SUNSHINE TRACON PVT. LTD.,MUMBAI vs. CENTRA CIRCLE WARD 4(1) MUMBAI, MUMBAI

All these cases were heard together and are being disposed off by this consolidated order. All the appeals arise out of the search and seizure action conducted under section 132 on 06.10.2017 in case of the Sunshine Group. In its appeals, the assessee has challenged the confirmation of additions made under Sections 68 and 69C of the Income-tax Act, 1961, on account of alleged non-genuine unsecured loans received from alleged shell entities and related disallowance of interest expenditure. The Revenue Appeal for A.Y. 2014-15 is confined to the relief granted by the ld. CIT(A) in respect of M/s. Sulabh Resources Pvt. Ltd., whereby the addition under Section 68 and the consequential addition of interest under Section 69C were deleted. The issues involved in these appeals are almost identical, and while deciding the appeals for A.Ys. 2015-16, 2016-17 and 2018-19, the ld. CIT(A) has followed the findings and reasoning recorded in his appellate order for A.Y. 2014-15. Accordingly, with the consent of both the parties, the cross-appeals filed by the assessee and the Revenue for A.Y. 2014-15 were taken as lead cases wherein respective grounds of appeal taken by the assessee and the Revenue read as under:

Subsequently, a search and seizure operations u/s 132 were conducted on 06.10.2017 in the Sunshine Group of cases. The Assessing officer states that the search action unearthed evidences which shows the involvement of this group in providing accommodation entry in the form of unsecured loans, bogus long term capital gain, etc. It was revealed that the assessee group has taken huge unsecured loan from the dubious Kolkata based concerns, which were found to be paper companies not doing any business. These companies were managed by the Kolkata based entry providers viz. Praveen Jain, Jagdish Purohit, Pravin Agarwal, etc. The Assessing officer refers to the statement of Shri Kashyap Mehta, Managing Director of the Group which was recorded during the course of search wherein he has admitted on oath that the assessee had taken unsecured loan of Rs. 17,52,000/- from Sahanubhuti Distributors Pvt. Ltd., Rs. 38,30,195/- from Sulabh Resources Pvt. Ltd. and Rs. 3,95,375/- from Intero Infrastructure Trading Pvt. Ltd. Further, the assessee has also paid interest of Rs. 17,52,000/- to Sahanubhuti Distributors and Rs. 3,95,375/- to Intero Infrastructure. The Assessing officer further refers to statement of Shri Pramod Ramdin Sharma, Director of M/s Sahanbhuti Distributors Pvt Ltd, who has stated that while he was working in the office of Shri Praveen Agarwal, Shri Praveen Agarwal made him director in several Jama Kharchi/Shell Companies of Shri Praveen Agarwal, he used to get a lump-sum payment of

As per the Assessing officer, the assessee availed accommodation entry in the form of unsecured loans and also shown to have paid interest on the loan taken. During the course of search, the key persons voluntarily under oath had admitted that the assessee availed bogus loan from the parties who were running business of providing bogus accommodation entries. As regards the claim of the assessee that in this case assessment was completed, etc. is not relevant as in this case, a search/survey action were carried out and the proceedings are based on the material found and seized during such action therefore, it overrules the general provisions of the Act. Therefore, the submission made by the assessee was rejected and the amount shown credited in the books of the assessee amounting to Rs 35,96,507/- was treated as unexplained cash credit u/s. 68 of the Act and the expenditure shown amounting to Rs 23,81,063/- was treated as unexplained expenditure u/s. 69C of the Act and the amount of Rs.59,77,570/- was thus brought to tax in the hands of the assessee.

Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A), wherein the ld. CIT(A) has confirmed the findings of the Assessing Officer and against the said order, the assessee is in appeal before us.

During the course of hearing, the ld. AR submitted that in all four years, similar additions are made except for the difference in the figures involved. Further, all four orders passed by the ld. CIT(A) are identical

It was submitted that M/s. Sulabh Resources Pvt. Ltd. is a registered NBFC with Reserve Bank of India and is in the business of money lending and borrowing and has a networth of more than Rs 12 crores. It was submitted that the director of the assessee company, Mr. Kashyap Mehta in his statement has clearly stated that the assessee company has taken unsecured loans from M/s. Sulabh Resources Pvt. Ltd., M/s. Sahanbhuti Distributors Pvt. Ltd. and M/s. Intero Infrastructure & Trading Pvt. Ltd. and therefore, it is a fact that all loan transactions are genuine recorded loan transactions undertaken by the assessee company. Regarding connection of the lender/borrower

It was further submitted that the Assessing Officer has relied on statement of Shri Pramod Ramdeen Sharma and that of Shri Pankaj Agarwal. It was submitted that Shri Pramod Ramdeen Sharma was never a director in M/s. Sulabh Resources Pvt. Ltd. He was a director with M/s. Sahanbhuti Distributors Pvt. Ltd. from 05.04.2004 till 31.03.2012 and thereafter, resigned from the company and reference was drawn to Form 32 filed with the Registrar of companies. It was submitted that the loan transaction between the assessee company and M/s. Sulabh Resources Pvt. Ltd., happened subsequent to his resignation in the financial year 2013-14 onwards and therefore, his statement has no bearing on the matter under consideration. It was submitted that the ld. CIT(A) who has passed the impugned order has himself taken cognizance of the said fact while deciding another matter in case of Sun and Shine Entertainers Private Limited for A.Y. 2016-17 vide his order dated 20.12.2024 and has deleted the addition of Rs. 50 lakhs under Section 68 of the Act. It was further submitted that Shri Pankaj Agarwal was never a director of M/s. Sulabh Resources Pvt. Ltd. and therefore, his statement has no relevance to the subject loan transaction.

It was further submitted that the assessee has submitted the necessary documentation to establish the initial onus cast on it in terms of identity, creditworthiness, and genuineness of the transaction by way

Similarly, it was submitted that regarding M/s. Sahanbhuti Distributors Pvt. Ltd. and M/s. Intero Infrastructure & Trading Pvt. Ltd. there are no fresh loan transactions during the any of the years under consideration, right from A.Y. 2014-15 to 2018-19, and it is only the payment of interest which has been made by the assessee company. It was submitted that the necessary documentation has been placed on record in terms of the balance confirmation, the ledger account, the bank statement, the ITR copy, audited financial statement of these companies, and in spite of that, the Assessing Officer has gone ahead and made the disallowance of the interest so paid by the assessee company to these companies. It was submitted that where there is no adverse finding recorded regarding the initial principal amount which has subsequently been repaid on 23.11.2015 in case of M/s. Sahanbhuti Distributors Pvt. Ltd. and on 11.06.2019 in case of M/s. Intero Infrastructure & Trading Pvt. Ltd., question of disallowance of interest does not arise for consideration. It was further submitted that the assessee has done due compliances in terms of TDS while making the payment of interest to these two entities and therefore, both in terms of the documentation and the tax compliances, the interest expenditure so claimed by the assessee company deserves to be allowed.

Further, reliance was placed on decision of Coordinate Mumbai Benches in case of ITO vs. Rubberwala Shelter, ITA No. 8258 & 8260/Mum/2025 dated 15.06.2026 and Mahindra Enterprises Firm vs. ACIT, ITA No. 4213/Mum/2025 dated 11.05.2026.

In his submissions, the ld. DR submitted that the Assessing Officer recorded that the assessee had received unsecured loans from entities such as M/s. Sulabh Resources Pvt. Ltd., M/s. Sahanbhuti Distributors Pvt. Ltd. and M/s. Intero Infrastructure & Trading Pvt. Ltd., which were identified by the Investigation Wing as shell companies managed by accommodation entry operators. Accordingly, the AO held that the assessee had failed to establish the identity, creditworthiness and genuineness of the lenders and made additions under Section 68, together with consequential disallowance of interest under Section 69C, wherever applicable. Further, it was submitted that during the course of search, Shri Kashyap Mehta, Managing Director of the Sunshine Group, was confronted with the statements of various accommodation entry operators. Despite admitting that the Group had obtained loans from the impugned entities, he was unable to explain the identity, address, directors, shareholders or financial capacity of the lender companies. He also failed to rebut the Investigation Wing findings and merely stated that, according to him, the loans were not bogus without producing any supporting evidence. The ld. CIT(A) has specifically noticed this aspect

It was submitted that the ld. CIT(A.) also noted that similar additions had already been confirmed in earlier appellate orders relating to the Sunshine Group and that several cases involving identical issues were pending adjudication. Thus, it was further submitted that the learned CIT(A.) found that the Assessing Officer's conclusions were fully supported by the search material and Investigation Wing findings. The learned CIT(A.) further observed that the assessee failed to place on record the complete submissions allegedly made before the Assessing Officer and also failed to produce any independent corroborative evidence establishing the genuineness of the impugned transactions. It was specifically held that mere filing of balance confirmations and ledger accounts cannot establish the genuineness of unsecured loan transactions. It was submitted that the learned CIT(A) reiterated that the assessee must establish (i) identity of the creditor, (ii) creditworthiness of the creditor and (iii) genuineness of the transaction, which constitutes

It was further submitted that during the course of hearing, the ld. AR has relied upon Form No. 32 to contend that Shri Pramod Ramdin Sharma had resigned as Director of M/s. Sahanbhuti Distributors Pvt. Ltd. with effect from 31.03.2012, and therefore his statement cannot be relied upon for the impugned assessment years. It was submitted that the said contention is misconceived and has rightly been rejected. The additions are not based solely upon the statement of Shri Pramod Ramdin Sharma. They are founded upon the cumulative effect of (i) the statement of Shri Kashyap Mehta recorded under section 132(4), (ii) the statement of Shri Pankaj Agrawal recorded under section 131 admitting that the lender concerns were accommodation entry providers, (iii) the Investigation Wing findings, and (iv) the incriminating material seized during the course of search. Therefore, the resignation of Shri Pramod Ramdin Sharma does not dilute the overwhelming evidence establishing that the impugned lender entities were shell companies engaged in providing accommodation entries.

It was submitted that the Revenue's appeal for AY-2014-15 is confined to the relief granted by the learned CIT(A.) in Para 10.24 relating to M/s. Sulabh Resources Pvt. Ltd. The learned CIT(A.), after recording categorical findings in Paras 10.2 to 10.23 that the assessee had failed to establish the identity, creditworthiness and genuineness of the impugned transactions and after accepting the Investigation Wing findings that the

It was finally submitted that the additions made by the Assessing Officer are not based merely upon isolated statements but upon a comprehensive body of evidence comprising the search material, Investigation Wing findings, statements recorded under Sections 132(4) and 131, documentary evidence and surrounding circumstances. The assessee has failed to discharge the statutory burden cast upon it under Section 68 by establishing the identity of the creditors, their creditworthiness and the genuineness of the impugned transactions. Mere production of bank statements, confirmations, ledger accounts, routing of funds through banking channels, deduction of tax at source or accounting entries cannot validate transactions with entities which have

We have heard the rival contentions and perused the material available on record. The transactions under consideration relates to unsecured loan transactions entered into by the assessee company with M/s. Sulabh Resources Pvt. Ltd, M/s. Sahanubhuti Distributors Pvt. Ltd. and M/s. Intero Infrastructure Trading Pvt. Ltd. Firstly, we take up the transactions with M/s. Sulabh Resources Pvt. Ltd. wherein, the Assessing Officer has brought to tax a sum of Rs. 38,30,195/- for A.Y. 2014-15, Rs. 2,15,10,643/- for A.Y. 2015-16, Rs. 4,23,27,163/- for A.Y. 2016-17 and Rs. 3,12,93,270/- for A.Y. 2018-19, which, as per the assessee, represent the principal amount of unsecured loan received by the assessee company and interest payment thereon except for A.Y. 2014-15, wherein the assessee claims the same to be a reverse transaction, wherein the assessee has initially advanced the loan to M/s. Sulabh Resources Pvt. Ltd. and which has been repaid to the assessee.

We find that the whole genesis of this addition in the hands of the assessee company arises out of the search proceedings under section 132 in case of M/s. Sunshine Housing and Infrastructure Private Limited and other group entities, wherein, the statement of the managing director of the Sunshine group of companies, Shri Kashyap Kanhaiyalal Mehta was recorded under section 132(4) of the Act on 10.10.2017. On perusal of the said statement, in response to question no. 8, he has submitted that

We find that basis said statement of Shri Pankaj Agarwal recorded under section 131 on 03.02.2015 and which was subsequently confronted to the managing director of the assessee company during the

The ld. CIT(A), in his order, has stated that Shri Pankaj Agarwal is a well-known accommodation entry provider, and the evidence unearthed by the Investigation Wing revealed that M/s. Sulabh Resources Private Limited was managed and controlled by him for providing accommodation entries in the form of unsecured loans, share premium, etc. Given that the said statement was confronted to Shri Kashyap Mehta during the course of search, the submissions of the assessee that the said company was acquired by Shri Kashyap Mehta and is part of its group of companies cannot be accepted, especially given that the said company was acquired by Shri Kashyap Mehta from well-known entry provider Mr. Jagdish Purohit without any valuation.

Further, the ld. CIT(A) stated that though Shri Kashyap Mehta stated that the loan from these companies is not bogus, in support, he failed to offer a proper explanation when the statement of entry operators and evidences were confronted to him. He also noted that Shri Kashyap

Thereafter, the ld. CIT(A) has stated that Sunshine Group is also involved in providing bogus accommodation entries and has, in turn, taken huge unsecured loans from dubious Kolkata-based concerns which were found to be paper companies not doing any business, managed and controlled by known entry operators, that the loans were taken from shell companies/paper companies; that they do not carry out any genuine business and transactions, that the assessee has failed to produce any evidence, including loan agreement, collateral, correspondences, and other particulars, during the course of search, assessment, and appellate proceedings, and these are paper entities used for layering of transactions and routing of unaccounted money as loan or share capital and passing it on to other such paper entities. Therefore, the statement of Kashyap Mehta that the loan is not bogus has no value and, hence, cannot be accepted in the absence of any evidence to the contrary brought on record by him. Finally, he held that the documentation furnished by the assessee is grossly insufficient for establishing that these credit entries and interest expenditure are genuine, the assessee has not discharged the onus cast on it, and mere submission of a bank account and ledger confirmation does not prove anything, that the assessee has routed non- genuine transactions, and the findings of the Assessing Officer were confirmed.

We, therefore, find that the ld. CIT(A) has given precedence to the statement of Shri Pankaj Agarwal as against the statement of Shri Kashyap Mehta recorded during search and, taking into consideration the fact that the assessee is otherwise engaged in providing/receiving bogus accommodation entries and there is lack of adequate documentation to support the transaction under consideration, has held

During the course of hearing, the ld. AR submitted that both the assessee company and M/s. Sulabh Resources Private Limited are registered Non-Banking Financial Companies with the Reserve Bank of India and are in the business of money lending and borrowing, and have substantial net worth as can be seen from their respective financial statements. It was submitted that these are genuine loan transactions undertaken by the assessee company as part of its routine financial business, and necessary documentation has been duly submitted during the course of assessment proceedings, and no adverse finding has been recorded by the Assessing Officer. It has also been submitted that Shri Pankaj Agarwal was never a director of M/s. Sulabh Resources Private Limited, and therefore, his statement has no relevance to the subject loan transaction, and, in any case, Mr. Kashyap Mehta in his statement has affirmed the transaction, stating that the transactions have been duly executed and recorded in the books of accounts. It was accordingly submitted that the assessee is not disputing the transaction wherein the funds have been received through the banking channels and which have been repaid from time to time, and finally repaid on 21.11.2017, however, the same duly stand substantiated with adequate documentation.

The ld. DR in his submission has reiterated the findings of the ld. CIT(A), and it was submitted that it is a case where the Investigation Wing has identified M/s. Sulabh Resources Private Limited as one of the shell entities managed by accommodation entry providers, and despite admitting by Shri Kashyap Mehta that his group has obtained loans from these entities, he was unable to explain the identity, address, directors, shareholders, or financial capacity of the lender companies, and he also

On consideration of entirety of facts and circumstances of the case, we find that the case of the Revenue is based on statement of Shri Pankaj Agarwal, which was recorded under section 131 dated 03.02.2015, and which was confronted to the Managing Director of the assessee company during the course of search at its premises on 10.10.2017. The contents of the said statement are not discernible either from the assessment order or from the impugned appellate order, nor has the same been brought to our notice during the course of hearing and therefore, we are not in a

In any case, the findings of the Investigation Wing are no doubt a good starting point wherein, as so submitted by the ld. CIT DR, that the lender entity have been “identified” as accommodation entry provider but what is more important to determine is how the status of the said entity has been “finally determined” by the Assessing Officer having jurisdiction over the said entity and therefore, merely stating that a certain entity has been identified as an accommodation entry provider without taking into consideration the subsequent development as to how the said entity has been treated and accepted either as a genuine business entity or as an accommodation entry provider cannot be the sole basis for holding the transaction so undertaken by the assessee company with said company as a non-genuine loan transaction. From perusal of records, we do not find any material which has been brought on record by the Assessing

Further, regarding the documentation so submitted by the assessee, the ld. CIT(A) has recorded a finding that the same are grossly insufficient for establishing the genuineness of the transaction and has referred to further documentation such as loan agreement, etc. which has not been submitted by the assessee. However, the question is whether the initial documentation was examined by the Assessing Officer at the first place and whether the assessee was put to notice in terms of lack of sufficiency of the documentation so submitted and to submit the further documentation either during the assessment or appellate stage.

We therefore find that in our overall analysis, the matter needs a fresh examination, wherein the statement of Pankaj Agarwal and his locus standi in the whole transaction has to be clearly brought on record, the findings of the investigation wing report and material gathered during the course of search are to be brought on record Further, it is equally relevant to examine the position adopted by the Revenue in case of M/s. Sulabh Resources Private Limited as to how the said entity has been finally treated for tax purposes and in particular, how the subject transactions have been treated in its hands and any dispute in relation thereto and related proceedings. Similarly, the documentation so submitted by the assessee needs to be examined, and the whole gamut of transactions both on the receipts and payments side needs to be considered and specific finding needs to be recorded as to why the same is not acceptable to the Assessing officer.

In light of the same, we deem it appropriate to set aside the matter relating to M/s Sulabh Resources Ltd to the file of the Assessing officer to examine the same afresh as per law after providing reasonable opportunity to the assessee. We find that similar fact pattern emerges as far as the other two entities, M/s. Sahanubhuti Distributors Pvt. Ltd. and M/s. Intero Infrastructure Trading Pvt. Ltd and matter relation thereto are also set-aside to the file of the Assessing officer to examine the same afresh as per law.

All the contentions on merits are thus left open and not adjudicated upon and the assessee is at liberty to raise the same before the Assessing officer where so advised.

In the result, the respective appeals for the assessee and the cross appeal for the Revenue are allowed for statistical purposes.

Now coming to ITA No. 1088/Mum/2026 for A.Y 2010-11 wherein the Assessee has taken the following grounds of appeal: “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the disallowance of interest on loan of Rs. 77,42,431/- in the hands of an appellant.

Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). During the appellate proceedings, it was submitted that the assessee has taken the loan through the banking channel and the loan has been repaid through the banking channel, and the assessee has paid interest and deducted TDS thereon. It was submitted that all requisite documents were submitted before the Assessing Officer including balance confirmation, bank statement, ledger account, financials and ITR, and the Assessing Officer did not consider any of the documentary evidence and disallowed interest paid of Rs. 77,42,431/-. It was submitted that the Assessing Officer did not establish that the

The submissions so filed by the assessee were considered, but not found acceptable to the ld. CIT(A). As per ld. CIT(A), the documentation furnished by the assessee is grossly insufficient for establishing that the credit entries and interest paid thereon are genuine. The assessee has not discharged the onus cast on it, and mere submission of a bank statement, bank account and a copy of ledger does not prove anything. It was further held that the repayment of the loan is no doubt a relevant factor, but same cannot be seen in isolation of other factors, and reliance was placed on various High Court and Coordinate Benches decisions. Further, the contention of the assessee that payments were made through banking channel were also held to be irrelevant and accordingly, the ld. CIT(A) held that the AO has rightly held that the transaction of money borrowed from M/s. Sunshine Merchant Private Limited was not a genuine transaction. Therefore, addition made by the Assessing Officer on account of interest disallowance as well as commission income was upheld. Against the said order, the assessee is in appeal before us.

During the course of hearing, the submissions made before the lower authorities were reiterated. It was submitted that the assessee is a registered NBFC with Reserve Bank of India and has reported an income of Rs. 2,39,35,545/-, which has been duly accepted by the Assessing Officer. It was further submitted that M/s. Sunshine Merchant Private Limited also has a net worth of Rs. 6,34,60,511/-. Further, the loan transaction is duly supported by the bank statements as well as the confirmation submitted by M/s. Sunshine Merchant Private Limited. Further, the loan amount has been duly repaid during the year on

Per contra, the ld. DR submitted that the assessment was validly reopened under section 147 on the basis of specific information received from the Director of Income Tax (Investigation), Unit-3(4), Mumbai, that the assessee had received unsecured loan of Rs.9,76,95,000 from M/s. Sunshine Merchants Pvt. Ltd., which was found to be a non-creditworthy entity providing accommodation entries. During the reassessment proceedings, the Assessing Officer found that the assessee had borrowed and repaid the said loan during the same financial year while claiming interest expenditure of Rs.77,42,431/-. It was submitted that the Assessing Officer held that the funds of M/s. Sunshine Merchants Pvt. Ltd. were merely routed through the assessee company and that the assessee had acted as a conduit for facilitating accommodation entries. Accordingly, the interest expenditure of Rs.77,42,431 was disallowed. The Assessing Officer further estimated commission income at 0.50% of the accommodation entries amounting to Rs.4,88,475, considering the prevailing market practice adopted by accommodation entry operators.

It was further submitted that the ld. CIT(A.), after independently examining the assessment records and the material available on record, upheld the findings of the Assessing Officer. In Paras 9.9 to 9.11 of its order, the ld. CIT (A) observed that the assessee failed to establish the identity of the creditor, the creditworthiness of the creditor and the genuineness of the transaction. The assessee failed to produce basic

It was submitted that the Assessing Officer, on the basis of the investigation findings and the material available on record, rightly concluded that the assessee had acted as an accommodation entry provider by routing non-genuine loan transactions. Accordingly, the Assessing Officer estimated commission income at 0.50% of the accommodation entries, which was rightly confirmed by the learned CIT(A.). The estimation is neither arbitrary nor excessive but is based on the recognised modus operandi adopted by accommodation entry operators. Reliance was placed on the decision of ITAT, Surat Bench in Sanjay Kumar Choudhary (HUF) v. ACIT [2022] 136 taxmann.com 151 (Surat-Trib.), wherein the Tribunal, on the basis of incriminating material and statements recorded during search, upheld estimation of commission income at 0.50% on accommodation entries and held that

It was submitted that the contention of the ld AR that the ld. CIT (A) merely reiterated the findings of the predecessor without independent application of mind is wholly misconceived. The impugned appellate order contains independent findings recorded after considering the assessment records, the submissions of the assessee and the settled legal position. The reference to earlier appellate orders has been made only for maintaining consistency on identical issues and does not vitiate the independent adjudication undertaken by the ld. CIT(A.). The findings recorded by the Assessing Officer are duly supported by the Investigation Wing report, the material available on record and the surrounding circumstances. The assessee has failed to produce any cogent or independent evidence to rebut these findings or to establish the genuineness of the impugned loan transaction. The additions have, therefore, been rightly sustained by the ld. CIT(A). In view of the facts of the case, the findings recorded by the Assessing Officer, the detailed and reasoned order passed by the learned CIT (A.), and the settled judicial precedents governing Section 68 of the Act, it was submitted that the appeal filed by the assessee be dismissed and the order of the ld. CIT(A) be upheld.

We have heard the rival contentions and perused the material available on record. The transaction under consideration relates to unsecured loan transaction entered into by the assessee company with M/s Sunshine Merchants Private Limited. The case of the assessee was reopened u/s 147 information received from DDIT Investigation Wing Mumbai that M/s. Sunshine Merchants Private Limited extended unsecured loan to several entities and assessee is one of those entities and basis investigation, it was found that the said entity is not creditworthy of advancing loan to the tune of Rs. 9,76,95,000/-. Basis the said information, the reasons were recorded and notices were issued to the assessee to substantiate the unsecured loan transaction through appropriate documentation. Nothing is discernible from the records in terms of any submissions/ documentation filed by the assessee during the course of assessment proceedings and/or considered by the Assessing officer. The Assessing Officer basis investigation wing report held that it is a case of a non-genuine loan transaction, wherein the money pertaining to M/s. Sunshine Merchants Private Limited has been routed through the assessee company and assessee has basically acted as a conduit for facilitating the accommodation entry by way of an unsecured loan transaction and interest expenditure was disallowed and certain commission income was brought to tax in the hands of the assessee.

During the appellate proceedings, the assessee has submitted that it is a case of genuine loan transaction which has been taken and repaid during the year along with interest after due tax compliances and has submitted necessary documentation before the Assessing Officer and which has not been considered by the Assessing Officer and he has gone ahead and disallowed the expenditure towards claim of interest amounting to Rs. 77,42,431/- and computed certain income by way of commission. As per ld. CIT(A), the documentation furnished by the

During the course of hearing, the submissions made before the lower authorities were basically reiterated before us. On consideration of entirety of the facts and circumstances of the case, we find that the case of the Revenue is based on the findings of its investigation wing wherein M/s. Sunshine Merchants Private Limited was held to be a non- creditworthy entity of advancing loan to the tune of Rs. 9,76,95,000/-. However, the basis of arriving at such a finding by the investigating wing is not discernible from the assessment order, nor the same has been brought to our notice during the course of hearing and therefore, we are not in a position to properly appreciate the findings so recorded by the Assessing Officer, wherein the unsecured loan transaction was held to be a non-genuine transaction and the assessee was held to be acting as a conduit for facilitating accommodation entry.

Further, we find that under identical fact pattern in the other assessment years where the unsecured loan transaction has been held to be non- genuine, as we have noted earlier, the Assessing Officer has brought the whole amount of credit as unexplained credit to tax without taking into consideration repayments thereof. In the instant case, the Assessing Officer has not brought the whole of the credit to tax. However, a percentage of the transaction value has been brought to tax for facilitating the accommodation entry representing an inconsistent approach and separately, the interest expenditure so claimed by the assessee has been disallowed.

Further, regarding the documentation so submitted by the assessee, the ld. CIT(A) has recorded a finding that the same are grossly

We therefore find that in our overall analysis, the matter needs a fresh examination, wherein the findings of the investigation wing report are to be brought on record and what is the basis of arriving at the finding that M/s. Sunshine Merchants Private Limited was a non-creditworthy entity of advancing loan to the tune of Rs. 9,76,95,000/-, and that the transaction so entered into by the assessee was not a genuine loan transaction and is a mere transaction for facilitating the accommodation entries wherein there are credits and debits in the assessee bank account and in its books of accounts without any commercial rationale or understanding. Further, it is equally relevant to examine the position adopted by the Revenue in case of M/s. Sunshine Merchants Private Limited as to how the said entity has been treated for tax purposes and in particular, how the subject transaction of Rs. 9,76,95,000/- has been treated in its hands and any dispute in relation thereto and related proceedings. Similarly, the documentation so submitted by the assessee needs to be examined and specific finding needs to be recorded as to why the same is not acceptable to the Assessing officer. In light of the same, we deem it appropriate to set aside the matter to the file of the Assessing officer to examine the same afresh as per law after providing reasonable opportunity to the assessee. All the contentions on merits are thus left open and not adjudicated upon and the assessee is at liberty to raise the same before the Assessing officer where so advised. In the result, the appeal of the assessee is allowed for statistical purposes.

In the result, all the appeals filed by the assessee as well as Revenue are allowed for statistical purposes.