ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, SURAT, SURAT vs. SWAGAT DEVELOPERS, SURAT

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ITA 118/SRT/2025Status: DisposedITAT Surat08 May 2026AY 2015-168 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the additions made by the AO were not sustainable in law, following the jurisdictional High Court's decisions. The Tribunal noted that the assessee had repaid the entire loans in subsequent years, which was not controverted by the Revenue.

What were the facts?

The Assessing Officer (AO) reopened the assessment of Swagat Developers based on search proceedings in another case, alleging the assessee received bogus unsecured loans. The AO added the loan amount and commission paid for these loans as unexplained income.

What were the issues?

Whether additions on account of unsecured loans and commission are sustainable when the loans have been repaid in subsequent years, and whether the AO's reliance on information from a search in another case is sufficient to make additions without providing cross-examination opportunities.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: Shri T.R. Senthil Kumar & Shri Ratnesh Nandan Sahay

Hearing: 30.04.2026Pronounced: 08.05.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT Before: Shri T.R. Senthil Kumar, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member

ITA Nos:116, 118, 218 & 219/SRT/2025 AY(s): 2013-14, 2015-16, 2016-17 & 2017-18

ACIT, Vs Swagat Developers, Central Circle – 2, T.P. No.7, FP – 28, Vesu Surat BO, Surat – 395007 PAN: AAOFM4772B (Appellant) (Respondent)

Assessee Represented : Shri Manish J. Shah, AR Revenue Represented : Shri Ajay Uke, Sr. DR Date of hearing : 30.04.2026 Date of pronouncement : 08.05.2026 आदेश/ORDER PER, T.R. SENTHIL KUMAR, JM:

These four appeals are filed by the Revenue as against the separate appellate orders dated 30.11.2024 and 02.12.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the separate assessment orders passed under section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the AYs 2013-14, 2015-16, 2016-17 and 2017-18 respectively. Since the issues involved in these appeals are similar, the same are heard together for the sake of convenience and brevity.

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 2 ACIT vs. Swagat Developers

2.

ITA No.116/SRT/2025 for AY 2013-14 is taken as the ‘lead case’. Brief facts of the case are that the assessee is a Partnership Firm engaged in the business of Real Estate. For the Asst. Year 2013-14, assessee filed its Return of Income on 26-09-2013 declaring total income of Rs.26,62,240/-. Regular assessment u/s. 143(3) was made on 14-03-2016 assessing the total income at Rs.29,37,240/-. Based on the search proceedings in the case of K Star group cases of Surat, the assessment was reopened that the assessee was the beneficiary of bogus entries of unsecured loans. Therefore notice u/s. 148 was issued on 30-03-2021. The assessee filed Return of Income declaring total income of Rs.29,37,340/-. The AO, on page 3 of the assessment order, has tabulated the details of unsecured loan amounting to Rs.46,50,000/- availed by the assessee from five different concerns. The AO made two additions (i) Rs.46,50,000/- towards unexplained unsecured loans u/s 68 r.w.s 115BBE of the Act and (ii) Rs.93,000/- towards unexplained expenditure u/s 69c of the Act on account of 2% commission paid to avail the said loans.

3.

Aggrieved against the reassessment order, assessee filed appeals before Ld. CIT(A), who considered the submissions of the assessee and deleted the addition of unsecured loans by observing as follows: “…6. In Ground No.1 [containing 7 Sub-Grounds), the appellant has challenged the action of the AO in making addition of Rs. 46,50,000/- towards unexplained unsecured loans u/s. 68 rws 115BBE of the Act and also addition of Rs.93,000/- towards unexplained expenditure u/s. 69C of the Act on account of 2% commission paid to avail such loans. According to the AO, as per the information received, a search action was carried out in the case of K Star Group of Surat on 17.08.2016, wherein it was noticed that Sh Vasant Keshavlal Thakkar was engaged in providing accommodation entries, who had provided accommodation entries to K-Star Group and some other parties. During the Search action, various incriminating documents and digital data were found and seized, which further revealed that the

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 3 ACIT vs. Swagat Developers

appellant was one of the beneficiaries in availing bogus entries of unsecured loan from Sh. Vasant Thakkar. The AO, on page 3 of the assessment order, has tabulated the details of unsecured loan amounting to Rs. 46,50,000/-availed by the appellant from five different concerns. On verification of Tax Audit Report for the year under consideration, the appellant, in item No.24 (a), has shown to have received all these loans during the year. 6.1 The appellant in reply stated that the action of the AO is based on assumption, which is baseless & arbitrary. The appellant also sought statement and an opportunity of cross examination of a person whose statement is relied upon while making addition. However, the same were not provided to the appellant at the fag end of time barring matters. The AO did not accept the contention of the appellant and held that Sh. Vasant Thakkar, during his statement on oath, himself had admitted that he charged commission against accommodation entries to the interested parties. Further, the material available with the Department is enough to form a belief that the appellant's income, chargeable to tax, has escaped assessment. The AO also relied on various case laws to support his finding. Hence, the amount of Rs.46,50,000/- is treated as unexplained income u/s. 68 rws 115BBEof the Act and added the same in the hands of the appellant. The AO also held that it is a general practice to pay commission @ 2% to avail accommodation entries. The appellant has also paid 2% commission to parties / concerns to avail such loans. The commission so paid is not shown by the appellant, which remained unexplained and the same is to be treated as unexplained expenditure. Hence, a commission of 2% on the said unsecured loan is worked out at Rs.93,000/- and added the same in the hands of the appellant u/s. 69Crws 115BBEof the Act. 6.2 The AR of the appellant made various submissions. I have gone through the assessment order and the submissions made by the appellant. I have also considered the case laws relied upon by the appellant. The AO has made addition of unexplained cash credit of Rs.46,50,000/- u/s 68 and also added commission income of Rs.93,000/-. The appellant has given as many as 7 sub-points, both on technical as well as on merit and for the sake of convenience, ground will be adjudicated together. The appellant was held to be beneficiary of 5 bogus loans ranging from Rs.4,50,000/- to Rs.25,00,000/-. The appellant on technical grounds has submitted that reopening is done on change of opinion since 2 times scrutiny was done earlier. However, in the instant case, reopening was done on the basis of new information. Hence, the appellant's submission is not accepted and in any case, the AO has followed due procedure, asked for appellant's view, disposed off objection with speaking order and reopened assessment with approval of the PCIT. It was also submitted that Sh. Vasant Thakkar, who is the person alleged to have arranged accommodation entries by means of loans, never took the name of the appellant. Further, neither the statement of Sh. Vasant Thakkar nor an opportunity of cross examination, of the person relied upon was given. Finally, it was submitted

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 4 ACIT vs. Swagat Developers

that no corroborative evidences were provided and that no evidence of cash taken back by the appellant against unsecured loan taken by the appellant in cheque. 6.3 All above submissions are on technical basis, duly considered but not accepted since the AO, in my view, passed order after due procedure of law and providing reasonable opportunity. However, on merits, it has been contended that loan amounting to Rs.46,50,000/- has been repaid to concerned parties subsequently. There are direct decision of Hon'ble jurisdictional High Court, which are binding on the undersigned such as CIT vs Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat), where the Hon'ble Court held that once repayment of loan is done, the addition u/s 68 on the same loan is not permissible. Hon'ble Gujarat High Court decision in the case of DCIT Vs Rohini Builders. (256 ITR 230) (Guj) had also held that no substantial question of law arise where the appellant established identity of the creditors by giving complete address, GIR/PAN number as well as confirmation along with copies of assessment orders wherever available. SLP filed by the Revenue against this decision has also been rejected (254 ITR 275]. In view of the above 2 decisions which are binding on me, I direct that addition of Rs.46,50,000/- on account of unsecured loan be deleted. Since, I have directed deletion of addition on unsecured loan, therefore, commission on the same is also directed to be deleted. Since, Ground No.1 has both technical and merit points and I have not agreed upon technical points, while I have allowed points on merit and directed deletion of addition, this ground may be taken as partly allowed for statistical purposes.” 4. Aggrieved against the appellate order, the Revenue is in appeal before us raising the following Grounds of Appeal in ITA No. 116/SRT/2025 (for the other three Asst. Years identical grounds with change in figure of disallowances): “1) On the facts and in the circumstances of the case and in low the Ld. CIT(A) has erred in deleting the addition of Rs 46,50,000/- made by the AO u/s 68 of the I.T. Act on account of unexplained cash credit in the form of accommodation entries observing that the appellant had repaid the entire loans in the subsequent years which is not disputed by the AO and under the circumstances, such unsecured loans cannot be added u/s 68 of the IT. Act despite the fact that the loan were claimed to be received from the persons in which name income tax records were artificially created by Shri Vasant Thakkar, such creditors having minimal incomes, and having no Genuine Business Transactions in their Return of Income filed and Shri Vasant Thakkar himself admitted in his statement that he charges commission and provides accommodation entries to the parties which are interested in it.

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 5 ACIT vs. Swagat Developers

2) In addition to the ground no.1 above, on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.46,50,000/- made by the AO u/s 68 of the I.T. Act on account of unexplained cash credit in the form of accommodation entries relying upon the decision of the Hon'ble Gujarat High Court in the case of CIT V/s Ayachi Chandrasekhar Narsangi [2014] 42 taxmann.com 251 (Gujarat) who had confirmed the order of the lower appellate authorities observing that the Ld. CIT(A) was satisfied with respect to the genuineness of the transaction and creditworthiness of the creditors, however in the instance case the entry operator Shri Shri Vasant Thakkar himself admitted in his statement that he charges commission and provides accommodation entries to the parties which are interested in it and hence the genuineness of the transaction and creditworthiness of the creditor are not satisfactory. 3) On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.93,000/- made by AO u/s 69C of the I.T. Act on account of unaccounted commission paid for availing accommodation entry of unsecured loan without appreciating the fact that the assessee has obtained unsecured loan in the form of accommodation entries. 4) The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made.”

5.

Ld. Sr. D.R. appearing for the Revenue supported the order passed by the assessing officer and requested to confirm the additions made by the A.O.

6.

Per contra, Ld. A.R. appearing for the Assessee submitted before us that the entire loans were paid with interest as follows: Asst. Year 2013-14

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 6 ACIT vs. Swagat Developers

Asst. Year 2015-16

Asst. Year 2016-17

Asst. Year 2017-18

6.1 The Ld. Counsel relied upon the judgements of Jurisdictional High Court in cases of (i) CIT vs. Ayachi Chandrashekar Narsangji (supra), (ii) PCIT vs. Ambe Tradecorp Pvt. Ltd., 145 taxmann.com 27 (Guj.). He also relied upon the decision of Tribunal in case of Amee Govindbhai Patel vs. ITO, ITA No.120/Ahd/2024, dated 18.09.2025

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 7 ACIT vs. Swagat Developers

and Maruti Multichem Pvt. Ltd. vs. DCIT, dated 07.11.2025 and requested to delete the additions made by the Ld. A.O.

7.

We have heard rival submissions and perused the material available on record. We have also gone through the judgment of Hon’ble Jurisdictional High Court of Gujarat in case of Ayachi Chandrashekhar Narsangji (supra), relied upon by the Ld. Counsel of the assessee. The Jurisdictional High Court of Gujarat held that the department had accepted repayment of loan for subsequent year, no addition was to be made on account of cash credit. This view was confirmed in the subsequent judgment rendered by the Gujarat High Court in case of M/s Ambee Tradecorp (P.) Ltd. (cited supra). The facts in the present case are similar, and the entire loan is repaid by the assessee in the subsequent assessment years which are explained in Para 6 above. Therefore, the entire additions made by the AO are not sustainable in law. The Ld. Sr. DR for the Revenue unable to controvert the repayment of loans and produce any adverse findings.

8.

Respectfully following the judgment of Hon’ble Jurisdictional High Court, we are of the considered opinion that additions made by the Ld. A.O. are not sustainable in law. Whereas Ld. CIT(A) followed the above Jurisdictional High Court judgment, therefore the findings arrived by Ld. CIT(A) does not require any interference. Thus the grounds raised by the Revenue are devoid of merits and liable to be deleted. There is no change in the facts of the remaining three appeals filed by the Revenue for the Asst. Years 2015-16, 2016-17 and 2017-18 respectively. Therefore the same are hereby dismissed.

I.T.A Nos.116, 118, 218 & 219/SRT/2025/AYs.2013-14, 2015-16, 2016-17 & 2017-18 8 ACIT vs. Swagat Developers

In the result, the appeals filed by the revenue in ITA 9. Nos.116, 118, 218 & 219/SRT/2025 are hereby dismissed.

Order is pronounced in open court on 08-05-2026 Sd/- Sd/- (R. N. SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat True Copy Dated 08/05/2026 SAMANTA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, सूरत

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