The Pr. Commissioner Of Income Tax (Central) vs. M/S Shri Govind Realty Pvt Ltd

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ITA/53/2025HC Madhya Pradesh07 May 2026Bench: HON'BLE SHRI JUSTICE VIVEK RUSIA9 pages
For Petitioner: Siddharth Sharma[P-1]
AI SummaryDismissed

What did the High Court hold?

The High Court held that the proposed questions of law were not questions of law but were based on facts concurrently found by the CIT(A) and the ITAT. The Court found no perversity in these findings, noting that the assessee had filed various documents, including the lender's confirmation, bank statement, ITR, audited financial accounts, MCA portal data, and Form 16A for TDS. The lender, M/s East West Finvest India Limited, was an RBI-registered NBFC, and its return of income and NBFC certificate were provided. The Court found that the assessee had discharged its onus under Section 68 by submitting documentary evidence, including the lender's balance sheet showing sufficient funds. The Court also noted previous ITAT decisions in cases involving M/s East West Finvest India Limited, which held it to be a genuine company. The Court further observed that the tax effect of Rs. 1,82,61,900 was below the CBDT's prescribed limit of Rs. 2,00,00,000. Consequently, the Court found no substantial question of law involved and dismissed the appeal at the admission stage.

What were the facts?

The Revenue (Principal Commissioner of Income Tax) has appealed against an order of the ITAT, Indore Bench, dated January 20, 2025. The appeal concerns Assessment Year 2016-17 and relates to the deletion of an addition of Rs. 6,71,00,000 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, for unexplained unsecured loans. A search under Section 132(1) was conducted on the assessee, M/s Shree Govind Realty Pvt. Ltd., on May 16, 2018. The AO added Rs. 6.71 crores, including a loan of Rs. 5.91 crores from M/s East West Finvest India Limited, finding the lenders' creditworthiness and transaction genuineness unsubstantiated. The CIT(A) deleted the addition, holding that the assessee proved identity, creditworthiness, and genuineness, and that some amounts were opening balances. The ITAT affirmed the CIT(A)'s decision.

What were the issues?

1. Whether on the facts and circumstances and in law, the ITAT was justified in upholding the CIT(A)'s deletion of the Rs. 5,91,00,000 addition under Section 68, despite the assessee allegedly failing to discharge its burden regarding the unsecured loan from M/s East West Finvest India Limited. 2. Whether on the facts and circumstances and in law, the ITAT was justified in upholding the CIT(A)'s deletion of the Rs. 5,91,00,000 addition under Section 68, considering: (a) that mere submission of ITR, PAN, confirmation, and bank statements does not prove lender creditworthiness and transaction genuineness; (b) that M/s East West Finvest India Limited had no fixed assets, huge accumulated losses, and reserves mainly from 'Security premium' & 'Share Forfeit Reserve', incurring a loss of Rs. 5.69 crores; (c) that the lender received funds in 23 tranches from a shell company, Jay Jyoti India Pvt. Ltd., and immediately transferred them to the assessee; (d) that summons issued to lenders under Section 131 were unserved or unanswered. 3. Whether on the facts and circumstances and in law, the ITAT's findings and decision suffer from perversity by failing to allude to relevant facts, misreading evidence, and misinterpreting the legal position, as per the ratio in Sudarshan Silk and Sarees (300 ITR 205 SC). Revenue's contentions: The ITAT erred by not appreciating the lender's lack of creditworthiness (net loss of Rs. 5.69 crores, no fixed assets). Mere submission of documents is insufficient if the lender's financial health is suspect. The lender received funds from a shell company and immediately transferred them to the assessee, indicating accommodation entries. Lenders failed to respond to summons under Section 131. Reliance on the absence of incriminating material during search is misplaced. Assessee's contentions: The assessment for AY 2016-17 was unabated at the time of search, so additions under Section 153A require specific incriminating material found during the search, which was absent for these loans. The assessee discharged its onus by providing PAN, address, ITRs, and bank statements of lenders. M/s East West Finvest India Ltd. is an RBI-registered NBFC. A business loss in a year does not negate its capacity to lend. Transactions were through banking channels, and interest was paid, with TDS accepted by the department. A significant portion of the addition related to brought-forward opening balances, not originating in the current year.

Which sections of the Income-tax Act were involved?

Section 68,Section 132,Section 153A,Section 131,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE VIVEK RUSIA & HON'BLE SHRI JUSTICE PRADEEP MITTAL ON THE 07th OF MAY, 2026 INCOME TAX APPEAL No. 53 of 2025 THE PR. COMMISSIONER OF INCOME TAX (CENTRAL) Versus M/S SHRI GOVIND REALTY PVT LTD Appearance: Shri Harpreet Singh Gupta, learned Advocate for the petitioner. Shri Abhijeet Shrivastava, learned counsel for the respondent No.1. ORDER Per: Justice Vivek Rusia

This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), is directed against the order of the Income Tax Appellate Tribunal (for brevity “ITAT”), Indore Bench, dated 20.01.2025. The dispute pertains to the Assessment Year 2016- 17 and centers on the deletion of an addition of Rs. 6,71,00,000/- made by the Assessing Officer under Section 68 of the Act on account of unexplained unsecured loans. Facts of the case, in short, are as under:- 2. The respondent/assessee (Shree Govind Reality Pvt. Ltd.) is a private limited company engaged in the construction, sale and renting of Aashima Shopping Mall in Bhopal. A search and seizure operation under Section 132(1) of the Act was conducted at the business premises of the 1 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

assessee on 16.5.2018. Following the search, notices under Section 153A of the Act were issued to the assessee for multiple assessment years, including the year under consideration. During the assessment proceedings, the Assessing Officer (AO) scrutinised the unsecured loans appearing in the assessee's books of accounts. The Assessing Officer identified substantial credits from various entities, primarily a loan of Rs. 5.91 crores from M/s East West Finvest India Limited. The Assessing Officer concluded that the assessee failed to establish the creditworthiness of the lenders and the genuineness of the transactions stating that the funds were merely accommodation entries routed through shell companies. Consequently, an addition of Rs. 6.71 crores was made under Section 68 of the Act. 3. On an appeal by the respondent/assessee before the Commissioner of Income Tax (Appeals) [for short “CIT(A)”], vide order dated 18/12/2023 the CIT(A) deleted the additions of Rs.5,91,00,000/- finding that the assessee has proved the identity and creditworthiness of the lenders and genuineness of transaction. The CIT(A) further noted that several disputed amounts were actually opening balances from previous years and could not be added in the current year. The ITAT subsequently dismissed the Revenue’s appeal and affirmed the CIT(A)’s findings, leading the Revenue to approach this Court. SUBMISSIONS OF THE APPELLANT/REVENUE 4. The learned counsel for the appellant-Revenue contends that the ITAT committed a manifest error by failing to appreciate the lack of creditworthiness of the primary lender, M/s East West Finvest India Ltd. It is submitted that the lender reported a significant net loss of Rs. 5.69 crores during the relevant period and has no fixed assets, which contradicts its 2 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

purported ability to advance a loan of nearly Rs.6.0 crores to the assessee. It is further argued that mere submission of Income Tax Returns and bank statements does not automatically satisfy the requirements of Section 68 of the Act if the underlying financial health of the lender is under suspect. The learned counsel of the appellant further submits that the investigation revealed a specific modus operandi of layering. It is alleged that the lender company received funds in 23 separate tranches from Jay Jyoti India Pvt. Ltd. (which an entity identified by the Department as a shell company) and immediately transferred these sums to the assessee. The Revenue stresses that during assessment proceedings the summons issued under Section 131 of the Act to the lenders were neither responded nor any one appeared in the proceedings. Therefore, it clearly appears that payer introduces receiver’s own money in the books of accounts through accommodation entries. Lastly, the appellant argued that reliance by the ITAT's on the absence of incriminating material found during the search is misplaced. The Revenue, in essence, submitted that the failure of the lenders to respond to summons and substantial evidence made available on record in respect of flow of funds do constitute sufficient material to sustain the addition in question under Section 153A of the Act. SUBMISSIONS OF THE RESPONDENT/ASSESSEE 5. Per contra, the learned counsel for the respondent (Assessee) submits that the assessment for AY 2016-17 was unabated or completed on the date of the search. Relying on the settled law of the Hon’ble Supreme Court, the respondent argues that no addition can be made in a search-based assessment under Section 153A of the Act in the absence of any specific 3 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

incriminating material found during the search that relates to the addition. The assessee highlights that no such documents were seized regarding the unsecured loans in question. Regarding the merits of the addition, the respondent's counsel submits that they have fully discharged their onus by providing the PAN details, registered addresses, ITR acknowledgements, and bank statements of the lenders. It is specifically pointed out that M/s East West Finvest India Ltd. is a Non-Banking Financial Company (NBFC) duly registered with and regulated by the Reserve Bank of India. The respondent's advocate argues that the lender’s business loss in a specific year does not negate its status as a legitimate financial entity or its capacity to advance loans from its available capital and reserves. The respondent further emphasises that all loan transactions were conducted through transparent banking channels (RTGS/Cheque) and that the assessee has consistently paid interest on these loans. The Department’s acceptance of the TDS deducted and paid on this interest is claimed to be inconsistent with the allegation that the principal loan amount is unexplained. Lastly, the respondent submits that since a large portion of the addition relates to brought forward opening balances from earlier years, the provisions of Section 68 could not be invoked for the current year as the credit did not originate during the relevant previous year. 6. We have heard learned counsel for the parties and perused the record. Appreciation & Conclusion: 7. This appeal is filed in respect of the assessment year 2016-17 about a loan of Rs. 5,91,00,000/- taken from M/s East West Finvest India 4 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

Limited. The identity and creditworthiness of the aforesaid Lender Company were explained by the assessee by tendering the documents like confirmation of lender, bank account statement of lender, copy of ITR, audited financial accounts, data as per MCA portal, Form 16A for deduction of TDS and interest payment. The respondent/assessee filed various documentary evidence, like the PAN Number of East West Finvest India Limited, to show its identity. The Lenders Company filed a return of income for the assessment year 2016-17 on 16.10.2016 and also filed a certificate of NBFC as per Registration B-03.00161 dated 20.12.2002 issued by the Reserve Bank of India (RBI). In order to show the genuineness of the transactions, the assessee deposited Account Payee Cheques through which the loan amount was transferred after deducting TDS for the assessment year 2016-17. In order to show the creditworthiness of the investor company, an Auditor's Report for the assessment year 2016-17 was filed. The Balance Sheet of the Company as on 31.3.2016 was also filed to show funds of Rs.241,93,90,959/-.Therefore, the CIT (A) has rightly held that the Lender Company had sufficient funds in the form of share capital and reserves & surplus to give an unsecured loan to the respondent assessee. Even otherwise, in the case of Mr.Girish Kumar Sharda [IT(SS) A No.30 to 33/Ind/2012] the ITAT has rightly held that M/s East West Finvest India Limited is a genuine company and not a dummy company. In the cases of M/s Shalimar Housing & Finance Limited, Pramod Kumar Sethi & M/s Tirupati Construction, Ujjain, the ITAT has also found that the Lender Company is genuine. 5 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

8.

In view of the above, the respondent has rightly discharged its onus as envisaged under section 68 of the IT Act. The ITAT has also independently examined the order passed by the Assessing Officer as well as CIT (A) and held that the Assessing Officer has made incorrect findings. The assessee's appeals for the assessment years 2013-14, 2014-15 and 2015-16 were allowed by the ITAT, against which the Revenue has not filed any appeal before this Court. The loans taken for the assessment years 2013-14 to 2015-16 were considered in the assessment proceedings of that year, and the outstanding balance was forwarded in assessment year 2016-17. 9. Further, the learned CIT(A) has relied upon judicial pronouncements, Hon’ble ITAT, Indore bench, Indore, in the case of Girish Kumar Sharda (IT(SS) No.30 to 33/Ind/2012 dated 30.01.2014) wherein it was held that M/s East West Finvest India Limited is a genuine company and not a dummy company. With such observations, the learned CIT(A) has held that “cash credit in the name of the lenders company is treated as genuine”. The Revenue has not challenged such fundings by way of an appeal, hence treated as accepted. Hence, the CIT (A) has rightly held that no addition can be made under section 68 of the Act in respect of the assessment year 2016- 17. Therefore, there are concurrent findings recorded by the CIT as well as the Appellate Authority. 10. The appellant has proposed the following substantial questions of law:-

"(1) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was 6 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

justified in upholding the order of Ld. CIT(A), which deleted the addition of Rs. 5,91,00,000/- made by the AO on account of unexplained credit u/s 68 of the Act, ignoring that the assessee has failed to discharge the burden placed upon it in respect of an unsecured loan taken from M/s East West Finvest India Limited? (2) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in upholding the order of Ld. CIT(A) which deleted the addition of Rs. 5,91,00,000/- made by the AOon account of unexplained credit u/s 68 of the Act, ignoring: (a) That mere submission of ITR, PAN, confirmation, and Bank Statement of the lender does not necessarily prove the creditworthiness of the lender and the genuineness of the transaction? (b) That perusal of the Balance Sheet of M/s East West FinvestIndia Limited reveals that the said company has no fixed assets, it has huge accumulated losses, and reserves are mainly from "Security premium" & "Share Forfeit Reserve" and during the year, it incurred losses of Rs. 5.69 crores. (c) That perusal of the lender company revealed that it advanced loan to the assessee in 23 tranches, and in each case, amounts were credited in the bank account of the company from Jay Jyoti India Pvt Ltd (a shell company)and on the same day or the very next day, the money got transferred to the assessee 7 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

company. (d) During the assessment proceedings, summons u/s 131 of the I.T. Act were issued to the lenders,’ however, summons returned un- served many cases, and no reply was received in the remaining cases? (3) Whether on the facts and circumstances of the case and in law, the findings given and decision made by ITAT suffers from perversity asit failed to allude to relevant facts, misread the evidence and its probative value and the legal position, which itself gives rise toquestion of law in view of ratio of decisions in several cases including in the case of Sudarshan Silk and Sarees 300 ITR 205(SC)?" 11. The above proposed questions are not on Law, but on facts given by the CIT(A) and ITAT concurrently. There is no perversity in those findings, as various documents were filed, like the confirmation of the lender, bank account statement of the lender, copy of ITR, audited financial accounts, data as per the MCA portal, Form 16A for deduction of TDS and interest payment. The respondent/assessee filed various documentary evidence, like the PAN Number of East West Finvest India Limited, to show its identity. The copy of a return of income for the assessment year 2016-17 on 16.10.2016 and a certificate of NBFC as per Registration B-03.00161 dated 20.12.2002 issued by the Reserve Bank of India (RBI) of East West Finvest India Limited. The onus of section 68 of the Act has been discharged by the respondent. Hence, these are no questions on law, rather on facts. 8 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

(VIVEK RUSIA) JUDGE (PRADEEP MITTAL) JUDGE 12. Moreover, the tax effect involved in this case is Rs. 1,82,61,900/- which is below the prescribed limit of Rs. 2,00,00,000/- as per CBDT Circular No. 09/2024 dated 17.09.2024. 13. In the result, we do not find that any question of law is involved in the instant appeal; therefore, the same stands dismissed at the admission stage itself. RM

9 ITA-53-2025 NEUTRAL CITATION NO. 2026:MPHC-JBP:35799 Signed by: RAJESH MAMTANI Signing time: 08-05-2026 12:24:22 Signature Not Verified

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