M/S. SARVESH MERCANTILE PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE 2(1) MUMBAI, MUMBAI

ITA 1951/MUM/2026Status: DisposedITAT Mumbai15 October 2026AY 2014-1525 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal partly allowed the appeal concerning the addition made on account of estimated business income. For AY 2014-15, the addition was restricted to 2% of sales, instead of the 5% initially made by the AO. This decision was applied mutatis mutandis to the instant ground. Regarding the addition of Rs. 2,06,56,349/- under section 68, the Tribunal upheld the authorities below. The assessee failed to satisfy the three conditions required to establish the burden of proof for loans: identity, creditworthiness, and genuineness of the transaction. While identity was established, the creditworthiness of the lenders and the genuineness of the transactions were not proved, even after ample opportunity. Summons issued to the lending entities were not complied with, and statements from directors of these entities indicated they were 'paper companies' used for accommodation entries. Therefore, the loans were treated as bogus and added back to the income. The Tribunal noted that the grounds for AY 2013-14 were adjudicated against the assessee, and the decision applied to the instant appeal.

What were the facts?

The assessee, M/s Sarvesh Mercantile Pvt. Ltd., is in appeal before the Income Tax Appellate Tribunal (ITAT) against the order of the Commissioner of Income Tax (Appeals), CIT(A)-48, Mumbai. The appeals pertain to Assessment Years (AYs) 2013-14, 2014-15, and 2015-16. The original assessment order was passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. The Assessing Officer (AO) made additions on account of alleged bogus sales and unsecured loans. A previous appeal to the ITAT had set aside certain issues and remitted them to the AO for fresh examination, allowing the assessee to produce additional evidence. In compliance, fresh proceedings were initiated, during which the assessee failed to provide sufficient evidence to prove the genuineness of its business transactions and the creditworthiness of loan lenders.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the CIT(A) erred in confirming the AO's action in rejecting the returned loss of Rs. (10,57,574/-) and estimating the income at 2% on sales, by rejecting the books of accounts under section 145(3) of the Income Tax Act, 1961. 2. Whether the CIT(A) erred in confirming the AO's action in making an addition of Rs. 2,35,00,000/- under section 68 of the Income Tax Act, 1961, considering unsecured loans as unexplained cash credits. Assessee's contentions: - The AO's rejection of books of accounts and estimation of income was done without considering the facts and circumstances. - The unsecured loans were taken for certain parties and should not be treated as unexplained cash credits. Revenue's contentions: - The revenue relied on the orders of the authorities below. - The assessee failed to prove the genuineness of its business transactions and the creditworthiness of the lenders.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 145(3),Section 68,Section 131,Section 46A(1)(d)

AI-generated summary — verify with the full judgment below

Before: SHRI SIDDHARTHA NAUTIYAL & SHRI PRABHASH SHANKAR

For Appellant: Shri Rakesh Joshi, AR
For Respondent: Shri Basavaraj Hiremath, CIT-DR a/w, Shri Rajgopal Parthasarathi, Sr.DR
Hearing: 23.09.2026Pronounced: 15.10.2026

PER PRABHASH SHANKAR [A.M.] :- The above captioned appeals preferred by the assessee emanate from the order passed by the Learned Commissioner of Income-tax, Appeal, CIT(A)-48, Mumbai [hereinafter referred to as “CIT(A)”]

P a g e | 2 ITA No. 1950, 1951 &1952/Mum/2026 A.Y. 2013-14, 2014-15& 2015-16 M/s Sarvesh Mercantile Pvt. Ltd. pertaining to assessment order passed u/s. 143(3) r.w.s. 254 of the Income

The order continues below.

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