INCOME TAX OFFICER - 9(1)(1), MUMBAI, MUMBAI vs. ACQUITOR FINANCIAL S ERVICES PVT LTD, MUMBAI

PDF · subscribers
ITA 6838/MUM/2026Status: DisposedITAT Mumbai05 October 2026AY 2015-1611 pages
AI SummaryDismissed

What did the Tribunal hold?

For AY 2014-15, the Tribunal upheld the CIT(A)'s deletion of the ₹62,50,000/- addition. The Tribunal found that the CIT(A) had considered the documentary evidence, including confirmations, bank statements, financial statements, and replies under Section 133(6), and noted the substantial net worth and turnover of the lenders. The Tribunal agreed that routing funds through banking channels and providing documentation, when not specifically rebutted by the Revenue with adverse material beyond general investigation findings, was sufficient to establish the identity, creditworthiness, and genuineness of the transactions. The Tribunal dismissed the Revenue's appeal on this issue. For AY 2015-16, the Tribunal upheld the CIT(A)'s deletion of ₹1,00,00,000/-. The Tribunal found that the CIT(A) correctly identified that the transaction with M/s Victory Sales Pvt. Ltd. was an advance of ₹35,00,000/- by the assessee, creating a debit balance, thus not a credit under Section 68. Similarly, the amount from M/s B.K. Dyeing & Printing Mills Pvt. Ltd. was an opening balance from the previous year, not subject to Section 68 in the current year. The Tribunal also found that the remaining loan of ₹15,00,000/- from M/s P. Saji Textiles Ltd. was supported by sufficient documentary evidence and the lender had the financial capacity, and the AO had not brought specific material to rebut this. Therefore, the Tribunal dismissed the Revenue's appeal for this AY as well.

What were the facts?

The assessee, Acquitor Financial Services Pvt. Ltd., is in appeal against orders of the CIT(A) for Assessment Years (AY) 2014-15 and 2015-16. The Assessing Officer (AO) reopened assessments under Section 147 based on information from an Investigation Wing search concerning Shri Vipul Vidur Bhatt, an alleged entry operator. The assessee had received unsecured loans of ₹62,50,000/- in AY 2014-15 from M/s Shipra Fabrics Pvt. Ltd. and M/s Shyam Alcohol & Chemicals Ltd., which were allegedly controlled by Shri Bhatt. The AO added this amount as unexplained cash credit under Section 68, treating the lenders as accommodation entry providers. The CIT(A) deleted this addition. For AY 2015-16, the AO made an addition of ₹1,15,00,000/- under Section 68 from M/s P. Saji Textiles Ltd., M/s Victory Sales Pvt. Ltd., and M/s B.K. Dyeing & Printing Mills Pvt. Ltd. The CIT(A) deleted ₹1,00,00,000/- of this addition.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition of ₹62,50,000/- under Section 68 of the Income-tax Act, 1961, for AY 2014-15, by not properly appreciating material facts and evidence? The Revenue argued that the assessee failed to discharge its onus under Section 68 to establish the identity, creditworthiness, and genuineness of the loan transactions, and that the CIT(A) relied on documentary evidence without examining credibility, especially when lenders were found to be accommodation entry providers. The Revenue also contended that the CIT(A) ignored the Investigation Wing findings and Shri Vipul Vidur Bhatt's statement under Section 132(4) admitting to providing bogus entries, and that the assessee failed to produce lenders for verification. The assessee argued that the loans were genuine, supported by confirmations, bank statements, ITRs, and financial statements, and that Shri Bhatt's statement was general, uncorroborated, and retracted. 2. Whether the CIT(A) erred in deleting the addition of ₹1,00,00,000/- for AY 2015-16, comprising amounts from M/s Victory Sales Pvt. Ltd. and M/s B.K. Dyeing & Printing Mills Pvt. Ltd.? The Revenue argued that the CIT(A) failed to appreciate the overall nature and genuineness of transactions and that non-genuine credits can be examined irrespective of the year of origin. The assessee contended that the amount from M/s Victory Sales Pvt. Ltd. was an advance by the assessee, resulting in a debit balance, and the amount from M/s B.K. Dyeing & Printing Mills Pvt. Ltd. was an opening balance from a prior year, not taxable under Section 68 for the current year.

Which sections of the Income-tax Act were involved?

Section 68,Section 147,Section 132(4),Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI SIDDHARTHA NAUTIYAL

For Respondent: Shri Ravikant Pathak, CA

आदेश / ORDER

PER SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:

These appeals are filed by the Department against the order of Ld. CIT(A) for the Assessment Years 2014-15 & 2015-16 respectively. Since the facts and issues for consideration are substantially common for the appeals of the Department for Assessment Years 2014-15 & 2015-16, both these appeals are being disposed of by way of a common order.

ITA Number 6841/Mum/2026, A.Y: 2014-15

The Department has raised the following grounds of appeal:

1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition under section 68 of the Income-tax Act, 1961 of Rs.62,50,000/- made by the Assessing Officer without properly appreciating the material facts and evidence available on record. 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not discharged the onus cast upon it under section 68 of the Act to establish the identity, creditworthiness, and genuineness of the loan transactions. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying merely on documentary evidence such confirmations, bank statements, ITRs, and financial statements, without examining their credibility and surrounding circumstances, especially when the lender entities were found to be accommodation entry providers. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Investigation Wing findings, based on search action under section 132, clearly established that the lender companies were controlled by entry operator Shri Vipul Vidur Bhatt, who admitted to providing bogus accommodation entries. 5) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the statement recorded under section 132(4) of Shri Vipul Vidur Bhatt, wherein he categorically admitted that the entities, including the lenders in the present case, were engaged in providing accommodation entries. 6) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to consider that the assessee did not produce the loan creditors for verification, despite being afforded sufficient opportunities during the assessment proceedings, thereby failing to substantiate the genuineness of the transactions. 7) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the Assessing Officer had not brought any (adverse material on record, ignoring the specific investigation findings, corroborative evidence, and matching transaction details received from the Investigation Wing. 8) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that mere routing of funds through banking channels does not establish genuineness when the transactions are part of a pre-arranged accommodation entry mechanism. 9) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the modus operandi of entry providers, as unearthed during search proceedings, which clearly indicated that such transactions were not genuine but were meant for introduction of unaccounted income. 10) 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 11) The appellant craves leave to add, amend, alter, OR withdraw any ground of appeal at the time of hearing.

2.

The brief facts of the case are that the assessee, M/s Acquitor Financial Services Pvt. Ltd., filed its return of income for A.Y. 2014-15 declaring total income of ₹1,29,450/-. Subsequently, the Assessing Officer received information from the Investigation Wing that a search and seizure action under section 132 of the Act had been carried out in the case of Shri Vipul Vidur Bhatt and related entities. During the search, Shri Vipul Vidur Bhatt stated that he was engaged in providing accommodation entries through several entities controlled by him. The information further with the Department showed that the assessee had received unsecured loans of ₹2,50,000/- from M/s Shipra Fabrics Pvt. Ltd. and ₹60,00,000/- from M/s Shyam Alcohol & Chemicals Ltd., amounting to ₹62,50,000/-, and both these concerns were controlled by Shri Vipul Vidur Bhatt. On the basis of this information, the Assessing Officer reopened the assessment under section 147 of the Act. In response, the assessee filed its return declaring the same income of ₹1,29,450/-.

3.

During the reassessment proceedings, the assessee submitted that the loans were genuine business loans and the assessee furnished confirmations, income-tax return acknowledgements, bank statements and financial statements of the lenders. The assessee also contended that the statement of Shri Vipul Vidur Bhatt was general in nature, did not specifically refer to the assessee and had subsequently been retracted. The Assessing Officer did not accept these explanations. He relied upon the findings of the Investigation Wing and the statement of Shri Vipul Vidur Bhatt, wherein M/s Shipra Fabrics Pvt. Ltd. and M/s Shyam Alcohol & Chemicals Ltd. were entities used for providing accommodation entries. The Assessing Officer also observed that the assessee had failed to produce the lenders for examination and held that routing the transactions through banking channels and furnishing documentary evidence would not by itself establish the genuineness of the loans in the light of the investigation findings. The Assessing Officer treated the loans of ₹62,50,000/- as unexplained cash credits and added the same to the income of the assessee. The Assessing Officer accordingly assessed the total income at ₹63,79,450/-.

4.

The assessee carried the matter in appeal before the learned CIT(Appeals).

5.

On the merits of the addition under section 68, however, the learned CIT(Appeals) accepted the case of the assessee. During the appellate proceedings, the assessee placed on record confirmations, income-tax return acknowledgements, audited financial statements, bank statements and replies filed by the lenders in response to notices issued under section 133(6) of the Act. The assessee also filed affidavits of Shri Vipul Vidur Bhatt confirming the transactions and produced evidence showing subsequent repayment of the loans through banking channels. The learned CIT(Appeals) also obtained a remand report from the Assessing Officer dated 27.02.2026 and observed that the Assessing Officer had mainly reiterated the findings of the Investigation Wing regarding the modus operandi without bringing any specific material to rebut the documentary evidence furnished by the assessee.

6.

The learned CIT(Appeals) further noted that M/s Shipra Fabrics Pvt. Ltd. had a net worth of about ₹3.42 crore and turnover of about ₹83.99 crore, while

M/s Shyam Alcohol & Chemicals Ltd. had a net worth of about ₹16.34 crore and turnover of about ₹45.61 crore. He also noted that the loans had been advanced and subsequently repaid through banking channels and that the bank statements did not show corresponding cash deposits. The CIT(Appeals) placed reliance on various decisions of the Tribunal concerning loans received from the same entities, the learned CIT(Appeals) held that a general third-party statement, without any specific corroborative material against the assessee, could not override the documentary evidence placed on record. The CIT(Appeals) held that the assessee had satisfactorily established the identity and creditworthiness of the lenders and the genuineness of the transactions and deleted the addition of ₹62,50,000/- made under section 68 of the Act. The CIT(Appeals) allowed the appeal of the assessee on merits.

7.

The Department is in appeal before us against the order passed by the learned CIT(Appeals).

8.

We have heard the rival submissions and perused the material available on record. The Assessing Officer made additions on the basis of information received from the Investigation Wing that the assessee had obtained accommodation entries in the form of unsecured loans of ₹2,50,000/- from M/s Shipra Fabrics Pvt. Ltd. and ₹60,00,000/- from M/s Shyam Alcohol & Chemicals Ltd. The basis of the Assessing Officer was the statement of Shri Vipul Vidur Bhatt and the investigation carried out in his case.

9.

However, the learned CIT(Appeals) observed that the assessee had furnished confirmations from both the lenders, their income-tax return acknowledgements, audited financial statements, bank statements and ledger accounts. The lenders had also responded to notices issued under section 133(6) of the Act and confirmed the transactions. The assessee further placed on record affidavits confirming the loans. The learned CIT(Appeals) obtained a remand report from the Assessing Officer dated 27.02.2026. Even in the remand proceedings, the Assessing Officer mainly relied upon the general findings of the Investigation Wing regarding the modus operandi of Shri Vipul Vidur Bhatt and did not point out any specific defect in the documents relating to these particular loan transactions of the assessee.

10.

The CIT(Appeals) observed that M/s Shipra Fabrics Pvt. Ltd., which advanced ₹2,50,000/- to the assessee, had a net worth of about ₹3.42 crore and turnover of about ₹83.99 crore during the relevant year. Further, M/s Shyam Alcohol & Chemicals Ltd., which advanced ₹60,00,000/- to the assessee, had a net worth of about ₹16.34 crore and turnover of about ₹45.61 crore. Thus, the amounts advanced to the assessee were not disproportionate to the financial position and scale of operations of the lenders. The bank statements also did not show any corresponding cash deposit immediately preceding the advancement of the loans. The transactions were routed through normal banking channels.

11.

There is another important factual aspect. Out of the total loan of ₹62,50,000/-, the substantial amount of ₹60,00,000/- received from M/s Shyam Alcohol & Chemicals Ltd. had already been repaid by the assessee much before initiation of the reassessment proceedings. The assessee repaid ₹15,00,000/- on 02.08.2017 and the balance ₹45,00,000/- on 04.09.2017. Thus, the entire loan of ₹60,00,000/- was repaid by the assessee before the Assessing Officer issued notice under section 148 on 15.12.2017. The remaining loan of ₹2,50,000/- received from M/s Shipra Fabrics Pvt. Ltd. was subsequently repaid on 13.08.2018 through banking channels. Therefore, the record shows not merely receipt of money through banking channels but also its subsequent repayment through the banking system. Though repayment by itself may not conclusively establish genuineness; however, when considered along with the confirmations, financial statements, bank accounts, replies under section 133(6) of the Act, financial capacity of the lenders and absence of any specific contrary material, it is an important corroborative circumstance.

12.

We also find substance in the observation of the learned CIT(Appeals) that the statement of Shri Vipul Vidur Bhatt was general in nature insofar as the assessee's transactions were concerned. The Assessing Officer did not bring on record any material showing that cash belonging to the assessee had moved to the lenders before the loans were advanced, nor did he identify any cash trail, layering of the assessee's own funds or any other material connecting the assessee with the accommodation-entry mechanism in respect of these two transactions.

13.

The learned CIT(Appeals), after examining the documentary evidence and the remand report, held that the assessee had established the identity of the lenders, their creditworthiness and the genuineness of the transactions. The Revenue has not brought before us any material to show that these factual findings are incorrect. The Department did not place any material before us to rebut the turnover and net worth of the lenders, the payments through banking channels, the replies filed by the lenders under section 133(6) of the Act, or the subsequent repayment of the loans.

14.

Considering the facts in their entirety, the financial standing of the two lenders, the substantial turnover carried on by them, the banking trail, the confirmation of transactions, the replies furnished in response to notices under section 133(6) of the Act, the absence of any cash trail emanating from the assessee and, importantly, the fact that ₹60,00,000/- out of the total loan of ₹62,50,000/- had already been repaid on 02.08.2017 and 04.09.2017, much before issuance of notice under section 148 on 15.12.2017, we find that the material relied upon by the Assessing Officer does not justify treating these particular transactions as unexplained or bogus accommodation entries. We find no infirmity in the order of Ld. CIT(A) so as to call for any interference

15.

In the result, appeal of the Department is dismissed.

ITA Number 6838/Mum/2026 (assessment year 2015-16)

The Department has raised the following grounds of appeal:

1.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the AO u/s. 68 of the Income Tax Act, 1961 of Rs.1,15,00,000/- without properly appreciating the facts and evidence on record.

2.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the addition was based on specific information received from the Investigation Wing pursuant to search u/s. 132 of the Act, wherein the entry operator had admitted to providing bogus accommodation entries through the entities from whom the assessee claimed to have received loans.

3.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee had discharged the onus u/s. 68 of the Act merely on the basis of documentary evidence such as confirmations, bank statements, and ITRs, without appreciating that such documents do not establish genuineness when the lenders are found to be paper companies engaged in accommodation entries.

4.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee did not produce the loan creditors for verification despite being provided sufficient opportunity, thereby failing to discharge the primary onus cast upon it under Section 68 of the Act.

5.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the statement recorded u/s 132(4) of Shri Vipul Vidur Bhatt, wherein he categorically admitted that the lender entities were engaged in providing bogus accommodation entries.

6.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition in respect of M/s Victory Sales Pvt. Ltd. by treating the transaction as a debit balance without appreciating the overall nature and genuineness of the transaction, 9 MAY 2026

7.

On the facts and in the circumstances of the case and in law, the Ld. Mills Pvt. Ltd. on the ground that it represented an opening balance, without CIT(A) erred in deleting the addition in respect of M/s B.K. Dyeing & Printing appreciating that non- genuine credits can be examined when detected, irrespective of the year of origin.

8.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee could not establish the real creditworthiness of the lenders and merely relied on paper documentation.

9.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to consider the matching of transaction details with the Investigation Wing data, which clearly established the involvement of the assessee in accommodation entry transactions.

10.

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

11.

The appellant craves leave to add, alter, amend or withdraw any ground of appeal at the time of hearing.

In this case, the Assessing Officer had made an addition of ₹1,15,00,000/- 16. under section 68 of the Act on the ground that the assessee had received loans from M/s P. Saji Textiles Ltd., M/s Victory Sales Pvt. Ltd. and M/s B.K. Dyeing & Printing Mills Pvt. Ltd. The learned CIT(Appeals), however, on analysis of the ledger accounts, bank statements and other documents, found that this factual premise itself was incorrect insofar as ₹1,00,00,000/- was concerned. In the case of M/s Victory Sales Pvt. Ltd., the assessee had not received any loan but had itself advanced ₹35,00,000/- during the year, resulting in a debit balance in its books. Therefore, there was no credit capable of being examined under section 68 of the Act. Similarly, the amount of ₹65,00,000/- relating to M/s B.K. Dyeing & Printing Mills Pvt. Ltd. was an opening balance brought forward from the earlier year and there was no transaction with that party during the year under consideration. Such an opening balance could not be brought to tax under section 68 in A.Y. 2015-16. The learned CIT(Appeals), therefore deleted the addition of ₹1,00,00,000/- on these two counts.

As regards the only loan actually received during the year of ₹15,00,000/- 18. from M/s P. Saji Textiles Ltd., we find that the assessee had furnished the ledger confirmation, bank statement, income-tax return acknowledgement, audited financial statements and the reply furnished by the lender directly to the Assessing Officer under section 133(6) of the Act. The learned CIT(Appeals) observed that M/s P. Saji Textiles Ltd. had a net worth of about ₹3.68 crore and turnover of about ₹191.11 crore during the relevant year, which clearly demonstrated its financial capacity to advance a loan of ₹15,00,000/-. The transaction was through banking channels and the Assessing Officer, even in the remand report, did not point out any specific defect in these documents but merely reiterated the general findings of the Investigation Wing and the statement of Shri Vipul Vidur Bhatt. In the absence of any specific material brought by the Revenue to rebut the documentary evidence or the factual findings recorded by the learned CIT(Appeals), we find no reason to interfere with his conclusion that the assessee had established the identity and creditworthiness of the lender and the genuineness of the transaction. In the result, the appeal of the Revenue is accordingly dismissed.

19.

In the combined result, both the appeals filed by the Department are dismissed.

Order pronounced in the open court on 05th Oct, 2026.

Sd/- Sd/- OM PRAKASH KANT SIDDHARTHA NAUTIYAL ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 05 Oct, 2026 KRK, Sr. PS Copy to: INCOME TAX OFFICER - 9(1)(1), MUMBAI, ROOM NO. 205, 2ND FLOOR, AAYKAR 1 BHAVAN, MUMBAI, MUMBAI-400020, MAHARASHTRA ACQUITOR FINANCIAL S ERVICES PVT LTD, 2 B-304, MOTA NAGAR, ANDHERI KURLA ROAD, CHAKALA ANDHERI EAST, MUMBAI-400099, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Latest GST High Court judgments

Search GST case law →