SILVER APPARELS INDUSTRIES PRIVATE LIMITED,KOLKATA vs. DCIT, CENTRAL CIRCLE 1(1),, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA SHRI DUVVURU RL REDDY, VICE PRESIDENT RAJESH KUMAR, ACCOUNTANT MEMBER

I.T.A. No. 1518/Kol/2025 (Assessment Year 2015-2016)

Silver Apparels Industries Private Limited, 1, R N Mukherjee Road, 5th Floor, Room No. 52, Kolkata - 700001 [PAN: AAMCS6898M] …..…...…………….... Appellant vs. DCIT, Central Circle-1(1), Kolkata, Aayakar Bhawan, Poorva, 110, Shantipally, E.M. Bypass, Kolkata - 700107 ……..…...…………….... Respondent Appearances by: Assessee represented by : Shri Siddharth Agarwal, AR Department represented by : Raman Garg, CIT, DR

Date of concluding the hearing : 12.08.2026 Date of pronouncing the order : 30.10.2026 O R D E R Per Rajesh Kumar, AM

The present appeal filed by the assessee arise from order dated 17.06.2025 passed u/s 250 of the Income Tax Act, 1961 (hereafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals) Kolkata-20 [hereafter referred to “the Ld. CIT(A)] for the Assessment Year 2015-16.

2 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. 3. Ground No. 1(a) and 1(b)are against the validity of the reassessment proceedings initiated u/s 147 of the Act are not pressed and are dismissed. 4. Ground No. 2 is directed against the addition of Rs.65,00,000/- made by the Ld. AO on account of alleged unexplained cash credit in respect of loans received from M/s Gulzar Hire Purchase Pvt. Ltd. (GHPPL), M/s Krishnasudha Dealtrade Pvt. Ltd. (KDPL) and M/s Sagun Commercial Pvt. Ltd. (SCPL). 5. The facts in brief are that during the relevant previous year the assessee received unsecured loans of Rs.16,00,000/- from GHPPL, Rs.45,00,000/- from KDPL and Rs.4,00,000/- from SCPL, aggregating to Rs.65,00,000/-. Interest debited in respect of these loans was Rs.3,41,655/-, Rs.77,260/- and Rs.79,495/- respectively, aggregating to Rs.4,98,410/-. The assessee furnished documentary evidences in support of the identity and financial capacity of the lenders and genuineness of the transactions comprising company master data, income-tax acknowledgements, NBFC certificates where applicable, audited financial statements, confirmations, bank statements, assessment records and ledger accounts etc. The Ld. AO accepted the identity of the lender companies but doubted their creditworthiness and the genuineness of the transactions. The case of the Ld. AO was that the three lenders were used for providing accommodation entries through Shri Banwari Lal Agarwal and that the amounts received by the assessee were its own undisclosed money routed back into the regular books in the guise of unsecured loans. The Ld. AO relied principally upon the statements of Shri Banwari Lal Agarwal recorded under sections 132(4) and 131(1A), the statement of Shri Ashok Kumar Bhaiya, Director of the assessee- company, recorded under section 132(4), certain WhatsApp images

3 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. recovered from the mobile phone of Shri Banwari Lal Agarwal and the financial particulars/common directorships of the lender companies. 6. The assessee, on the other hand, submitted that it had discharged the primary onus under section 68. All the three lenders are companies incorporated under the Companies Act and their status on the MCA records was “Active Compliant”. Two of the three lenders were stated to be NBFCs registered with the RBI. All the lenders were income-tax assessees and had filed their returns of income. The documentary material furnished by the assessee was not confined to confirmations alone but comprised corporate records, audited accounts, income-tax records, bank statements and assessment orders. 7. The financial position of the lenders is also relevant. As per the audited financial statements placed on record, GHPPL had net worth of about Rs.83.79 crore against the loan of Rs.16 lakh advanced to the assessee, KDPL had net worth of about Rs.48.01 crore against the loan of Rs.45 lakh, and SCPL had net worth of about Rs.68.21 crore against the loan of Rs.4 lakh. The respective loan amounts represented approximately 0.19%, 0.94% and 0.58% of the respective net worth. Thus, the impugned loans constituted only a small fraction of the financial resources disclosed by the lender companies. 8. The Ld. AO, while questioning the transactions, also referred to the financial particulars and income of certain directors of the lender companies. In our considered view, however, the creditworthiness of a corporate lender has to be examined primarily with reference to the financial position and funds of the corporate entity which actually advanced the money. The personal income disclosed by individual

4 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. directors, by itself, cannot substitute an examination of the audited financial position of the lender company. In the present case, the substantial net worth of the three lenders has not been shown to be fictitious or non-existent. 9. We have heard the rival contentions and perused the material on records.We find from the records placed before the lower authorities comprised assessment orders of GHPPL for A.Ys. 2015-16, 2016-17 and 2019-20, KDPL for A.Ys. 2015-16 and 2016-17 and SCPL for A.Ys. 2015-16 and 2016-17. The assessee's specific submission was that in those assessments there was no adverse finding in respect of the loans advanced, interest income or TDS relating to the transactions in question. It was also submitted that the lender companies had themselves been subjected to additions under section 68 as beneficiaries in different years. 10. The jurisdictional Hon’ble Calcutta High Court in CIT v. Dataware Pvt. Ltd., ITA No.263 of 2011, dated 21.09.2011 also supports the case of the assessee. The Hon’ble Court observed that after obtaining the PAN and information that the creditor is assessed to tax, the Assessing Officer should enquire from the Assessing Officer of the creditor regarding the genuineness of the transaction and whether it has been accepted in the creditor’s assessment, instead of himself entering into the return of the creditor and branding it as unworthy. The Court further observed that where the identity of the creditor and the genuineness of the transaction through account payee cheque are established and the creditor’s return has not been rejected, the assessee’s AO cannot simply disregard the same. The principle is of particular relevance where the creditor companies were within the Department’s own assessment machinery and their financial records were available.

5 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. 11. We note that the movement of funds were through banking channels. There was no immediate cash deposit in the bank accounts of the lenders immediately preceding the payments to the assessee. The loans were duly recorded in the books and audited financial statements of the lenders and the assessee. Interest was paid and tax was deducted at source. The loans were subsequently fully repaid together with interest through banking channels, much before the search. Thus, the documentary trail covers not merely the receipt of the funds but also payment of interest and eventual repayment. 12. The circumstance of repayment cannot be considered in isolation from the original receipt. The Hon’ble Calcutta High Court in PCIT Vs. Sreeleathers Ltd., ITAT/18/2022, decided on 14.07.2022, considered a case where the loan had been repaid and observed, inter alia, that once repayment was established on documentary evidence, the credit entries could not be looked at in isolation after ignoring the debit entries. The Court also noticed that the assessee had established identity, banking movement, availability of funds, payment of interest and deduction of tax at source. The facts in the present case similarly show receipt, interest payment and repayment through banking channels. 13. The Revenue, however, has relied upon the statements of Shri Banwari Lal Agarwal. It is an admitted factual position that Shri Banwari Lal Agarwal was not a director of any of the three lender companies. The assessee therefore specifically contended that he had no authority to depose on behalf of those companies and that no director of any of the lenders had confirmed that the loans granted to the assessee were accommodation entries. There is also no finding in the orders of the lower authorities that the statement of BLA was affirmed by a director of any of the three lender companies.

6 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. 14. The assessee was furnished copies of the statements of BLA and, on 12.06.2024, filed a detailed rebuttal specifically disputing his authority, the evidentiary value of the images and the absence of corroboration, and requested an opportunity to cross-examine him. Such cross-examination was not afforded. The assessee relied upon Kishinchand Chellaram v. CIT, 125 ITR 713 (SC), Andaman Timber Industries v. CCE, 62 taxmann.com 3 (SC), CIT v. Odeon Builders (P.) Ltd., 110 taxmann.com 64 (SC), PCIT v. Hadoti Punj Vikas Ltd., 157 taxmann.com 193 (SC), and CIT v. Anandlok, 152 taxmann.com 13 (Calcutta). The requirement of cross-examination is not an abstract formality where a third-party statement is used as substantive evidence against the assessee. In the present case, both Shri Banwari Lal Agarwal and Shri Ashok Kumar Bhaiya subsequently retracted their statements, and the assessee explained the circumstances in which such statements came to be made. The Revenue has not brought on record any independent transaction- wise material which removes the evidentiary difficulty arising from the retractions and absence of cross-examination. 15. As regards the statement of Shri Ashok Kumar Bhaiya the assessee submitted that there was no reference therein to any specific material found from his possession during the search establishing that the three impugned loans were accommodation entries. It was also submitted that the statement did not establish the precise amount of Rs.65,00,000/- as the assessee’s undisclosed money and that AKB had subsequently retracted the statement. The assessee relied upon CIT v. Mantri Share Brokers (P.) Ltd., 96 taxmann.com 280 (SC), where the Supreme Court dismissed the Revenue’s challenge in a case in which, apart from a statement of the director offering additional income, there was no other material to justify the

7 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. addition. In the present case also, the Revenue has to establish the connection between the statement and the specific three loan transactions. 16. The two WhatsApp images recovered from BLA’s mobile phone constitute the principal digital material relied upon by the Revenue. The assessee’s specific objection is that the images do not contain any reference whatsoever to Silver Apparels Industries Private Limited, do not state that the entries are accommodation entries, do not record any cash payment by the assessee, do not identify the recipient of any alleged cash, and do not show the corresponding movement of such cash into the bank account of any of the three lenders. The assessee also submitted that there was no independent corroborative material found during the search establishing that the entries in the images represented accommodation entries. 17. We find that the evidentiary value of the images has to be examined in this factual context. A digital entry or loose paper is not self- proving merely because it is found during a search.Its contents must be capable of being connected with the assessee and with the particular transaction sought to be assessed. The assessee relied upon PCIT v. Umesh Ishrani, 108 taxmann.com 437 (Bombay), P. Goel v. DCIT, 85 ITD 1 (Mumbai), S. Venkatesan v. ACIT, 74 ITD 298 (Calcutta), T. Mudduveerappa Sons, 45 ITD 12 (Bangalore), and ITO v. Kranti Impex Pvt. Ltd., ITA No.1229/Mum/2013, for the proposition that uncorroborated loose material cannot, by itself, establish undisclosed income. 18. In the present case, even if the images are taken as genuine material recovered from BLA, the Revenue has not demonstrated the transaction-wise bridge between the images and the three credits in the books of the assessee. There is no material identifying the date

8 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. on which Silver allegedly handed over cash, the amount of such cash, the person who received it, the corresponding cash entry, the bank account into which such cash was deposited, and the precise linkage of that cash with the Rs.16 lakh, Rs.45 lakh and Rs.4 lakh credited by the three lenders. The banking records, on the other hand, show the actual movement of funds from the lenders to the assessee without any immediate cash deposit being demonstrated. 19. We also take note of the departmental record concerning the lenders. The assessee placed before the lower authorities assessment orders of the three lender companies for different years and specifically pointed out that the lenders were within the same centralised charge. The assessee further relied upon the fact that the lenders had themselves been assessed as beneficiaries under section 68 in different years. Decisions relied upon by the assessee, including PCIT v. Lal Baba Seamless Tubes (P.) Ltd., ITAT/71/2024, dated 26.04.2024 (Calcutta High Court), C.P. Re-Rollers Ltd. v. DCIT, ITA No.1811/Kol/2017, dated 03.04.2019, DCIT v. Maa Amba Towers Ltd., ITA No.1381/Kol/2015, dated 12.10.2018, and ITO v. Happy Structure Pvt. Ltd., ITA No.1977/Kol/2016, dated 22.05.2019, were relied upon for the relevance of the treatment of the lender/beneficiary entities in the Department’s own proceedings. 20. We are not suggesting that an assessment order in the hands of a lender conclusively establishes the genuineness of every transaction with a borrower. The significance of those orders is that the Revenue, having the assessment records of the lender companies within its own machinery, has not brought before us any specific adverse finding in those proceedings establishing that the particular loans of Rs.16 lakh, Rs.45 lakh and Rs.4 lakh were fictitious or that the corresponding funds originated from the assessee’s undisclosed

9 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. cash. The evidentiary burden at that stage was on the Revenue to displace the specific documentary trail placed by the assessee. 21. The Revenue has relied upon the commonality/change of directors and the financial characteristics of the lender companies. Such circumstances may justify enquiry, but they do not by themselves establish that the particular sums credited to the assessee were its own undisclosed money. The relevant question is whether there is a live and transaction-specific nexus between the assessee and the alleged accommodation-entry mechanism. No such nexus has been demonstrated through an identified cash payment, corresponding cash deposit, transaction-wise fund trail or confirmation by a director of the concerned lender companies. 22. The fact that the loans were fully repaid is also relevant. The repayment took place through banking channels and was accompanied by payment of interest. The Revenue has not demonstrated that the repayment was preceded or followed by a cash return to the assessee. The allegation of an accommodation entry normally involves a corresponding movement of the assessee’s unaccounted cash. In the present case, no transaction-wise evidence of such cash movement has been brought on record. The mere existence of a banking credit from a company which the Revenue alleges to be an entry provider cannot, without establishing the corresponding cash component, prove that the amount was the assessee’s own undisclosed money. 23. We also find that the interest paid by the assessee to the lenders was recorded in the books, and tax was deducted at source. Such conduct is consistent with the documented character of the transactions as interest-bearing loans. The lenders also reflected the corresponding interest income and TDS in their records, and no

10 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. specific contrary material has been brought on record to show that the interest entries were fictitious. 24. The principle in Dataware Pvt. Ltd(Supra). assumes significance in this factual setting because the lender companies were identifiable corporate entities, had PANs, were assessed to income-tax and had their own audited financial records. The Revenue was in possession of the lender companies’ assessment records. If the Department’s own assessment of the lenders did not record the impugned loans as fictitious, and no transaction-specific material was brought before us to demonstrate that the funds originated from the assessee, the mere rejection of the lenders’ capacity on the basis of the personal income of directors or general characteristics of the companies cannot sustain the addition. 25. We further note the decision of the Co-ordinate Bench in Bihariji Constructions (India) Ltd. v. ACIT, Circle-7(1), Kolkata, ITA Nos. 1305 & 1306/KOL/2026, concerning AYs 2013–14 and 2014–15, relied upon by the assessee, where the very lender entities including Gulzar Hire Purchase Pvt. Ltd. and Sagun Commercial Pvt. Ltd. were considered in the context of additions relating to unsecured loans. The Tribunal examined the documentary evidence, banking transactions, repayment of loans and interest paid with TDS and did not sustain the additions in the absence of sufficient material connecting the particular transactions with the assessee’s alleged undisclosed money. The said decision is not binding on us but is a relevant coordinate-bench decision on materially similar factual allegations. 26. We have considered the entire material in its totality. The assessee has established the identity of the three lender companies; has produced their corporate and income-tax records; has demonstrated

11 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. substantial net worth; has furnished confirmations, audited accounts and bank statements; has shown receipt of the funds through banking channels; has demonstrated payment of interest with deduction of tax at source; and has shown subsequent repayment of the loans with interest through banking channels. These circumstances are not isolated pieces of routine documentation but constitute a continuous documentary trail of the transactions. 27. Against this documentary foundation, the Revenue’s case rests substantially on third-party statements, the two WhatsApp images and general circumstances concerning the lender companies. Those materials may create a reason for enquiry, but in the present case they do not identify any material establishing that the specific amounts received by Silver Apparels Industries Private Limited under the three impugned loans represented its own undisclosed money. There is no transaction-wise material linking the assessee with any alleged accommodation-entry arrangement, no director of the lender companies affirming the accommodation-entry allegation, and no independent document establishing that the particular amounts received by the assessee represented its own undisclosed money. 28. We find that the Hon’ble Calcutta High Court in PCIT v. Golden Goenka Fincorp Ltd., 148 taxmann.com 313 (Calcutta), also considered the significance of a retracted statement in the absence of a cash trail or other corroborative material connecting it with the alleged undisclosed income. 29. We therefore find that the Revenue has failed to establish, on a transaction-specific basis, that the loans received from GHPPL, KDPL and SCPL represented the assessee’s own undisclosed money.

12 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. The addition under section 68 of Rs.65,00,000/- sustained by the Ld. CIT(A) is accordingly not sustainable and is directed to be deleted. Ground No. 2 is allowed. 30. Ground No. 3 is directed against the disallowance of interest of Rs.4,98,410/- relating to the aforesaid loans. 31. The facts in brief are that the Ld. AO disallowed interest of Rs.4,98,410/- comprising Rs.3,41,655/- paid to GHPPL, Rs.77,260/- paid to KDPL and Rs.79,495/- paid to SCPL, on the premise that the underlying loans were bogus accommodation entries. The Ld. CIT(A) sustained the disallowance as consequential to the substantive addition. 32. We have already held while adjudicating Ground No. 2 that the Revenue has failed to establish that the underlying loans represented the assessee’s undisclosed money. The assessee has shown that the interest was actually debited, paid to the lenders and subjected to tax deduction at source. Once the substantive addition on the very loans does not survive, and no independent material has been brought on record to establish that the interest expenditure itself was fictitious or unexplained, the consequential disallowance cannot be sustained. Accordingly, the disallowance of Rs.4,98,410/- is directed to be deleted. Ground No. 3 is allowed. 33. Ground No. 4 is directed against the addition of Rs.1,62,500/- on account of alleged commission paid for obtaining the alleged accommodation entries. 34. The Ld. AO made the addition under section 69C by applying a rate of 2.5% to the alleged accommodation-entry amount of Rs.65,00,000/-, resulting in Rs.1,62,500/-. The Ld. AO relied upon the statement of Shri Banwari Lal Agarwal that commission was

13 ITA No. 1518/Gty/2025 Silver Apparels Industries Pvt. Ltd. earned on unsecured loans allegedly facilitated by him. The Ld. CIT(A) sustained the addition as consequential to the finding that the loans were bogus. 35. We have heard the rival contentions and perused the materials on record. We have already held that the underlying loan transactions have not been established to be accommodation entries involving the assessee’s undisclosed money. The foundation for the alleged commission addition therefore does not survive. Apart from this, section 69C requires evidence of expenditure actually incurred. In the present case, there is no independent material establishing that the assessee actually paid Rs.1,62,500/- as commission. The mere application of a percentage to the alleged loan amount cannot, by itself, establish the factum of expenditure. 36. We therefore find that the addition of Rs.1,62,500/- under section 69C is not sustainable. The same is directed to be deleted. Ground No. 4 is allowed. 37. In the result, the appeal of the assessee for Assessment Year 2015- 16 is partly allowed. Order pronounced on 30.10.2026

Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE PRESIDENT) (ACCOUNTANT MEMBER) Kolkata, Dated: 30.10.2026 Sudip Sarkar, Sr.PS

Sudip True Copy// Digitally signed by Sudip Sarkar Date: Sarkar 2026.10.30 15:28:00 +05'30'