DCIT 42 1 1 , KAUTILYA BHAVAN vs. CHANDRESH DINESH KOTHARI, MUMBAI

In the instant batch of appeals, the issues involved are substantially identical. Therefore, for the sake of brevity, all the appeals were heard together and are being disposed of by this consolidated order by taking ITA No. 8817/Mum/2025 as the lead case and the decision rendered therein shall apply mutatis mutandis to the remaining appeals.

Coming to ITA No. 8817/Mum/2025, it is observed that the Ld. Assessing Officer (in short, "Ld. AO") more or less by considering “the statement of Shri Rajesh G. Mehta, wherein he allegedly admitted that M/s. Aneri Fincorp Limited was merely an accommodation entry provider and that various beneficiaries, including the Assessee, had introduced their own unaccounted money in the guise of unsecured loans”, treated the unsecured loan of ₹50,00,000/- received by the Assessee from M/s. Aneri Fincorp Limited, as an accommodation entry and made an addition under section 69 of the Act.

Thus, the Assessee being aggrieved by the said addition, preferred an 1st appeal before the Ld. Commissioner and during the 1st appellate proceedings filed detailed written submissions along with documentary evidence, including the income-tax return of M/s. Aneri Fincorp Limited, confirmation of account from the lender, bank statements of the Assessee, and the documents furnished during the assessment proceedings.

The Ld. Commissioner, after examining the documentary evidence, observed that the Assessee had repaid the entire loan on 14.01.2020 and 15.01.2020, as reflected in the Axis Bank account statement reproduced at page 7 of the impugned order. The Ld. Commissioner also examined the confirmation of account and the balance sheet of M/s. Aneri Fincorp Limited, copies, whereof were reproduced at pages 8 and 9 of the impugned order. The Ld. Commissioner further observed that the AO had failed to establish any cash trail demonstrating that the Assessee's own unaccounted funds were first withdrawn in cash and thereafter routed through the lender, as an accommodation entry. Thus, in the absence of any such money trail, the allegation of accommodation entry remained purely conjectural.

The Ld. Commissioner further observed that the notice issued under section 133(6) of the Act to the lender was duly complied with by furnishing confirmation of account, financial statements and bank statements reflecting the impugned loan transaction.

The Ld. Commissioner also examined the statement of Shri Rajesh G. Mehta and found that the same did not specifically implicate the Assessee or establish any nexus between the Assessee and the alleged accommodation entry activities. Accordingly, it was held that, in the absence of any direct incriminating material against the Assessee, the general statement of Shri Rajesh G. Mehta could not override the documentary evidence produced by the Assessee.

Thus, the Ld. Commissioner on the basis of the aforesaid findings, the deleted the addition.

We have thoughtfully considered the rival submissions and perused the material available on record. The Revenue has preferred the present appeal mainly contending that the Ld. Commissioner erred in ignoring the statement of Shri Rajesh G. Mehta, who had admitted that the companies controlled by him were merely paper entities engaged in providing accommodation entries. On the other hand, the Ld. A.R. supported the impugned order.

We find that the Assessee had discharged the primary onus cast upon it by producing documentary evidence establishing the identity of the lender, the genuineness of the transaction and the source of the loan. The AO has neither disproved nor effectively controverted any of these documents. We further find that the Ld. Commissioner has independently examined not only the documentary evidence furnished by the Assessee but also the financial position and creditworthiness of the lender.

We further observe that more importantly, the AO has failed to establish any direct nexus between the Assessee's alleged unaccounted money and the impugned loan transaction or any cash trail supporting the allegation of accommodation entry. It is also an undisputed fact that the Assessee repaid the entire loan together with interest within the same financial year, which further strengthens the genuineness of the transaction and lends considerable support to the explanation furnished by the Assessee.

We further observe that the Hon'ble Gujarat High Court in PCIT vs. Ambe Tradecorp (P.) Ltd. [2022 TaxPub (DT) 7021 (Guj.)] has held that where the Assessee establishes the identity of the creditor, the creditworthiness and the genuineness of the transaction by producing cogent documentary evidence, such as confirmations, bank statements, financial statements and replies to notices issued under section 133(6) of the Act, and the loan is subsequently repaid through banking channels, no addition under section 68 can be sustained merely on the basis of suspicion or a general allegation that the transaction represents an accommodation entry.

We further observe that Hon'ble Gujarat High Court in the case of CIT vs. Ayachi Chandrashekhar Narsangji (Tax Appeal No. 992 of 2013, decided on 02.12.2013) [(2014) 223 Taxman 146 (Guj.)] has also conidred the identical issue as involved in this case and held that where the identity of the creditor, the source of funds and repayment of the loan stand established through documentary evidence, the addition cannot be sustained merely on suspicion. Once these ingredients are satisfactorily established, the addition is liable to be deleted.

Thus, considering the aforesaid facts and circumstances, we are of the considered view that the Assessee has duly discharged the burden cast upon it by producing cogent documentary evidence in support of the loan transaction. The Revenue has failed to rebut the said evidence by bringing any cogent material on record. The transaction is further corroborated by the repayment of the loan through banking channels. Therefore, we find no infirmity in the well-reasoned order of the Ld. Commissioner deleting the impugned addition. Accordingly, the order of the Ld. Commissioner is upheld and the grounds raised by the Revenue are dismissed.

Since we have upheld the order of the Ld. Commissioner on merits, the remaining grounds, including the legal grounds raised by the Revenue, have become merely academic and, therefore, do not require separate adjudication.

In the result, the appeal filed by the Revenue in ITA No. 8817/Mum/2025 is dismissed.

Since the issues involved in the connected appeals are identical and arise out of similar facts and circumstances, thus our findings recorded in ITA No. 8817/Mum/2025 shall apply mutatis mutandis to the connected appeals as well and therefore the same are also dismissed accordingly.

In the result, all appeals filed by the Revenue stand dismissed.