmation copies of bank statements. It has also been observed that the total worth of the lender companies are as follows:

ITA No.511/Kol/2026 Assessment Year- 2018-19 Name of the tender company Net Worth 31.03.2018) (as on 31.03.2018) Pioneer Saree Merchants More than More than 13 crores 13 crores Pvt Ltd Vishesh Marketing Pvt Ltd (since M/s More than 13 crores Mount View Dealmark Pvt Ltd has been amalgamated) It is settled principle that the burden of proof is on the appellant stands discharged once the appellant establishes identity, and creditworthiness of the creditor and genuineness of loan transaction. Now, the onus is shifted on the Assessing Officer to disprove the documents furnished by the assessee, which was not done by the Assessing Officer. The AO's approach was mere rudimentary and mechanical. The Assessing Officer was required to make proper investigation to determine whether the money was really lent by the third party or it has come out of the resources of the assessee itself. Thus, the Assessing Officer has failed to apply his mind in all aspects of the case.

2.8. It is settled jurisprudence that the additions u/s 68 of the Act cannot be sustained when the appellant has discharged the initial burden and revenue has failed to bring any cogent material to rebut the same. In the absence of any such finding. the order passed by the assessing officer is utterly perverse. In this

ITA No.511/Kol/2026 Assessment Year- 2018-19 context, reliance is being placed in the case of Principal Commissioner of Income-tax vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)/[2022] 448 ITR 332 (Calcutta) [14-07-2022] where it was held that-

"Section 68. read with section 143 of the Income-tax Act 1951-Cash credit (Loans and advances) Assessment Officer noted that assessee-company had received certain unsecured loans from various companies out of which 13 were alleged paper companies having no worth and, thus, issued a show cause notice - Subsequently assessee furnished various documents, however same were rejected by Assessing Officer in a very casual manner and an assessment order was passed - It was noted that show-cause notice issued on assessee was only in respect of one lender company, namely, FGD-Assessee provided various documents in form of PAN card, income-tax acknowledgement, copy of bank statement, certification of incorporation, master data from register of companies, certificate of incorporation and annual account to prove FGD's identity and creditworthiness and genuineness of transaction. However, Assessing Officer by relying on statement of one AKA, who was alleged operator of such bogus companies, brushed aside these documents on mere ground that they did not absolve assessee from his responsibility of proving nature of transaction - It was noted that statement of AKA was not recorded in presence of assessee nor an opportunity of cross examination was provided to it Whether

ITA No.511/Kol/2026 Assessment Year- 2018-19 where there was no evidence brought on record by Assessing Officer to connect statement of AKA with loan transaction of assessee, said statement was of little avail and could not be basis of allegations - Held, yes - Whether, further, since assessee had discharged its initial burden by providing documentary evidences and burden had now shifted to Assessing Officer, who failed to bring on record any reason in writing as to why these documents did not establish identity of lender or proved genuineness of transaction, impugned assessment order passed by casually brushing aside these evidences was utterly perverse and liable to be quashed-Held, yes"

2.9 Section 68 of the Income tax Act states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The crucial words in the said provision are "assessee offers no explanation". This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income-tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence

ITA No.511/Kol/2026 Assessment Year- 2018-19 regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds.

There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under section 68 of the Act.

2.10 The appellant argued that the entire loan amount was repaid in the subsequent years. Further the AO has not disputed the repayment of loan. When the unsecured loan has been repaid within a short period of time, the 6

ITA No.511/Kol/2026 Assessment Year- 2018-19 Assessing Officer was not justified in making addition under section 68 of the

Act. The details of the loan transaction over the years are as under-

ITA No.511/Kol/2026 Assessment Year- 2018-19 Perusal of the ledger copy cited above, it is evident that the loan taken during the FY. 2017-18 relevant to A.Y 2018-19 by the appellant was repaid in subsequent years. The loan was paid through banking channel.

As the loan was repaid in the subsequent years and therefore it cannot be said that the assessee was a beneficiary of the loan. In this connection, the judgement of the Hon'ble Gujrat High Court in the case of PCIT Vs Ambe Tradecorp Pvt Ltd. [2022] 145 taxmann.com 27 (Gujarat) where it has been held as follows:

"Section 68 of the Income-tax Act 1961 Cash credit (Bogus loan) Assessment year 2012-13-Assessee received loans from two parties - Assessing officer treated same to be sham for reason that creditworthiness of loan givers was not established and, accordingly, made addition under section 68 It was noted that Tribunal recorded findings of facts that assessee had fumished details such as copy of ledger account, bank statements, income-tax returns, balance sheet etc. of loan givers - it was also recorded that notice under section 133/6) was issued to said loan givers which were duly responded by them, therefore, identity of parties could not be disputed-It was also noticed that assessee was not beneficiary as loan was repaid by assessee in subsequent year-Whether, on facts, identity and creditworthiness of parties and genuineness of loan transactions were well established, therefore, impugned addition made under 8

ITA No.511/Kol/2026 Assessment Year- 2018-19 section 68 on account of said loan amount was unjustified-Held, yes (Paras 3.4, 3.5 and 5) [In favour of assesse.

It is, therefore, held that since the appellant had discharged its onus of proving the identity of the loan creditor, which in the instant case, having PAN and filed the return of income as well. Further, the creditworthiness of the transaction is proved with the fact that they have been carried through banking channel and sufficient funds were available with loan creditor to explain the amount of loan given. The genuineness of the transaction is proved in the fact that the assessee is carrying regular business activity and the loan was also repaid at a later date, and income tax return has been filed by the loan creditors.The loan taken had been repaid at a subsequent date. Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries being carried out in the later years.

Further, reliance is also placed in the case of Principal Commissioner of Income- tax vs. Bairagra Builders (P.) Ltd. [2024] 164 taxmann.com 162 (Bombay)/[2024] 299 Taxman 460 (Bombay) [18-06-2024] where it has been held that -

Section 68 of the Income-tax Act, 1961 Cash credit (Loans) Assessment years 2007-08 and 2012-13 Assessee-company took unsecured loans from two 9

ITA No.511/Kol/2026 Assessment Year- 2018-19 companies On basis of statement of one PKJ recorded during search and seizure operation that he had provided accommodation entries to assessee, Assessing Officer treated said loans as fake Whether since Assessee had submitted all evidence to substantiate loans in question, including confirmation from creditors and loans were taken and repaid through banking channels, Assessing Officer was not justified in treating said unsecured loan as fake and making addition of interest paid on said loan to assessee's income-Held, yes [Para 8) [In favour of assessee]

Therefore, in view of the above findings and catena of judicial decisions, there is no justification on the part of the AO for invoking the provisions of section 68 of the Act and therefore the addition of Rs.25,00,000/-made by the AO is deleted. The details of interest paid is reproduced below

SI. No. Name of the Opening Amount of Year of Interest lender party Balance loan taken loan taken paid during this (A.Y) year 1. Pioneer Saree - 10,00,000 2018-19 Merchants Pvt. Ltd

ITA No.511/Kol/2026 Assessment Year- 2018-19 2 Mount View 15,00,000 15,00,000 2017- 2,05,808 Delamark Pvt. 18/2018- Ltd. 19 (amalgamated with Vishesh Marketing Pvt Ltd) Total 2,05,808 Since, the principal loan amount in respect of Mount View Dealmark Pvt. (amalgamated with Vishesh Marketing Pvt Ltd) for the current financial year has been deleted as above the interest paid on account of disallowance of loan during this year cannot be treated as bogus

Further, so far as earlier loan taken amount of Rs. 15,00,000/- in A.Y. 2017-18 from the above mentioned party is concerned, it has been observed that no adverse inference has been drawn by the AO vide assessment order passed by him u/s 147 of the Act on 31.03.2024 Hence, the interest paid on that amount also should be treated as genuine.

Hence, the total interest paid during year on account of loan taken from Mount View Dealmark Pvt. Ltd. (amalgamated with Vishesh Marketing Pvt Ltd) to the

ITA No.511/Kol/2026 Assessment Year- 2018-19 tune of Rs. 2.05.808/- cannot be treated as bogus and addition on account of disallowances of total interest paid to the tune of Rs 2,05,808/- is deleted.

Hence, the appeal of these ground are allowed.

Ground No. 4 to 10All the grounds are similar in nature Since, the appeal in ground 2 & 3 had already been adjudicated, these grounds need not be adjudicated further.

Ground No 11

Consequential in nature.

Ground No.12

Not pressed, hence dismissed.

प�रणाम�व�प, अपील आं�शक �प से �वीकार क� जाती है।

In the result, the appeal is partly allowed.

ITA No.511/Kol/2026 Assessment Year- 2018-19 2. That on the facts and in the circumstances of this case and in law, whether the Ld. CIT(A) is correct in deleting the addition of Rs. 2,05,808/- pertaining to Interest expenses claimed by the assessee on unsecured loans received from the shell companies. 3. That on the facts and in the circumstances of this case and in law, whether the Ld. CIT(A) was justified in merely relying on routine confirmations and banking channel transactions, while ignoring the findings of the Investigation Wing and the Assessing Officer: Statements of the accommodation entry operator recorded u/s 131/132(4) of the Act, financial credibility of the lender companies and other surrounding facts, which clearly established that the assessee had routed its own unaccounted money in the form of unsecured loan through accommodation entries. 4. That on the facts and circumstances of this case and in law, whether the Ld. CIT(A) was justified in accepting the unverified submissions of the assessee without conducting any specific enquiry, even though under Section 250(4) of the Act the Ld. CIT(A) has the inherent power to conduct such enquiries himself or direct the AO to do so in order to establish the finality of facts before deciding the appeal. 5. For that the menetary limit for filing appeal before Hon'ble ITAT as prescribed by the CBDT Circular No.09/2024 is not applicable in the present case as the case pertains to organised tax evasion and falls under the exceptional clause in para 3.1(h) of the CBDT circular No 05/2024. 6. That the appellant craves leave to add and/or alter, amend, modify or rescind the grounds hereinabove before or at the time of hearing of this appeal. 5. Contrary to that Ld. AR supports the impugned order thereby submitting that assessee has furnished complete details of the loan taken by the assessee, such as loan confirmation of M/s Mount View Dealmark Private Limited and abstracts of the bank accounts to establish the relevant loan transaction. The Ld. AR further submits that the Ld. Assessing Officers was fully aware of the loan transactions from the said party in the Assessment year 2017-18 and Assessing Officers accepted the genuineness of the loan for the assessment year 2017-18 received from M/s Mount View Dealmark Private Limited without drawing any adverse inference. The ld. AR placed the copy of the assessment order of assessment year 2017-18. The ld. AR submits that CIT(A) has allowed the appeal of the assessee after discussing the documentary evidences and

ITA No.511/Kol/2026 Assessment Year- 2018-19 relied upon several decisions of the Hon’ble High Court and there is no infirmity in the impugned order.

ITA No.511/Kol/2026 Assessment Year- 2018-19 from a party and interest paid thereof has already been accepted in earlier years, loan taken from the same party in subsequent years and interest paid thereof cannot be said to be in genuine. The assessee has submitted the PAN Card, balancesheet, extract of the bank statement and loan confirmation of M/s Mount View Dealmark Private Limited and Pioneer Saree Merchants Pvt Ltd to prove the identity, creditworthiness and genuineness.

6.1. Keeping in view the above facts as well as considering the order passed by the CIT(A) we do not find any infirmity in the impugned order.

Accordingly, appeal of the Revenue is hereby dismissed.

Kolkata, the 21st August , 2026.

Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member

DC Dated:. 21 .08.2026.

ITA No.511/Kol/2026 Assessment Year- 2018-19

Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Deputy Registrar, Kolkata Benches

ITA No.511/Kol/2026 Assessment Year- 2018-19