SETU INFRACON,AHMEDABAD vs. THE ITO, WARD-2(1)(2), AHMEDABAD

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ITA 2576/AHD/2025Status: DisposedITAT Ahmedabad12 May 2026AY 2016-177 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 98,00,000/- could not be treated as an accommodation entry solely based on general statements without establishing a nexus between the cheque received and cash deposits in the lender's account. The matter was set aside to the AO for further inquiry and verification of loan repayment.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case under Section 147 based on information that the assessee received an accommodation entry of Rs. 65,00,000/- as an unsecured loan. The AO ultimately added Rs. 98,00,000/- to the assessee's income, treating the loan from M/s Mehta Finance as an accommodation entry.

What were the issues?

The primary issues were the validity of reassessment proceedings under Section 147 and whether the loan received from M/s Mehta Finance constituted an accommodation entry.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148A(d),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri K C Thaker, AR
For Respondent: Shri Abhijit, SR-DR
Hearing: 06.05.2026Pronounced: 12.05.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 07.11.2025 for the Assessment Year (A.Y.) 2016-17 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act.

2.

The brief facts of the case are that the assessee had filed its return of income for A.Y. 2016-17 declaring total income of Rs. 22,85,780/-, which was processed u/s. 143(1) of the Act. Subsequently, the AO had received an information that assessee had received accommodation entry of Rs. 65,00,000/- from M/s Mehta Finance in the form of unsecured loan.

ITA No. 2576/Ahd/2025 Setu Infracon Vs. ITO, AY- 2016-17 2 On the basis of this information the case of the assessee was reopened u/s. 147 of the Act. In the course of assessment, the AO was not satisfied with the credit worthiness and genuineness of the loan transaction. Therefore, the loan of Rs. 98,00,000/- taken from M/s Mehta Finance was considered as accommodation entry and added to income. The assessment was completed u/s. 147 r.w.s. 144B of the Act on 12.03.2025 at total income of Rs. 1,20,85,780/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

4.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

1.

The ld. CIT(A) has erred in law and on facts in rejecting the grounds of appeal No. and 2 contesting the AO’s jurisdiction and validity of proceedings u/s. 147 of the Act and also contesting validity of assessment made in pursuance of invalid proceedings, and in not quashing the proceedings u/s 147 and inn not annulling the assessment order under appeal. 2. The Ld. CIT(A) has further erred in law and on facts in upholding the addition of Rs. 98,00,000/-. 3. On the facts in the circumstances of the case and in law, the Ld. CIT(A) ought to have quashed the reassessment proceedings, ought to have annulled the order of assessment being void ab intio, and ought to have deleted the decided the addition of rs. 98,00,000/- 4. It is therefore prayed that the orders of the lower authorities may be set aside, proceedings u/s. 147 may be quashed, the assessment under appeal may be annulled and the addition of Rs. 98,00,000/- may be deleted.

ITA No. 2576/Ahd/2025 Setu Infracon Vs. ITO, AY- 2016-17 3 5. Your appellant craves leave to add, amend, alter or withdraw any ground of appeal at the time of hearing. 5. The first ground pertains to validity of proceeding u/s. 147 of the Act. Shri K C Thaker, the Ld. AR of the assessee submitted that the AO had issued initial show cause notice in respect of loan of Rs.65,00,000/- taken from M/s Mehta Finance whereas in the assessment order he had made addition of Rs. 98,00,000/-. Thus, the information received by the assessee was not correct. Further that the AO had merely relied upon the information uploaded on Insight portal of the Department and had not recorded his independent satisfaction for escapement of income.

6.

Per Contra Shri Abhijit, the Ld. SR-DR, submitted that the AO had duly confronted the assessee with the information in his possession by issue of show cause notice and thereafter considering the reply of the assesse had passed the order u/s. 148A(d) of the Act, wherein he had recorded the fact of escapement of income of R.s 98,00,000/-. He, therefore, strongly supported the order of the AO.

7.

We have considered the rival submissions. As per the revised procedure of section 148 of the Act, the AO is required to conduct inquiry and provide opportunity to the assessee before issue of notice u/s. 148 of the Act. It is found that the AO in the present case, had not only provided the opportunity to the assessee but also considered the reply of the assessee and thereafter passed a reasoned order u/s. 148A(d) of the Act, before issue of notice u/s. 148 of the Act. From the copy of 148A(d) order brought on record in the paper-book, it is found that the AO had discussed all the facts diligently and recorded his satisfaction for escapement of

ITA No. 2576/Ahd/2025 Setu Infracon Vs. ITO, AY- 2016-17 4 income of Rs. 98,00,000/-. We do not find any infirmity in the order of the AO. Therefore, the proceeding initiated u/s. 147 of the Act is upheld and the ground taken by assessee is dismissed.

8.

The next three grounds pertain to addition of Rs. 98,00,000/- on account of loan taken from M/s Mehta Finance. Shri K.C Thaker, the ld. AR of the assessee submitted that the assessee was having a running account with M/s Mehta Finance and the entire amount received from the said concern was through banking channel. Further, the assessee had also paid interest on the outstanding loan, on which TDS was duly deducted. According to the Ld. AR, assessee had duly established the identity, credit-worthiness and genuineness of the loan transaction and the AO was not correct in treating the same as accommodation entry. He submitted that no evidence for accommodation entry was brought on record by the Assessing Officer. The Ld. AR further submitted that in the course of assessment proceeding, the assessee had requested the AO to make independent verification from M/s Mehta Finance, which was not done. Further an affidavit of Shri Deepak Rasiklal Mehta, Managing Partner of M/s Mehta Finance was also brought on record before the AO stating that the transaction of the assesse with M/s Mehta Finance was genuine transaction and not an accommodation entry. The Ld. AR contended that the AO did not controvert the evidence brought on record establishing the genuineness of the transaction. He further submitted that the entire loan amount was repaid in the subsequent years and, therefore, the loan could not have been treated as accommodation entry.

ITA No. 2576/Ahd/2025 Setu Infracon Vs. ITO, AY- 2016-17 5 9. Per Contra Shri Abhijit, the Ld. SR-DR, had drawn our attention to the specific findings of the Ld. CIT(A) as under:

xi. The contentions of the appellant assessee cannot be considered as correct by this Appellate authority due to following points: xii. The appellant has not provided any explanation and evidences which may show as to what was the purpose of the loan taken. xiii. The appellant has not provided any details towards the utilization of the said fuds. Thus, without any explanation w.r.t. the purpose of funds & without the details of utilization of funds, the genuineness of the loan taken cannot be proved. xiv. The appellant has not provided any Loan Agreement/MoU etc. done with the said party Mehta Finance. xv. The appellant has also not provided any explanation and evidences which may show that, the loan has been repaid back or not, to the said lender party i.e. Mehta Finance.

The Ld. SR-DR submitted that the assessee did not explain the purpose for which the loan was taken and no evidence for utilization of loan for the business purpose was brought on record. Further no evidence was submitted by the assessee that the loan amount was repaid in the subsequent years. The Ld. SR-DR, therefore, supported the order of lower authorities.

10.

We have considered the rival submissions. The case of the assessee was reopened on the basis of the information that Mehta Finance Group was engaged in providing accommodation entries. Shri Deepak Rasiklal Mehta, the Managing Partner of M/s Mehta Finace had admitted that the group was engaged in issuing cheque/RTGS in exchange of cash. On the basis of this information, the AO had treated the entire loan of Rs. 98,00,000/- taken by the assessee from M/s Mehta

ITA No. 2576/Ahd/2025 Setu Infracon Vs. ITO, AY- 2016-17 6 Finance during the current year as bogus and accommodation entry. The AO has also given a finding that the bank statement of M/s Mehta Finance reflected that transfer of amount to the assessee’s accounts were preceded by substantial cash deposits. However, the AO, in the assessment order, has referred to any specific instance of cash deposit in the bank account of M/s Mehta Finance, prior to issue of cheques to the assessee. The transaction of the assessee with M/s Mehta Finance could not have been considered as accommodation entry merely on the basis of general statement of Shri Deepak Rasiklal Mehta, without establishing the nexus between the cheque amount received by the assessee with the cash deposits in the bank account of the M/s Mehta Finance. The AO did not make any independent inquiry with M/s Mehta Finance regarding the nature of loan transactions by the assessee with the said firm. From the ledger account of M/s Mehta Finance brought on record in the paper-book, it is evident that the assessee had repaid loan of Rs. 20,00,000/- during the year. The contention of the assessee is that the entire loan was repaid in the subsequent years. However, the evidence for repayment of the loan was not brought on record either before the AO or before the Ld. CIT(A) and no such evidence has been filed before us as well.

11.

In view of above facts, we deem it proper to set aside the matter to the file of Jurisdictional AO with a direction to make enquiry from M/s Mehta Finance about the loan transaction and also to verify the repayment of the loan taken by the assessee and thereafter re-adjudicate the matter. The assessee is also directed to produce evidence for repayment of loan before the AO. If it is found that the loan amount was repaid by the

ITA No. 2576/Ahd/2025 Setu Infracon Vs. ITO, AY- 2016-17 7

assessee in the subsequent years, the same cannot be treated as an accommodation entry.

12.

In the result, the appeal of the assessee is allowed for statistical purpose.

Order pronounced in the Court on 12/05/2026 at Ahmedabad.

Sd/- Sd/- (SAJAY GARG) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 12th May, 2026 (True Copy) Neelesh, Sr. PS आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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