M/S SUBH LAXMI COTTON PVT. LTD.,NAGAUR vs. DCIT, CENTRAL CIRCLE-1, JODHPUR, JODHPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR

BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18)

M/s Subh Laxmi Cotton Pvt. Ltd. DCIT, Central Circle-1, Kalani and Co. Chartered Jodhpur. Accountant, 5th Floor, Milestone Building, Gandhinagar Turn, Tonk Road, Jaipur, 302015 PAN No. AASCS5928E Assessee by Shri P.C. Parwal, CA (Virtual) Revenue by Shri Anil Kumar Bharadwaj CIT (Virtually) Date of Hearing 29.04.2026. Date of Pronouncement 21.05.2026. ORDER PER BENCH: These appeals are filed by assessee against the order of Commissioner of Income Tax, Appeal, Jaipur-5 [hereinafter referred to as the CIT(A)] with respect to the assessment year 2014-15 to 2017-18.

2 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) incriminating material in respect of loans raised was found in search by making various incorrect 1 observations and ignoring that when assessment proceedings for the year under consideration stood completed u/s 143(3) and thus not pending on the date of search, no addition can be made in assessment framed u/s 153A in the absence of incriminating material found in search of the assessee. 2. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.3.20 crores u/s 68 of the Act by treating the unsecured loan raised from Emrald Commercial Ltd. (Rs.65 lacs), Mukesh Commercial Pvt. Ltd. (Rs.100 lacs) and Mangalam Viniyog Pvt. Ltd. (Rs.155 lacs) as unexplained and bogus. He has further erred in not considering the fact that the loans have been repaid partly during the year and partly in subsequent years and appreciating the fact that when assessce was incorporated on 15.01.2013 and started operational activity from 30.11.2013, it cannot be presumed that it has any undisclosed income which was routed through alleged bogus loan. 3. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.2,40,000/- u/s 69C of the Act on account of alleged commission paid on the alleged accommodation entry for bogus unsecured loan. 4. The Ld. CIT(A) has erred on facts and in law in confirming the 4 disallowance of interest of Rs. 12,40,000/- paid on the above unsecured loan. 5. The Ld. CIT(A) has erred on facts and in law in holding that the claim of telescoping of the amount of cash received back on repayment of loan cannot be allowed in case of Bhagwan Taparia, Director of the assessee company as no direct evidence of utilization of funds of the company in his hand was found during the course of search nor submitted by the assessee. 6. The assessee craves to amend, alter and modify any of the grounds of appeal. 7. The appropriate cost be awarded to the assessee. ITA NO. 141/JODH/2025 1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of assessment framed u/s 153A of IT Act, 1961 ignoring that in respect of completed assessment, no addition can be made in assessment framed u/s 153A in the absence of incriminating material found in search of the assessee. 2. The Ld. CIT(A) has erred on facts and in law in confirming the 2 disallowance of interest of Rs.28,00,000/- paid on the unsecured loan taken in AY 2014-15 alleged as bogus in that year. 3. The Ld. CIT(A) has erred on facts and in law in holding that the claim of telescoping of the amount of cash received back on repayment of loan cannot be allowed in case of Bhagwan Taparia, Director of the assessee company as

3 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) no direct evidence of utilization of funds of the company in his hand was found during the course of search nor submitted by the assessee. 4. The assessee craves to amend, alter and modify any of the grounds of appeal. 5. The appropriate cost be awarded to the assessee. ITA NO. 142/JODH/2025 1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of assessment framed u/s 153A of IT Act, 1961 ignoring that in respect of completed assessment, no addition can be made in assessment framed u/s 153A in the absence of incriminating material found in search of the assessee. 2. The Ld. CIT(A) has erred on facts and in law in confirming the 2 disallowance of interest of Rs.17,98,500/- paid on the unsecured loan taken in AY 2014-15 alleged as bogus in that year. 3. The Ld. CIT(A) has erred on facts and in law in holding that the claim of telescoping of the amount of cash received back on repayment of loan cannot be allowed in case of Bhagwan Taparia, Director of the assessee company as no direct evidence of utilization of funds of the company in his hand was found during the course of search nor submitted by the assessee. 4. The assessee craves to amend, alter and modify any of the grounds of appeal. 5. The appropriate cost be awarded to the assessee. ITA NO. 143/JODH/2025 1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of assessment framed u/s 153A of IT Act, 1961 ignoring that in respect of completed assessment, no addition can be made in assessment framed u/s 153A in the absence of incriminating material found in search of the assessee. 2. The Ld. CIT(A) has erred on facts and in law in confirming the 2 disallowance of interest of Rs.13,85,328/- paid on the unsecured loan taken in AY 2014-15 alleged as bogus in that year. 3. The Ld. CIT(A) has erred on facts and in law in holding that the claim of telescoping of the amount of cash received back on repayment of loan cannot be allowed in case of Bhagwan Taparia, Director of the assessee company as no direct evidence of utilization of funds of the

4 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) company in his hand was found during the course of search nor submitted by the assessee. 4. The assessee craves to amend, alter and modify any of the grounds of appeal. 5. The appropriate cost be awarded to the assessee 3. There are common issues involved in the grounds of appeals, on identical facts, therefore, these appeals were heard together and adjudicated by this consolidated order for the sake of convenience and brevity.

5 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 23-26) as against loss of Rs.50,65,534/- declared by the assessee by making addition for excess stock and partly disallowing the claim of interest paid on unsecured loan by capitalizing it to the cost of plant & machinery for the reason that it was incurred prior to the commencement of the business on 30/11/2013. The disallowance of interest was made out of the interest paid on unsecured loan of Rs. 3.20 crores raised from the following companies:-

Name of Company Principal Amount Interest Paid Interest Disallowed Emerald Commercial 65,00,000/- 4,17,700/- 1,57,700/- Ltd. Mukesh Commercial 1,00,00,000/- 12,06,600/- 7,93,300/- Pvt. Ltd. Mangalam Viniyog 1,55,00,000/- 11,93,300/- 6,26,600/- Pvt. Ltd. There was no disallowances made on account of the unsecured loan while passing original assessment order under Section 143(3) dated 30.12.2016. A search and seizure action under Section 132 was carried on the assessee on 30.01.2019. In course of search, no incriminating material relating to the loan of Rs.320 lacs taken from above three companies were found. The AO, however, at para 6 of the order observed that in course of pre search enquiry, it was gathered from the return of income and the balance sheet filed by the assessee that amount of unsecured

6 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) loans appearing in the balance sheet are suspicious. Some loans were received from Kolkata based companies which were apparently bogus/shell companies. In statement recorded u/s 132(4), Shri Bhagwan Kumar Taparia & Brindera Kumar Taparia could not satisfactorily reply about the said transaction. The investigation wing of Kolkata also carried out search on 01.02.2019 at the addresses of these Kolkata based companies. In this search, statement of Shri Indrajit was recorded (reproduced at page 14 to 17 of the assessment order) where he admitted that he provided the accommodation entries through the above three companies to the assessee on which he charged commission @0.75%. 7. The assessee filed a detailed reply dated 11.08.2021 (PB 75-80) on the allegation of accommodation entries made by the AO which is reproduced at page 17 to 20 of the assessment order. The AO, however, brushed aside the contention of the assessee by observing on page 20 to 28 of the order which is summarized as under: - (i) Shri Indrajit has categorically admitted that he had provided accommodation entries of unsecured loans to Subh Laxmi Group through the above three companies by charging commission @0.75%. (ii) The directors of the assessee company have denied any acquaintance with Shri Indrajit Seth but Shri Indrajit Seth has categorically stated in

7 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) reply to question no.15 of his statement that he came into contact with Birendra Kumar Taparia in a social occasion where he approached to provide accommodation entries. (iii) In the assessment proceedings u/s 143(3) dated 30.12.2016 the AO observed from the documents submitted that these companies have meagre income whereas huge loans has been provided by them. Thereafter the analysis of these companies and the extract of the report of income tax department Kolkata was reproduced at page 22 to 25 of the order. (iv) The contention of the assessee that this issue is already discussed in the assessment order framed u/s 143(3) and therefore cannot be raised in the present assessment proceeding is not acceptable since this issue is very much part of search proceeding as simultaneous search action were also taken by Investigation wing of the department at Kolkata and more particularly when the director of the company Shri Indrajit was covered in that search who has brought out new facts which were hitherto not in knowledge of AO framing the assessment u/s 143(3) and thus the same is the incriminating documents.

8 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) (v) The assessee has not given any justification as to why these remotely placed companies of Kolkata came in contact with the assessee company without any involvement of middle man. (vi) From the balance sheet of these companies, it is seen that they are declaring very low income which raises doubts about the creditworthiness, they have very nominal/insignificant business activity and the reserve funds of these companies are created out of share premium charged by them on issue of their shares and not out of the accumulated profits. (vii) From the report of ADIT (Inv.) unit -6, Kolkata providing the bank account it was seen that prior to the issue of cheques to the assessee company, there were transfer entries of similar amounts, source of which is neither explained nor acceptable in the absence of necessary details. Thus, these are merely paper/shell companies to provide accommodation entries. Accordingly, the AO held that assessee could not establish the genuineness of the unsecured loans and thus made an addition of Rs.3,20,00,000/- u/s 68 of the Act. 8. In appeal the Ld. CIT(A) has confirmed the addition by observing vide para 4.7 sub-para A to V as under:-

9 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed decided as under:- The AO treated the loan of Rs.3,20,00,000/- received from three Kolkatta based companies as unexplained/bogus/accommodation entry. The contention and arguments of the appellant can be divided mainly on two parts:  No Incriminating material was found during search and decision of Hon'ble Apex court in the case of Abhisar Buildwell is applicable.  All the three companies from whom loan taken are genuine and creditworthiness is not doubtful. 4.7.1 Rebuttal on the argument of the appellant that no incriminating material was found during search and applicability of case law of Abhisar Buildwell a) A report dated 7/12/2016 from ADIT, Inv. Wing Unit 6, Kolkata was received in the office of DCIT on 14/12/2016 who passed the order u/s 143(3) on 30.12.2016. b) This report was sent by the ADIT, Inv. Wing Unit 6, Kolkata in reference to letter written by the DCIT who passed the original order u/s 143(3). The then AO had not considered the findings on this report and accepted the submission of the assessee and had not taken any adverse inference on such Unsecured Loan. This report is scanned in the present 153A assessment order on page 24 and 25. c) During the pre-search inquiry, it was gathered that huge amount of unsecured loan was received from shell companies. Accordingly a Search & seizure action u/s 132 was carried on the assessee on 30/01/2019.

10 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) d) During the course of search, the issue was examined and details of unsecured loan were gathered from the business premises of assessee company and residence premises of key person Birendra Taparia and Bhagwan Taparia. e) During the course of search statement of various people including key person of the group was taken to examine the issue of bogus unsecured loan. f) During the course of search various documents, slips etc were found and seized which unearthed the unaccounted income of the group companies including the assessee company in form of unaccounted turnover, cash transactions which is clearly evident that the group has involve in generation of unaccounted income. The genetics of taking unsecured loan from such shell companies were found and seized in form of various slips and loose papers. g) These seized materials had clearly revealed that the assessee company has unaccounted income which need to route back in books by taking unsecured loan from such shell companies. h) While on-going search in the assessee group dated 30/01/2019, a simultaneous search was also conducted by the Kolkata Investigation wing on 01/02/2019 on all the address of such shell/paper companies to examine the genuineness and creditworthiness of these companies. i) During simultaneous search on such Shell companies in Kolkata, it was gathered that these suspicious companies were operated by Shri Indrajit Sett and the enquiry was made with him. Statement of Shri Indrajit Sett was recorded wherein he revealed various crucial details about the assessee group and the contact person. j) The details so gathered from Kolkata Investigation wing were confronted subsequently with the key persons of the assessee group. k) During the course of search proceedings in the case of M/s. S. L. Nutritions Nagaur, statement on oath of Shri Birendra Kumar Tapariya was recorded uls

11 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) Pvt. Ltd. & M/s. Shubh Laxmi Soap Industries at Plot No.363/169, Dukosi, 132(4) of the Act in which, he was asked whether he knows M/s Emrald Commercial Ltd., M/s Mukesh Commercial Pvt. Ltd. and M/s Mangalam Viniyog Pvt. Ltd., he stated that these are Kolkata based companies and group had taken unsecured loans from them in past. When he was asked about Shri Indrajit Sett, he stated that he does not know any Shri Indrajit Sett. He was asked that Shri Indrajit Sett is entry provider at Kolkata and he was providing the entries of bogus unsecured loans through the said three paper/bogus companies and for which, he charged commission @0.75%. Further he was also asked that for the said bogus loans, assessee had paid cash and repaid the cash by him when loan was squared-up. Shri Birendra Kumar Taparia could not give satisfactory reply and stated that more details can be given by his brother Shri Dharmendra Maheshwari. Vide Q. No.12 & 13, he was given further opportunities in this regard. However, he said further more details will be given by Shri Dharmendra Maheshwari and he does not know about this. l) The DDIT(Inv.), Unit-3(1), Kolkata has recorded the statement u/s. 131 of the Act of Shri Indrajit Sett on 01.02.2019 in which, in reply to Q. No.15, Shri Indrajit Sett has clearly stated that he met Shri Birendra Tapariya in a social function and discussed about accommodation entries of unsecured loans for his group concerns. m) In the statement recorded of key person Shri Birendra Tapariya in which he stated that that he does not know Shri Indrajit Sett and has no knowledge about such bogus unsecured loans, is nothing but hiding the truth by Shri Birendra Taparia. The relevant portion of Shri Birendra Tapariya's statement recorded u/s. 131 of the Act, was scanned by the AO on page 11 to 14 in which various relevant questions on the Kolkata Shell companies were asked and confronted.

12 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) n) During search, the statement of Inderjit Sett was also recorded who accepted that he provided accommodation entries and the documents filed does not proves the credit worthiness and genuineness of the loans. The AO had scanned this statement in the assessment order at Page 14 to 17 in which he had categorically admitted about the modus operandie of providing accommodation entries. o) During the parallel search at Kolkata, Shri Indrajit Sett had categorical admitted that he had provided the accommodation entries of unsecured loans to 'Shubh Laxmi Group'. He further admitted that such loans were taken by accommodation entries on cash payments, and subsequently shown the said loans repaid through banking channels in the books, whereas, the group has received back the cash amount against the book entries of loan repayments. Shri Sett also admitted this fact that he receipted a commission @.75% of the accommodation entry provided by him in the name of 3 companies M/s Emrald Commercial Ltd., Mukesh Commercial Ltd. and Mangalam Viniyog Ltd., which were controlled and managed by him. p) The Directors of this company repeatedly denied any acquaintance with Shri Indrajit Sett but Shri Sett duly recognised Shri Birendra Kumar Taparia, according to him who approached him for providing accommodation entries to two of the entities of their group and so he provided accommodation entry in the form of unsecured loan and he earned commission of Rs. 3 Lacs approximately on this account as Shri Birendra Kumar Taparia, provided cash for this purpose. q) Considering the evidences collected during search from the appellant and parallel search on the Shell companies and statement recorded of various key people of the appellant company as well as of the entry provider, sufficient incriminating material was there to acquire jurisdiction of 153A of the Act. Thus the case law as referred by the appellant of the Abhisar Buildwell and many others are not applicable.

13 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) r) The issue was very much of search proceedings as simultaneous search action were also taken up by the Investigation Wing of the department at Kolkata and more particularly the then Director of the company Shri Indrajit Sett (during the period when the loan arrangements were made) was covered in that search, who had brought out new facts which were hitherto not in the knowledge of Assessing Officer framing the assessment u/s 143(3) in 2016. The statement recorded of Shri Sett and his corroborated acceptance of facilitating the assessee company with accommodation entries in the disguise of unsecured loans from his companies, itself attained the stature of an incriminating document of which the Assessing Officer was mandated to take cognizance and in the search proceedings also the key persons of the assessee company were confronted that how they approached him for getting accommodation entries from his companies s) It is important to mention here that the statement was recorded of the key person of appellant company, Statement was recorded of Indrajit Sett in parallel search at Kolkatta, Facts and details of unsecured loan entries from the search premises of appellant company and various evidences gathered during search action are sufficient to categorize as incriminating material. t) During the course of search on the assessee company along with other found and seized which unearthed the unaccounted income of the group companies including the assessee company in form of unaccounted turnover. cash transactions. All such evidences are clearly evident that the group has involved in generation of unaccounted income. As stated earlier, the genesis of taking unsecured loan from such shell companies were found and seized in form of various slips and loose papers which are fulfilling the conditions of incriminating material. u) Incriminating material is a subjective term and had not defined anywhere in the Income Tax Act. Thus, the same has to be derived from the fact and

14 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) circumstances of case to case. If some transaction were bogus/ shame and these bogus transactions were recorded in books, then in this case the books of accounts having such bogus transactions found and seized during search can be treated as incriminating material. Although the transactions of unsecured loan were recorded in books of accounts, but as it is proved that the same are shame or bogus, then such books are as such incriminating material to fulfill the conditions laid down by the Hon'ble Apex court in the case of Abhisar Buildwell. During parallel search by Kolkata Investigation wing, statement of entry provider was recorded in which he had categorically admitted the modus operandie by taking the name of the appellant company and on similar line, during search of the appellant company, that fact were confronted from the key person of the appellant company, then in such circumstances all such statement recorded along with the transaction details gathered during search operation became an incriminating material. v) Considering the above facts and discussion, the argument of the appellant company that no incriminating material was found during search is not acceptable and accordingly the ratio laid down by the Hon'ble Apex court in the case of Abhisar Buildwell is not applicable in the present case. The Ld. CIT(A) has thus sustained the addition of Rs. 3.20 crores by holding that that all the three companies from whom unsecured loans were received were mere transaction which represents unaccounted income of the assessee. Accordingly, the addition of Rs. 3.20 crores made by the AO was confirmed.

15 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 9. The Ld. counsel for the appellant has submitted that the Ld. CIT(A) was not justified in holding the validity of the assessment order framed under Section 153A of the IT Act, 1961 by incorrectly observing that incriminating material in respect of loans raised was found in the course of search. The Ld. AR submitted that the CIT(A) made various incorrect observation and ignored the vital facts that when the assessment proceedings for the year under consideration stood completed under Section 143(3) and that no proceedings were pending on the date of search thereby no addition can be made in the assessment in the absence of the incriminating material found in the course of search of the assessee. The Ld. AR has further submitted that the Ld. CIT(A) has not been justified in confirming addition of Rs. 3.20 crores under Section 68 of the act by treating the unsecured loan raised from Emrlad commercial Ltd. (Rs. 65 lacs), Mukesh Commercial Pvt. Ltd. (Rs. 100 Lacs) and mangalam Viniyog Pvt. Ltd. (Rs. 155 lacs) as unexplained and bogus. He has further erred in not considering the fact that the lonas have been repaid partly during the year and partly in subsequent years and had not appreciated the fact that when the assessee company was incorporated on 15.01.2013 and started operational activity from

16 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 30.11.2013, then how it could be presumed that it has any undisclosed income which was routed through alleged disputed bogus loans. 10. The Ld. AR has filed a brief written synopsis to support the claim of the appellant assessee which reads as under:- 1. The moot issue in the present case is whether in case of concluded assessment, in the absence of any incriminating material found in search, the original assessment can be tinkered with and whether in the absence of any document found in search to prove that loan raised from above three companies which were subsequently repaid along with interest are sham transaction, addition can be made. 2. There is no dispute as to the fact that as on the date of search the assessment proceedings for the assessment year under consideration was not pending. No incriminating material relating to the unsecured loans taken from the above companies was found in search. The AO however has held that only after two days of the search of the assessee, a search was carried out at the address of these companies where Shri Indrajit has stated that he has provided accommodation entries to the assessee through these companies. This has been considered by the AO as an incriminating material. Further, the Ld. CIT(A) held that report dt. 07.12.2016 received from ADIT, Investigation Wing, Kolkata, is not considered by the AO in the original order u/s 143(3) and statement of Shri Birendra Kumar Taparia recorded u/s 132(4) and statement of Shri Indrajit Seth recorded u/s 131 on 01.02.2019 are sufficient incriminating material to acquire jurisdiction u/s 153A of the Act.

17 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 3. The observation of the AO/ Ld. CIT(A) to hold that the investigation report dt. 07.12.2016 and the statement of Birendra Kumar Taparia and Indrejit Seth are incriminating documents to assume jurisdiction u/s 153A is not correct. This is explained as under: - (i) The report dt. 07.12.2016 of ADIT, Investigation, Kolkata, received by the AO on 14.12.2016 was much before the original assessment order dt. 30.12.2016. Even if it is presumed that the same escaped the attention of the AO while passing the order, nothing prevented him to initiate proceedings u/s 148 of the Act. This report is much before the date of search. Hence, such report cannot be considered as incriminating material found as a result of search. (ii) Shri Birendra Taparia in his statement recorded u/s 131 dt. 01.02.2019, reproduced at pg 11-14 of the assessment order has accepted that unsecured loans were raised from the above 3 companies but how these companies came to their contact can be explained only by his brother Shri Dharmendra Maheshwari. He further stated that Maheshwari can explain about the statement of Inderiit Seth, Hence, this statement he did not know Shri Indrajit Seth and only his brother Shri Dharmendra cannot be said to be an incriminating material found in search. (iii) Shri Dharmendra Maheshwari in his statement, reproduced at page 7 to 10 of the assessment order, accepted that loan was raised from the above 3 companies which is also repaid along with interest. His answer to question no. 21 was not reproduced in the assessment order, but, from reply to this question and in subsequent questions particularly, question no. 36 to 39, when he was enquired about the unsecured loan taken from Mukesh Commercial Pvt. Ltd., he explained that all loans taken and

18 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) repaid through banking channel and all loans are genuine. Copy of his statement from question no. 20 to 41 is enclosed. In this statement, no question about Indrajit Seth was asked. Hence, this statement cannot be said to be an incriminating material found in search. (iv) The relevant statement of Shri Indrejit Seth recorded on 01.02.2019 is reproduced by AO at page 14-17 of the assessment order. In reply to question no. 15, he stated that he came into contact with Shri Birendra Kumar Taparia in a social occasion whereas, Shri Birendra Taparia in his statement has stated that, he did not know Indrejit Seth. Further, Shri Indrejet Seth stated that Shri Birendra Kumar Taparia asked him to arrange accommodation entry in form of unsecured loan of Rs.4-5 cr, which he arranged and later on the same was refunded by him. However, no evidence in support of the alleged accommodation entry of loan was provided by him. Even this statement was not confronted to Shri Dharmendra Maheshwari. The ITAT, Jaipur Bench in case of DCIT V. J K International (2019) 184 DTR 334 (JP) has held that statement recorded after search of the assessee is not an incriminating material. The relevant para of this decision is reproduced as under: - "The AO on the basis of statement treated the purchases made by the assessee as bogus and proceeded to make the addition of 25 per cent of such purchases as bogus under s. 69C. The AO also taxed such disallowances under s. 115BBE. It is an admitted fact that for the assessment year under consideration as well as for the asst. yr. 2011-12, the assessment stood completed on the date of search as the time period to issue the notice under s. 143(2) had also expired. Therefore, for the year under consideration as well for the asst. yr. 2011-12, the addition could only be made with regard to incriminating seized material found during

19 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) the course of search. The CIT(A) has rightly concluded that the addition made by the AO without any reference to the seized material is not legally sustainable. Even otherwise, the AO had made addition by merely relying on the statement of one RJ which cannot be termed as an incriminating material as said statement should have related to incriminating material found during the course of search or statement must be made relatable to material by subsequent enquiry/investigation" (v) Further, reliance is placed on the following decisions, where it was held that the statement recorded in search is not an incrementing material: - PCIT (Central) & Ors. Vs. Anand Kumar Jain (HUF) & Ors. (2021) 432 ITR 0384 (Del) (HC). The relevant Para 8 of the order is reproduced as under: - "8. Next, we find that, the assessment has been framed under s. 1534, consequent to the search action. The scope and ambit of s. 1534 is well defined. This Court, in CIT vs. Kabul Chawla (2015) 281 CTR (Del) 45: (2015) 126 DTR (Del) 130: (2016) 380 ITR 573 (Del): 2015 SCC OnLine Del 11554, concerning the scope of assessment under s. 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this Court as well as the decisions of other High Courts and Tribunals. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue's case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the search action.

20 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) This statement certainly has the evidentiary value and relevance as contemplated under the Explanation to s. 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any other material discovered during search and seizure operations, empower the AO to frame the block assessment. PCIT Vs. Best Infrastructure India Pvt. Ltd. (2017) 397 ITR 82/ 159 DTR 257 (Del.) (HC) The head note of this decision reads as under:- "Search and seizure-Assessment under s. 153A-Scope vis-a-vis incriminating material Statements of AG make it plain that the surrender of the sum of Rs. 8 crores was only for the assessment year in question and not for each of the six assessment years preceding the year of search Secondly, when AG was confronted with A-1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for Even these, therefore, could not be said to be incriminating material qua each of the preceding assessment years- Further, statements recorded under s. 132(4) do not by themselves constitute incriminating material Tribunal was fully justified in concluding that the assumption of jurisdiction under s. 153A qua the assessees was not justified in law." Thus, the investigation report and the statements referred by the lower authorities in their order are not an incriminating material to confer jurisdiction to the AO to make addition of unsecured loan in the assessment framed u/s 153A of the Act. 4. The Hon'ble Supreme Court in case of PCIT Vs. Abhisar Buildwell (P) Ltd. (2023) 225 DTR 105/293 Taxman 141 (SC) after considering decisions of various High Courts in favour of the assessee and one

21 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) decision against the assessee as referred in para 7,7.1,7.2 and 8 of the order, held at para 11 to 14 of the order that in the absence of any incriminating material found in search no addition can be made in the assessment framed u/s 153A of the Act which are concluded assessment.

22 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 116-117), it can be noted that the directors of these companies are Gajanand Gupta, Vinod Kumar Shah, Ayush, Monika Aggarwal & Ashwini Kumar Agarwal. Thus, statement of unrelated parties has been relied upon. Hence, statement of Shri Indrajit Seth cannot be taken as base to allege that transaction with these two companies is sham/ non- genuine. (ii) Shri Indrajit Seth is director in Emrald Commercial Ltd. It may be noted that as per the report of ADIT, Investigation, Kolkata dt. 07.12.2016 (PB 62), it is stated that present directors of this company through an affidavit on oath dt. 06.12.2016 have affirm that the company has not provided any accommodation entry in form of loan or share capital in last 3 years beginning from 01.04.2012. Thus, when other directors of the company have vouched the genuineness of the transaction, without confronting the same to Shri Indrajit Seth, his statement cannot be relied upon as a gospel truth. (iii) From the Master Data extracted from the MCA site, it is apparent that all these. three companies are active compliant companies (PB 87, 116-117 &142). Hence, it cannot be inferred that transaction with these companies are non-genuine. (iv) From the audited financial statement of Mukesh Commercial Pvt. Ltd. (PB 88- 106), it can be noted that turnover of this company in FY 2013-14 is Rs.1,60,61,830/- (PB 91), reserve and surplus is Rs.26,86,09,034/- (PB 96) and short term loans and advances given is Rs.32,48,61,453/- (PB 96). Similarly from audited financial statement of Mangalam Viniyog Pvt. Ltd. (PB 118-133), it may be noted that turnover of this company is Rs.1,75,15,288/- (PB 126), reserve and surplus is Rs.27,53,71,834/- (PB 125) and short term loans and advances

23 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) given is Rs.27,67,43,962/-, the list of which is at PB 129-130, in which the outstanding balance of assessee as on 31.03.2014 is shown at Rs.1,25,85,940/-. Again, from the audited financial statement of Emrald Commercial Ltd. (PB 143-173), it may be noted that reserve and surplus of this company as on 31.03.2014 is Rs.15,11,68,327/- (PB 148), short term loans and advances is Rs.22.69,52,133/-, list of which is at PB 165- 166, where against eh name of the assessee Rs.68,75,930/- is outstanding as on 31.03.2014. Thus, the creditworthiness of all these companies is established. (v) year-to-year basis after On the loan received, assessee has paid interest on year-to-year deduction of tax at source. The loan is fully repaid by FY 2016-17 as is evident from the account statement of these companies in the books of the assessee (PB 81-85, 107-110 & 134-138). Thus, when loan is repaid, the transaction cannot be alleged to be sham transaction for which reliance is placed on the decision referred at point no. 6 below. (vi) The fact that the statement of Shri Indrajit Seth is tutored & recorded under pressure is evident from the answers given by him to various questions put before him. This is evident from the fact that Question no. 1 to 4 are preliminary questions and Question no. 5 is to made him aware about the provision of section 177, 181 & 277A. Thereafter, in very first question i.e. in reply to Q. No. 6, he has stated that he is engaged in providing accommodation entries & earning commission thereof. And further, explained the modus operandi of the said business. However, after this answer, the authorized officer has not again invited his attention to provision of section 277A of the Income tax Act that providing of accommodation entries would tantamount to falsification/ fabrication of books of accounts & documents and he is liable to be

24 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) prosecuted. In the statement, authorized officer has totally ignored the present & past directors of the company. In Q. No. 13 to Q. No. 18, certain questions were asked about the transaction with Shubh Laxmi Group wherein he has admitted that accommodation transactions were entered with Shubh Laxmi Group. However, on perusal of financial statement of these companies, it may be noted that huge loans were given by these companies to various parties but, he is silent whether all these loans are accommodation entries or genuine transactions. He narrated the complete account statement of transaction with assessee company but, has not stated anything about the transaction with other loans & advances. This shows that statement is tutored and authorized officer has put word in his mouth. In reply to Q. No. 16, he has stated that he is charging commission in lieu of accommodation entries @0.75% but authorized officer has even not asked whether this income was shown in return of income or not. In reply to Q. No. 15 & 17, he has stated that Shri Birendra Kumar Taparia came in contact in social occasion however, he has failed to mention which social function. The word 'social function' is very wide & vague term. In between the answer he has also referred the word 'one middleman' but failed to tell the name of middle man whereas factually Shri Birendra Taparia does not know him and never met him as stated by him in his statement u/s 132(4) of the Act. Even the opportunity to cross examine him as requested vide letter dt. 11.08.2021 (PB 90) was not provided, which is against the principle of natural justice. Hon'ble Supreme Court in case of Andaman Timber Industries Vs. CCE 127 DTR 0241 has held that denial of opportunity to the assessee to cross-examine the witnesses whose statements were made the

25 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) sole basis of the assessment is a serious flaw rendering the order a nullity in as much as it amounted to violation of principles of natural justice. 6. It is submitted that the assessee has discharged its onus u/s 68 to prove the identity of the creditor, creditworthiness of the creditor and genuineness of the transaction as evident from the following table: -

Name, address and Amount Document filed Explanation of the assessee PAN of the company Emerald Commercial 65,00,000/- Confirmation From the confirmation (PB 134) and Ltd. Bank Account the bank statement (PB-139-141), it Address: room No. 4, Master Data may be noted that there is no immediate Rabindra Sasrani, 4th Balance Sheet cash deposit in the bank account of floor, Kolkata creditor. On interest payment, tax has PAN:AAACE575P been deducted at source. This loan is fully repaid in AY-17-18 (PB). The creditor has net worth of Rs. 20.54 cr (PB), which proves the creditworthiness. The loan was accepted as genuine in the original assessment proceeding under Section 143(3) even after considering the adverse report of the investigation wing. Mukesh Commercial 1,00,00,000/- Confirmation From the confirmation (PB 81) and the Pvt. Ltd. Bank Account bank statement (PB-86), it may be Address: 1, Mahendra Master Data noted that there is no immediate cash Nath Roy by Lane, Balance Sheet deposit in the bank account of creditor. Howrah On interest payment, tax has been PAN:AABCM7474L deducted at source. This loan is fully repaid in AY-17-18 (PB). The creditor has net worth of Rs. 28.33 cr (PB), which proves the creditworthiness. The

26 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) loan was accepted as genuine in the original assessment proceeding under Section 143(3) even after considering the adverse report of the investigation wing. Mangalam Viniyog 1,55,00,000/- Confirmation From the confirmation (PB 107) and Pvt. Ltd. Bank Account the bank statement (PB-111-115), it Address: P-27, 2nd Master Data may be noted that there is no immediate floor, Sahitya Parishad Balance Sheet cash deposit in the bank account of Street, Goa Bagan, creditor. On interest payment, tax has Kolkata-700006 been deducted at source. This loan is PAN:AADCM5074C fully repaid in AY-16-17 (PB). The creditor has net worth of Rs. 28.91 cr (PB), which proves the creditworthiness. The loan was accepted as genuine in the original assessment proceeding under Section 143(3) even after considering the adverse report of the investigation wing. Thus, when assessee has discharged his onus, the same is accepted in the original assessment framed u/s 143(3) and the loan is also repaid, solely on the basis of the statement of Indrajit Seth, no addition is justified as held in the following cases: - Pr. CIT, Udaipur Vs. Shubh Mines Pvt. Ltd. DBITA No.96/15 order dt. 03.05.2016 (Raj.) (HC) The relevant facts are that the assessee company introduced share application money to the tune of Rs.75 lacs including the sum of Rs.50 lacs allegedly taken from the entry provided namely, Moderate Credit Corporation Limited, Delhi. The AO observed that the assessee could not substantiate necessity for obtaining the huge share application money

27 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) only after few months of promoting the company. The AO on the basis of the statements of one Shri Aseem Kumar Gupta concluded that the money deposited in the bank accounts of the assessee company is bogus entry. Accordingly, treating the money received as belonging to the assessee company, same was added u/s 68 of the Act. The Ld. CIT(A) deleted the addition made by the AO and the order of CIT(A) was confirmed by Hon'ble ITAT. The Hon'ble High Court confirmed the order of lower authorities by giving the following findings at para 7 of its order:- "7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record that the share application money of Rs.50,00,000/- was received from Moderate Credit Corporation Ltd., a listed company. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the com absence of any cogent evidence on record establishing that the money shown to have company dropped its project. In the considered opinion of this court, in received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse. PCIT Vs. Bairagra Builders (P.) Ltd. (2024) 299 Taxman 460 (Bom.) (HC) Where assessee had taken unsecured loan from two companies and

28 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) had submitted all evidences to substantiate loan including confirmation from creditors and loan was taken and repaid through banking channels, AO was not justified in treating said unsecured loan as fake and unexplained cash credit. PCIT Vs. Ambe Tradecorp (P) Ltd. (2023) 290 Taxman 471 (Guj.) (HC) Assessee received loan from two parties. AO treated same to be sham for reason that creditworthiness of loan givers was not established and accordingly made addition u/s 68. It was held that assessee had furnished details such as copy of ledger account, bank statements, income tax returns, balance sheet, etc. of loan givers. Notice u/s 133(6) was issued to said loan givers which were duly responded by them therefore, identity of parties could not be disputed. Assessee was not the beneficiary as loan was repaid by assessee in subsequent year. Since identity and creditworthiness of parties and genuineness of loan transactions were well established, therefore, impugned addition made u/s 68 on account of said loan amount was unjustified. 7. Otherwise also, the assessee company was incorporated on 15.01.2013. It started the commercial production from 30.11.2013. The loans were raised form the above 3 companies between the months of April, 2013 to October, 2013. The assessee has no source of income when the loans were raised. Therefore, it cannot be presumed that assessee has any undisclosed income which was routed through the alleged bogus loan. Hence, addition is not justified in the hands of the assessee. For this reliance is place on the following cases: - CIT Vs. Lal Mohar (2018) 252 Taxman 401 (All.) (HC)

29 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) No addition can be made u/s 68 in hands of firm or any artificial person in first year of business that too on a day which is first day of its business. Assessee, an AOP commenced its business in relevant previous year. On first day of accounting period cash credit entries appeared in books of account of assessee. During assessment proceedings, assessee explained said entries to have arisen against deposits received from constituent members. AO rejected assessee's explanation and added said amount to assessee's income. Tribunal set aside addition made by AO. It was held that since it was first year of business of AOP and no business activity having been shown to have been conducted by it that could lead to generation of unaccounted income on first day of relevant accounting period itself. Tribunal had not committed any error in deleting impugned addition WOODCRAFT EXPORT CO. PVT. LTD. vs. ITO 70 ITR 436 (Delhi-Trib) The AY under appeal is 2013-2014 i.e.. relevant to F.Y. 2012-2013. The assessee-company filed Certificate of Incorporation which proves that assessee-company was incorporated on 14.12.2011 i.e., in preceding F.Y. 2011-2012 relevant to preceding A.Y. 2012-2013. Counsel for the Assessee, therefore, rightly contended that since assessee was at the stage of formation in preceding assessment year (during the part period) and has received share application money in assessment year under appeal, therefore, there could not be any unaccounted money invested by the assessee-company. The decision of the Supreme Court in the case of Bharat Engineering & Construction Co. is squarely apply to the facts and circumstances of the case. Allahabad High Court in case of Lal Mohar 409 ITR 95 observed credits pertain to first day of business, therefore, deletion of addition was held to be justified. Therefore, even if

30 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) the A.O. may not be satisfied with the explanation of assessee but such an addition could not be made against the assessee. Assessee produced sufficient documentary evidences before A.O. to prove that large number of investors have made investment in assessee-company, they were mostly related to the Directors of the assessee- company and that the amount in question was mostly less than Rs.50,000/-. Except in three cases, most of the creditors were examined who have admitted to have made investment in assessee-company. However, it is a fact that all the Investors who have been examined by the A.O. on oath were not subjected to cross- examination on behalf of the assessee, therefore, their statements cannot be read in evidence against the assessee. Therefore, the only material left for consideration was the documentary evidences filed by the assessee on record which supports the explanation of assessee that assessee received share application money from large number of investors who have made very small investment in assessee-company in each case. No evidence has been brought on record if the investment made by the investors have actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. Therefore, considering the smallness of the issue and the fact that assessee was incorporated only in preceding assessment year, therefore, in the light of decision of Supreme Court in the case of Bharat Engineering & Construction Co., there were no justification for the authorities to sustain the addition. In view of the above, even on merit, the addition of Rs.3,20,00,000/- confirmed by Ld. CIT(A) is uncalled for and be deleted.

31 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 14. We find that the AO has made the addition solely based on the statement of Shri Indrajit Seth dated 01.02.2019 as per page no. 14 to 17 of the assessment order without rebutting the contentions of the appellant assessee and submissions filed during the course of assessment proceeding with the support of material evidence. It is noted that Shri Indrajit Seth was neither a director nor an employee in M/S Mangalam Viniyog Pvt. Ltd. and Mukesh Commercial Pvt. Ltd. and therefore his statement is not relevant with reference to the unsecured loans taken by the assessee from these two companies. It is also noted that present director of the company through an affidavit on oath 06.12.2016 has affirmed that Emerald Commercial Pvt. Ltd. has not provided any accommodation entry in form of loan or share capital in last 3 years beginning from 01.04.2012. In the present case, there is a contradictory statement given by Shri Indrajit Seth who was earlier director in Emerald Commercial Pvt. Ltd. and further the department did not rebut the statement and contents of the affidavit of the present director regarding the genuineness of the transaction without confronting the same to Shri Indrajit Seth, and therefore, his statement cannot be relied upon as a gospel truth even ignoring the audited financial statements of accounts, reserves and surplus, short term loans

32 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) and advance outstanding balances shown which clearly established the creditworthiness of all these companies.

33 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) the findings arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Recently the Bombay High Court in the case of PCIT Vs. Bairagra Builders Pvt. Ltd. (supra) has observed that where assessee has taken unsecured loans from two companies and has submitted all evidences to substantiate loans including confirmation from the creditors and loan was taken and repaid through banking channels, AO was not justified in treating said unsecured loan as fake and unexplained cash credit.

34 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) the genuineness of the loan transaction either as fake or unexplained cash credits.

35 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) CIT(A) is uncalled for and the same is hereby deleted. Thus ground no. 1 and 2 of the assessee are allowed.

36 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 25. In ground no. 4, in assessment year 2014-15 and in ground no. 2 in the assessment year 2015-16 to 2017-18, the appellant has challenged confirmation of the disallowance of interest of Rs. 12,40,000/-, 28,00,000/-, 17,98,500/- and 13,85,328/- paid on the unsecured loans taken in the assessment year 2014-15.

37 ITA No. 140 to 143/Jodh/2025 (Assessment Year 2014-15 to 2017-18) 27. Since the appellant assessee gets relief on legal issue and merits of the case, the ground no. 5 of claim of telescopy is dismissed as infructuous. 28. In the result the appeals of the assessee in ITA No. 140 to 143/Jodh/2025 are allowed.

Order pronounced on 21 / 05 /2026 in the open court.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 21 /05/2026. Pritesh Vaishnav PS True copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File

BY ORDER,