DCIT CIRCLE 1(2)(1), MUMBAI, MUMBAI vs. BRANDZSTORM INDIA MARKETING PRIVATE LIMITED, MUMBAI

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ITA 5434/MUM/2025Status: DisposedITAT Mumbai23 September 2026AY 2011-1211 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s deletion of the addition of Rs. 1,30,00,000/- made under Section 68. The Tribunal noted that the AO primarily relied on third-party statements from the Gautam Jain search without independent inquiry or corroborative evidence. Crucially, these statements were retracted by the deponents via sworn affidavits. The Tribunal held that an addition cannot be sustained solely on a retracted third-party statement without independent corroboration linking the assessee to unaccounted cash. The Revenue failed to demonstrate that cash flowed back from the assessee to the lender entities. Furthermore, the AO did not provide the underlying material or grant cross-examination, violating principles of natural justice, as held in Andaman Timber Industries and H.R. Mehta. The Tribunal also noted that the loans were received and repaid through banking channels with interest subject to TDS, and the lenders' identity, creditworthiness, and genuineness were established by the assessee. The Tribunal cited CIT v. Rohini Builders and PCIT v. Ojas Tarmake (P.) Ltd. for the principle that credit/repayment entries through banking channels with TDS cannot be ignored. The assessee discharged its initial burden under Section 68, and the AO failed to rebut the documentary evidence. Therefore, the Revenue's grounds of appeal were dismissed.

What were the facts?

The Revenue appealed against the order of the CIT(A) deleting an addition of Rs. 1,30,00,000/- made under Section 68 of the Income-tax Act, 1961. The assessee, Brandzstorm India Marketing Private Limited, for Assessment Year 2011-12, had received unsecured loans from M/s Karishma Diamond Pvt. Ltd. (Rs. 35,00,000/-) and M/s Parashwanath Gems Pvt. Ltd. (Rs. 95,00,000/-). These entities were alleged to be part of a network of accommodation entry providers operated by Gautam Jain, based on information from an investigation wing search. The Assessing Officer (AO) initiated reassessment proceedings under Section 147. The assessee provided loan confirmations, audited financials, PAN details, bank statements showing disbursement and repayment via cheques/RTGS, TDS certificates, and income-tax acknowledgments of lenders. The AO, however, treated the loans as unexplained cash credits, relying on the Gautam Jain search information and rejecting the assessee's evidence and retractions of statements.

What were the issues?

1. Whether, on the facts and circumstances of the case and in law, the learned CIT(A) was justified in deleting the addition of Rs. 1,30,00,000/- made under Section 68 of the Act, without appreciating that the Revenue conducted inquiries and established the assessee obtained accommodation entries from bogus concerns of Gautam Jain, an accommodation entry provider? 2. Whether, on the facts and circumstances of the case and in law, the learned CIT(A) was correct in deleting the addition of Rs. 1,30,00,000/- made under Section 68 of the Act, without appreciating that the assessee failed to prove the genuineness of the loan creditors? Assessee's Contentions: The assessee discharged its initial onus under Section 68 by providing loan confirmations, PANs, audited balance sheets, income-tax returns, and bank statements of lenders. Transactions were through account payee banking channels, interest was paid after TDS, and lenders offered interest income in their returns. The entire loan from M/s Karishma Diamond Pvt. Ltd. was repaid within the financial year. Statements recorded during the search were retracted by directors via affidavits. The AO failed to conduct independent inquiry, provide adverse material, or grant cross-examination, violating principles of natural justice. Reliance was placed on judicial precedents. Revenue's Contentions: The Revenue argued that the Investigation Wing unearthed Gautam Jain's modus operandi. Statements recorded under Section 132(4) admitted the entities were paper companies providing accommodation entries. Mere paper trail, confirmations, and banking channels are insufficient when the principal operator admitted to running hawala concerns. The CIT(A) erred in deleting the addition, and the assessment order should be restored. Reliance was placed on the assessment order's findings.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 147,Section 148,Section 132,Section 132(4),Section 131(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI SANDEEP GOSAIN & SHRI JAGADISH

Pronounced: 23.09.2026

Heard together (2 matters)

ITA 5434/MUM/2025
CO 59/MUM/2026

Read from the judgment's own cause title. This page is filed under one of them.

PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal by the Revenue and the cross-objection by the assessee are directed against the order passed by the learned Commissioner of Income Tax (Appeals)/Joint Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld. CIT(A)”], bearing DIN & Order No. ITBA/NFAC/S/250/2025- 26/1077221030(1), dated 19.06.2025, arising out of the reassessment order passed under Section 143(3) read with Section 147 of the Income-tax Act, 1961 (“the Act”), dated 28.12.2016 by the Income Tax Officer, Ward- 9(2)(3), Mumbai.

2.

Firstly, we shall take up the Revenue’s appeal, i.e., ITA No. 5434/Mum/2025.

The Revenue has raised the following grounds of appeal:

“Whether on the facts and circumstances of the case and in law, ld. CIT(A) was justified in deleting the addition of Rs. 1,30,00,000/- made u/s 68 of the Act without appreciating the fact that Revenue conducted the inquiries and made detailed investigation and established that the assessee has obtained accommodation entries from the bogus concerns of Gautam Jain who is an accommodation entry provider?

Whether on the facts and circumstances of the case and in law, ld. CIT(A) was correct in deleting the addition of Rs. 1,30,00,000/- made u/s 68 of the Act without appreciating that the assessee failed to prove the genuineness of the loan creditors & the same was not established by the assessee?

It is submitted that though overall tax effect involved in this case is below the monetary limits, this appeal is being filed as the case falls under exception clause of 3.1(h) of CBDT Circular No. 05/2024 dated 15.03.2024.

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED The appellant craves leave to amend or alter any grounds or add a new grounds which may be necessary.”

3.

The assessee company filed its return of income for Assessment Year (AY) 2011-12 on 27.09.2011, declaring a total income of Rs. 99,33,790/-. Subsequently, information was received from the Investigation Wing, Surat/Mumbai, pursuant to a search and seizure operation conducted under Section 132 of the Act in the case of “Gautam Jain & Others” on 03.10.2013. Based on statements recorded during the search, it was alleged that Gautam Jain operated a network of paper entities engaged in providing accommodation entries. The AO noted that the assessee had credited unsecured loans aggregating to Rs. 1,30,00,000/- during the relevant financial year from two concerns belonging to the said group, namely:

(i) M/s Karishma Diamond Pvt. Ltd.: Rs. 35,00,000/-; and

(ii) M/s Parashwanath Gems Pvt. Ltd.: Rs. 95,00,000/-.

4.

Reassessment proceedings were initiated under Section 147 by issuing notice under Section 148 on 10.03.2016. During the assessment proceedings, the Assessing Officer called upon the assessee to establish the identity, creditworthiness and genuineness of the loan transactions. In response, the assessee submitted documentary evidence, including loan confirmations, audited financial statements, PAN details, bank statements reflecting disbursement through account payee cheques and repayment through RTGS/cheque along with interest, TDS certificates (Form 16A/26AS), and income-tax acknowledgments of the lenders showing interest offered to tax. The assessee specifically pointed out that the entire loan of Rs. 35,00,000/- from M/s Karishma Diamond Pvt. Ltd. stood fully

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED repaid within the financial year itself, with the closing balance as on 31.03.2011 being NIL, and that part repayment had been made to M/s Parashwanath Gems Pvt. Ltd. The assessee also placed on record affidavits dated 03.12.2013 filed by the respective directors retracting the statements recorded under Section 132(4)/131(1A), and requested copies of incriminating material as well as an opportunity for cross-examination, which were not provided.

5.

The AO, however, brushed aside the documentary evidence, holding that the search in the case of Gautam Jain had established the entities to be mere paper concerns. Rejecting the retractions as an afterthought, the AO treated the unsecured loans of Rs. 1,30,00,000/- as unexplained cash credits under Section 68 of the Act.

6.

Aggrieved, the assessee appealed before the Ld. CIT(A)/NFAC. The Ld. CIT(A), while upholding the validity of reopening under Section 147, deleted the addition of Rs. 1,30,00,000/- made under Section 68. The Ld. CIT(A) observed that the AO made the addition solely on the basis of retracted third-party search statements without independent inquiry or corroborative evidence, failed to grant cross-examination, and ignored the fact that the loans were received and repaid through banking channels, with interest subjected to TDS.

7.

Aggrieved by the deletion of the addition under Section 68, the Revenue is in appeal before us.

8.

The Ld. DR strongly relied upon the findings recorded in the assessment order. He submitted that the Investigation Wing had unearthed the modus operandi of Gautam Jain and his conduit entities. The statements

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED recorded on oath under Section 132(4) clearly admitted that the entities in question were paper companies providing accommodation entries. He contended that mere paper trail, filing of confirmations and routing of funds through banking channels are insufficient to establish the creditworthiness and genuineness of the transactions, especially when the principal operator had conceded to running hawala concerns. He submitted that the Ld. CIT(A) erred in deleting the addition and urged that the assessment order be restored.

9.

On the other hand, the Ld. AR appearing for the assessee supported the impugned order of the Ld. CIT(A). He submitted that the assessee discharged its initial onus under Section 68 by placing on record loan confirmations, PANs, audited balance sheets, income-tax returns and bank statements of both corporate lenders. He further submitted that the transactions were executed through account payee banking channels, interest was paid after deducting tax at source, and the lenders duly accounted for such interest income in their respective returns.

10.

The Ld. AR further submitted that the entire loan taken from M/s Karishma Diamond Pvt. Ltd. amounting to Rs. 35,00,000/- was repaid during the same financial year, leaving a NIL balance as on 31.03.2011. The loan from M/s Parashwanath Gems Pvt. Ltd. was also repaid through regular banking channels.

11.

It was further submitted that the statements recorded during the search on 03.10.2013 were retracted by the respective directors through sworn affidavits dated 03.12.2013. The AO failed to carry out any independent inquiry, did not furnish the adverse material to the assessee and denied cross- examination, thereby violating the principles of natural justice.

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED The Ld. AR submitted that the issue is covered in favour of the assessee by various judicial precedents and, therefore, the order of the Ld. CIT(A) warrants no interference.

12.

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities.

13.

The core grievance of the Revenue in Ground Nos. 1 and 2 relates to the deletion of the addition of Rs. 1,30,00,000/- made under Section 68 of the Act.

14.

It is an admitted position on record that the assessee company received unsecured loans of Rs. 35,00,000/- from M/s Karishma Diamond Pvt. Ltd. and Rs. 95,00,000/- from M/s Parashwanath Gems Pvt. Ltd. during the financial year relevant to AY 2011-12. To discharge the statutory onus cast upon it under Section 68 of the Act, the assessee furnished documentary evidence before the AO as well as the Ld. CIT(A), including:

(i) Confirmations of accounts issued by both lending companies with their registered addresses and PAN;

(ii) Acknowledged copies of Income-tax Returns and Computation of Income of both creditors;

(iii) Audited Balance Sheets and financial statements of the lenders establishing the availability of funds;

(iv) Bank statements of both the lender companies, maintained with Axis Bank, as well as the assessee company, maintained with ICICI Bank,

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED demonstrating that the monies were advanced through account payee cheques/RTGS;

(v) Proof of interest payments along with proof of deduction and deposit of TDS, substantiated through Form No. 16A and Form No. 26AS; and

(vi) Proof of repayment of loans through banking channels, particularly noting that the loan of Rs. 35,00,000/- from M/s Karishma Diamond Pvt. Ltd. was fully repaid during the same financial year, resulting in a closing balance of NIL as on 31.03.2011.

15.

A perusal of the assessment order reveals that the AO did not point out any specific infirmity, defect or discrepancy in the financial statements or bank accounts submitted by the assessee. The AO neither issued notices/summons under Section 133(6) or Section 131 to the lender companies during the reassessment proceedings nor conducted any independent verification with the lenders’ Assessing Officers or bankers. The AO primarily relied upon the information received from the Investigation Wing and the statements of Shri Gautam Jain recorded under Section 132(4)/131(1A) in October 2013.

16.

Crucially, the respective deponents of those statements retracted them by filing sworn affidavits dated 03.12.2013. While an admission under Section 132(4) carries evidentiary weight, an addition cannot be sustained solely on a retracted third-party statement in the absence of independent corroborative material linking the assessee to unaccounted cash transactions. In the present case, the Revenue has not brought any material on record to demonstrate that cash of an equivalent amount flowed back from the assessee to the lender entities.

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED 17. Furthermore, despite specific requests made by the assessee, the AO failed to provide the underlying material gathered during the third-party search and did not grant an opportunity to cross-examine the persons whose statements were utilized against the assessee. The Hon’ble Supreme Court in Andaman Timber Industries v. CCE (2015) 281 CTR 241 (SC)* and the Hon’ble Bombay High Court in H.R. Mehta v. ACIT (2016) 387 ITR 561 (Bom)* have held that making an adverse addition based on third-party statements without affording an opportunity of cross-examination violates the principles of natural justice.

18.

It is also pertinent to note that the loan taken from M/s Karishma Diamond Pvt. Ltd. stood fully repaid through banking channels within the relevant financial year itself, and the loan from M/s Parashwanath Gems Pvt. Ltd. was likewise serviced with interest under TDS and repaid. The Hon’ble Gujarat High Court in CIT v. Rohini Builders (2002) 256 ITR 360 (Guj)* and PCIT v. Ojas Tarmake (P.) Ltd. [2023] 156 taxmann.com 75 (Guj) has held that where loans are received through banking channels and repaid through banking channels with interest subject to TDS, and the initial onus regarding identity and source stands discharged, the credit entries cannot be viewed in isolation under Section 68 by ignoring the corresponding debit/repayment entries.

19.

Once the assessee established the identity of the lenders by providing their corporate credentials, PAN and ROC data, demonstrated their creditworthiness through their audited balance sheets reflecting sufficient net worth/capital, and established the genuineness of the transactions through verifiable banking transactions, the initial burden under Section 68 stood discharged. The AO, however, primarily relied upon the information

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED received from the Investigation Wing without conducting any independent inquiry to rebut the documentary evidence produced by the assessee.

20.

In view of the above factual matrix and the legal principles discussed hereinabove, we find no infirmity in the findings of the Ld. CIT(A) in deleting the addition of Rs. 1,30,00,000/- made under Section 68 of the Act. Accordingly, the findings of the Ld. CIT(A) on this issue are upheld and Ground Nos. 1 and 2 raised by the Revenue are dismissed.

21.

Ground No. 3 raised by the Revenue states that the appeal is maintainable under exception clause 3.1(h) of CBDT Circular No. 05/2024 dated 15.03.2024. Since the appeal has been heard and adjudicated on merits, this ground is academic in nature and does not require separate adjudication.

22.

Ground No. 4 is general in nature and does not require any specific adjudication.

23.

In the result, the appeal filed by the Revenue in ITA No. 5434/MUM/2025 is dismissed.

Now, we take up CO No. 59/Mum/2026.

24.

At the outset, we noticed that there is a delay of 114 days in filing the Cross-Objection before us. In this regard, the assessee has filed an affidavit explaining the delay.

25.

We have heard the Ld. DR and the Ld. AR and perused the material placed on record, including the affidavit filed by the assessee explaining the delay. Considering the entire factual position as explained before us and also

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED keeping in view the principles laid down by the Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors., 1987 AIR 1353 (SC), wherein it has been held that where substantial justice is pitted against the technicalities of non-deliberate delay, then, in such eventuality, substantial justice is to be preferred, we are of the view that the principle of advancing substantial justice is of prime importance. Hence, considering the explanation put forth by the assessee and the facts and circumstances of the case, and adopting a liberal approach while considering the expression “sufficient cause”, we are inclined to condone the delay in filing the Cross-Objection before us. Consequently, the delay is condoned and the Cross-Objection is admitted for adjudication on merits.

26.

Since we have already dismissed the appeal filed by the Revenue and upheld the order of the Ld. CIT(A), the Cross-Objection filed by the assessee becomes infructuous and, therefore, does not require adjudication.

27.

In the result both the appeal filed by the Revenue and the cross objection filed by the assessee stands dismissed.

Order pronounced in the open court on 23.09.2026.

Sd/- Sd/- JAGADISH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 23.09.2026 RY-SrPS

ITA 5434/MUM/2025 and CO/Mum/2026 BRANDZSTORM INDIA MARKETING PRIVATE LIMITED

Copy to: DCIT CIRCLE 1(2)(1), MUMBAI, ROOM NO 535 AAYAKAR BHAVAN 1 MUMBAI, MUMBAI-400020, MAHARASHTRA BRANDZSTORM INDIA MARKETING PRIVATE LIMITED, 305 HUBTOWN SOLARIS ,N S PHADKE 2 MARG ANDHERI EAST MUMBAI 400069 MAHARASHTRA INDIA, MUMBAI-400020, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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