DCIT, CC-2(2), KOLKATA, KOLKATA vs. BARAK VALLEY CEMENTS LIMITED, GUWAHATI

Per Pradip Kumar Choubey, Judicial Member:

This appeal filed by the Revenue is directed against the order dated 25.09.2025 of the Office of the Income Tax passed under Section 147 of the Assessment Year 2016-17 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). At the very outset, it appears from the Registry that appeal of the revenue has been filed after a delay of 04 days. Revenue has filed a petition to condone the delay supported with an affidavit. Going over the contents of the affidavit, we find substance in the argument that the delay was bona fide, accordingly we condone the delay.

a) Addition of Rs. 923,545/- on account of delayed payment of employees contribution to PF.

b) Addition of Rs. 1,54,427)- on account of disallowance of Prior Period expenses debited to Profit and Loss Account.

Thereafter a search & seizure operation u/s 132 of the Income Tax Act 1961 (hereinafter referred to as the 'Act'), was conducted on Prithvi Group and

its associates by the Directorate of Investigation, Kolkata on 16.11.2021 & on subsequent dates. Pursuant to the search and seizure, the case of the appellant company was reopened and a notice u/s 148 was issued upon the appellant company on 21.08.2024 requiring the appellant company to file its return of income within a period of three months from the end of month in which this notice is issued. That the appellant company filed a return in response to the notice u/s 148 on 23.08.2024 declaring total loss of Rs. 1,54,54,606/-i.e, the loss that was assessed vide assessment order dated 14.12.2018. Thereafter notice u/s 143(2) and 142(1) were issued to the assessee company from time to time and appellant company was required to furnish details of unsecured loan/borrowings in the desired format. The appellant company was also required to furnish the confirmation and copy of ITR of all the lenders and evidence regarding their creditworthiness and source of fund in the hand of lenders for fresh loan received during the year. The appellant was also required to furnish ledger and copy of relevant bank statement reflecting the loan transactions. The appellant company submitted a detailed reply in response to the above-mentioned notice wherein the appellant inter alla relied upon the documents submitted in reply dated 26.11.2024 to establish the identity and creditworthiness of the loan creditors and genuineness of the loan transactions. That notices u/s 133(6) were issued to the lender and the same was duly replied by them. That the assessment was completed u/s 147 of the Act at a total income of Rs. 1,08,77,040/- by making the following additions: -

a) Addition of Rs. 25,00,000/- on account of Unexplained Cash Credit u/s 68 received from M/s Sidhi Daatri Dealers Pvt Ltd. Addition of Rs. 99,969/- on account of disallowance of Interest u/s 37 of the Income Tax Act, 1961 being paid M/s Sidhi Daatri Dealers Pvt Ltd.

b) Addition of Rs.1,48,811/ on account of incremental interest on fixed deposit with State Bank of India as reflected in Form 26AS which differs from the 3

amount recorded in the books. The learned AO finds a mistake apparent from record crept in the assessment order passed u/s 147 wherein the LD AO erroneously mentioned income as per order u/s 143(3) dt. 14.12.2018 as Rs 81,28,260/- instead of loss as per order u/s 143(3) dt. 14.12.2018 as Rs 1,54,54,603/-. The said mistake was rectified vide rectification order u/s 154 of the Act dated 03.02.2025 by assessing a loss of Rs 1,27,05,823/-.

Thatthe addition of Rs 25,00,000/- & Rs 99,969/- made in the order dated 16.01.2025 passed u/s 147 of Act by the LD officer is contested by the appellant by preferred appeal before the CIT(A) wherein appeal of the assessee has been allowed by CIT(A) by observing thus:-

Thus, merely because the investor company is considered a "paper company" or a shell company, that alone does not justify an addition under Section 68 without further inquiry into the genuineness of the transaction. When the appellant, during the course of search assessment proceedings had duly complied with the notice u/s 142(1) of the Act or in response to show cause notice by submitting complete documentation and evidence to establish the identity and creditworthiness of the loan creditors and the genuineness of the transactions, the onus shifted back to the Assessing Officer to rebut the same. It was incumbent upon the Assessing Officer either to point out specific defects or inconsistencies in the documents submitted by the appellant or to conduct further independent enquiries to verify the information. However, neither of these steps were taken in, the present case. Instead, the Assessing Officer's approach is rudimentary and mechanical and blindly relied upon the information received from the Investigation Wing, without applying his own mind or undertaking any substantive verification. This approach is contrary to settled principles of law which mandate that the Assessing Officer must form an independent and reasoned belief before making additions to income, more importantly in a situation when no incriminating document had been unearthed during the course of search u/s 132 of the Act. Further, scrutiny assessment u/s 143(3) was already completed in the case of the appellant for the A.Y. 2016-17 on 14.12.2018 and no search u/s 132 of the Act. Further, scrutiny assessment u/s 143(3) was already addition was made on account of unsecured loan. So. in the assessment order passed u/s 143(3) of the Act dated 14.12.2018 the loan taken from M/s Sidhi Daatri Dealers Private Limited was accepted to be genuine. 4

2.3.2 Further it is to be noted that where the assessee had furnished full details/documents regarding the creditors, it is up to the department to pursue the matter further to locate those creditors and examine their creditworthiness. Thus, more importantly, as held by the Hon'ble Supreme Court in CIT Versus Daulat Ram Rawatmull [1973] 871TR349 (SC). The onus to prove that the apparent is not the real is on the party who claims it to be so. The AO had blindly followed the information available with him sans further enquiry concluded these all being shell companies and the loans are bogus in nature. The documents annexed to the reply against notice u/s 142(1) on 04.11.2024, 06.11.2024 and 11.11.2024 and show cause notice dated 17.12.2024 were to establish the identity of the lenders, to prove the genuineness of the transactions and to establish the creditworthiness of the lenders. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. No specific defect, inconsistency, or inadmissibility has been pointed out by the AO in the documentation submitted during the course of assessment proceedings. However, the AO had brushed aside the documents and proceeded to make the addition. Further, in the order of assessment, the AO had admitted that the notice u/s 133(6) of the Act was issued to the lenders and reply has been received from M/s Sidhi Daatri Dealers Private Limited. So, identity of the said lender has already been established.

2.4. Secondly, the AO in the order of assessment had stated that most of these loans are interest free or interest has not been actually paid on these loans.

2.4.1 The appellant had argued that the appellant had duly booked and paid interest on loan received from M/s Sidhi Daatri Dealers Private Limited during the Financial Year 2015-16 and TDS was deduced. The appellant had furnished extract of bank statement as well as copy of ledger in support of its claim.

2.4.2 Perusal of copy of ledger copy reflects that TDS was deduced at the time of making payment of interest to the loan creditor. Hence, the observation of AO that loan are interest free or interest has not been actually paid on the loan taken is not factually correct.

2.5 Thirdly on the issue of Statement of Shri Anand Kumar Sharma, an entry operator recorded it is stated that he has not made any affirmation of any 2.5 Thirdly on the issue of Statement of Shri Anand Kumar Sharma, an entry accommodation entry given to the appellant. In fact, neither the name of M/s Sidhi Daatri Dealers Private Limited from whom

fresh loan had been taken by the appellant nor name of the appellant itself appears even once in his entire statement Further, the statement was recorded on 06.02.2014, prior to date of original assessment u/s 143(3) of the Act dated 14.12.2018.

During the course of appellate proceedings, the appellant had contended that the statement was neither shared with the appellant nor the appellant was afforded an opportunity to cross- examine Shri Anand Kumar Sharma even though the statement of Shri Anand Kumar Sharma was one of the factors for the ultimate addition

In this context, reliance is placed of the Hon'ble Tribunal in the case of Smt. Surjeet Kaur vs ITO 74 TTJ 722 where in it is held that-

"materials gathered at the back of the assessee and not confronted should not be considered for the purposes of making, assessment"

In this context, reliance is also being placed on the decision of the Hon'ble Supreme Court in Andaman Timbers Finance v. CCE [CA No. 4228 of 2006, dated 2-92015] wherein the apex court has held that not allowing cross examination of the third party witnesses whose statements are relied upon, is a serious flaw in the adjudication order. Relevant portion of the judgment is set out below"

"According to us, not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of the principles of natural justice because of which the assessee was adversely affected...."

So, the reliance of the AO on the statement of Shri Anand Kumar Sharma to reach his conclusion while making the addition is erroneous.

2.6 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’s, they are regularly filing income tax returns, the loans were advanced through account payee cheque, details of bank accounts and statements were available. The appellant had submitted copy of ITR as well as account of the loan creditor for A.Y. 2016-17, loan confirmation, copy of bank statement evidencing receipt and repayment of loan. It is settled principle that the burden of 6

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 assessee, which was not done by the Assessing Officer. The AO's approach was is shifted on the Assessing Officer to disprove the documents furnished by the 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 himself. Thus, the Assessing Officer has failed to apply his mind in all aspects of the case. Most importantly, in a situation when the company itself is in financial distress and has no resources to generate unaccounted income.

2.7 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 on record 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 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, 1961 Cash credit (Loans and advances) - Assessment year 2015-16 - During scrutiny proceedings, Assessing 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 where there was no evidence brought on record by Assessing Officer to connect statement of AKA with loan transaction of assessee. statement documentary evidences and

burden had now shifted to Assessing Officer, who whether further, since assessee had discharged its initial burden by providing talled 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"

2.8 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 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.

2.9 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 Assessing Officer was not justified in making 8

addition under section 68 of the Act. The details of the loan transaction over the years are as under- Perusal of the ledger copies cited above, it is evident that the loan taken during the F.Y. 2015-16 relevant to A.Y. 2016-17 by the appellant were repaid in F.Y. 2017-18 relevant to A.Y. 2018-19. All the loans were through banking channel and interest were paid and TDS were deducted on payment of interest by the appellant.

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 Income-tax Act, 1961 1961 - Cash Cash cre 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 furnished 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 section 68 on account of said loan amount was unjustified-Held, yes (Paras 3.4, 3.5 and 5] [In favour of assessee]" 11 It is, therefore, held that since the appellant had discharged its onus of proving the identity 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 creditors to explain the amount of loan given. The genuineness of the transaction is proved in the fact that the assessee company 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 creditor.

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 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. 2.9.1 Since the addition made in respect of the principal amount of loan of Rs. 25,00,000/- obtained during the year have already been deleted on merit, the disallowance of interest paid on such loan to the tune of Rs 99,969/-, being consequential in nature has no legs to stand upon and hence deleted. Hence, the appeal of these grounds are allowed.

Aggrieved by the said order Revenue has preferred appeal before us by taking following grounds:-

loan taken as nothing but own unaccounted fund of the Prithvi Group (Barak Valley Part) which has been routed via shell entity to bring back the same in the regular books of account, as held by the Assessing Officers is wrong and illegal as the assessee has filed the balance-sheet, ITR acknowledgment confirmation of account extract of bank statement of the assessee showing the relevant transaction and also submitted the abstract of the bank statement of the lender companies. The Ld. AR submits that the Ld. AO under the garb of the reassessment is attempting to revisit the issues already examined and accepted during the earlier assessment proceedings. The further submission of the AR is that the principal amount of loan received from the Ms. Sidhi Daatri Dealers Pvt. Ltd and even interest paid on such loan has been treated genuine in earlier proceedings then there arises no question of considering the loan received from M/s Sidhi Daatri Dealers Pvt. Ltd and under paid on such loan as in genuine in the current assessment. The Ld. AR further submits that no evidence or incriminating material has been brought on record to substantiate the allegation that the assessee’s unaccounted income was introduced in the guise of unsecured loans. The Ld. AR further submits that assessee has discharge its initial onus cast U/s 68 of the Act by furnishing all relevant evidence documents and that has been considered by the CIT(A). According to him, there is no infirmity in the impugned order. 4. Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order we find that assessee in response to the query made, submitted the balance-sheet of lender, income tax, acknowledgment of the lender, confirmation of account, bank statement, etc. It is pertinent to mention here that no specific defect, inconsistencies or inadmissibility has been pointed out by the Ld. AR in the documentation submitted by the assessee. It is not in dispute that original assessment was already completed U/s 143(3) of the Act before initiation of such proceedings and addition was made on different issues not on account of unsecured loans. 14

Copy of the ledger reflects the TDS was educated at the time of making payment of interest to the loan creditor. 5. Going over the order passed by the CIT(A) as well as considering the material placed before the assessment proceeding, we do not find any infirmity in the impugned order. Accordingly, appeal of the Revenue as hereby dismissed.

Kolkata, the 20th May, 2026.

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

Dated:. 20.05. 2026. DC, PS

Copy of the order forwarded to: 15

1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order

Assistant Registrar, Kolkata Benches