ACIT, MUMBAI vs. NEELKANTH URBAN DEVELOPERS PRIVATE LIMITED, MUMBAI

Firstly, we shall take up ITA No. 9501/Mum/2025. The Department has raised the following grounds of appeal:

The brief facts, as emanating from the record, are that the assessee filed its return of income for Assessment Year 2013-14 on 31.03.2015 declaring total income of ₹5,95,22,380/-. The return was selected for scrutiny and assessment under section 143(3) of the Act was completed on 28.03.2016 accepting the returned income. During the relevant previous year, the assessee had issued 100 Secured Redeemable Non-Convertible Debentures (NCDs) of face value of ₹1,00,00,000/- each, aggregating to ₹100 crores, for which Kotak Mahindra Prime Ltd. acted as the Financial Advisor and IL&FS Trust Company Ltd. was appointed as the Debenture Trustee. The NCDs were subsequently listed on the Bombay Stock Exchange (BSE).

In the course of the original assessment proceedings, the Assessing Officer (AO) had issued notices under section 142(1) of the Act calling for details of the debenture holders, movements in long-term borrowings and finance costs. The assessee had furnished the relevant details, including the allotment of two NCDs of ₹1 crore each to M/s. Saffire Export & Agency Pvt. Ltd. and payment of interest thereon after deduction of tax at source (TDS).

Subsequently, the AO reopened the assessment under section 147 of the Act by issuing notice under section 148 on 05.03.2019, based on information 3

On appeal, the Ld. CIT(A)/NFAC upheld the assumption of jurisdiction under section 147 of the Act but deleted the substantive addition of ₹2,00,00,000/- on merits, observing that the assessee had established the identity, creditworthiness and genuineness of the transaction and that invocation of section 69A of the Act was not sustainable.

Aggrieved by the deletion of the addition, the Revenue is in appeal before us raising Grounds Nos. 1 to 7 challenging the deletion of the addition of ₹2,00,00,000/- made under section 69A of the Act, the discharge of the primary onus, the applicability of the test of human probabilities and the non-grant of an opportunity of cross-examination. The assessee has also filed Cross-Objection challenging the validity of the reopening under section 147 of the Act.

We have heard the rival submissions and perused the material available on record. Ground Nos. 1 to 6 raised by the Revenue relate to the deletion of the addition of ₹2,00,00,000/- made under section 69A of the Act.

The primary basis of the addition made by the AO was the investigation report received from Kolkata alleging that M/s. Saffire Export & Agency Pvt. Ltd. was a paper/shell entity managed by entry operators. However, on perusal of the material available on record, we note that the assessee had raised ₹100 crores through Secured Redeemable Non-Convertible Debentures under an institutional framework, with Kotak Mahindra Prime Ltd. as the Financial Advisor and IL&FS Trust Company Ltd. as the Debenture Trustee. The NCDs were subsequently 4

We further note that the amount of ₹2,00,00,000/- represented the subscription towards the aforesaid NCDs and was duly recorded in the books of account as a liability. Section 69A of the Act applies where an assessee is found to be the owner of money, bullion, jewellery or other valuable article which is not recorded in the books of account. In the facts of the present case, the amount in question was duly recorded in the regular books of account. Therefore, the essential conditions for invoking section 69A of the Act are not satisfied.

We also note that, before the lower authorities, the assessee had furnished documentary evidence in support of the transaction, including the Certificate of Incorporation, PAN, bank statements, audited financial statements, board resolutions, BSE listing permissions and debenture trust documents. The AO, however, has not brought any specific material on record to establish that the documents furnished by the assessee were false or that the amount received against the NCDs represented the assessee's own unexplained money.

The Revenue has also relied upon the test of human probabilities with reference to the decisions of the Hon'ble Supreme Court in CIT v. Durga Prasad More and Sumati Dayal v. CIT. However, the said principle cannot, by itself, substitute for material evidence establishing that the assessee's own unexplained funds were routed through the subscriber. In the present case, the transaction was supported by documentary evidence and was duly recorded in the books of account.

It is also the contention of the assessee that the addition was based upon third-party statements/information gathered by the Investigation Wing without providing the assessee with the statements relied upon or an effective opportunity 5

We also note the factual discrepancy pointed out by the assessee with regard to the period to which the investigation report relates. The investigation report referred to bank transactions of the EDCL Group during February–March 2015, whereas the transaction under consideration pertains to Assessment Year 2013-14. The alleged acquisition of the subscriber company by the EDCL Group is also stated to have taken place in August 2013. Thus, the material relied upon by the AO does not, by itself, establish a direct nexus between the assessee's transaction and any alleged accommodation-entry activity.

In the result, the appeal filed by the Revenue is dismissed.

Coming to Cross-Objection No. 129/MUM/2026 filed by the assessee, the assessee has challenged the validity of the reassessment proceedings initiated under section 147 of the Act.

Since we have upheld the deletion of the addition on merits and dismissed the Revenue's appeal, the issue relating to the validity of the reassessment proceedings has become academic. Accordingly, the Cross-Objection filed by the assessee is dismissed as infructuous.

In the result, the appeal of the Revenue and the Cross-Objection of the assessee are dismissed.