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Facts
The assessee filed a return of income reporting Rs. 8,22,830/-. The Assessing Officer initiated reassessment proceedings under Section 147 r.w.s. 148, alleging that unsecured loans of Rs. 3,61,57,561/- were accommodation entries. The AO alleged that the companies from whom loans were taken existed only in name and were represented by dummy directors. The CIT(A) upheld the addition.
Held
The Tribunal held that the assessee had provided documentary evidence and confirmations for the unsecured loans. It noted that four of the five lenders had been confirmed as genuine by previous Tribunal decisions. Relying on judicial precedents, the Tribunal found that the Assessing Officer had not brought sufficient evidence to controvert the genuineness of the transactions.
Key Issues
Whether the addition made under Section 68 for unsecured loans as accommodation entries is justified when the assessee has provided substantial documentary evidence and some lenders have been confirmed as genuine in previous cases.
Sections Cited
147, 148, 143(3), 68, 133(6), 131
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
Assessment Year: 2013-14 Nalin Jayantilal Shah Ward 34(3)(5), Mumbai 62, Hemgiri, 6th Road, JVPD Scheme, Near Bank of Maharashtra, Vile Parle, West, Vs. S.O. 400056. (PAN: AAGPS5573G) (Appellant) (Respondent) Present for: Assessee : Shri Suchek Anchaliya, CA Revenue : Shri Leyaqat Ali Aafaqui, Sr. DR Date of Hearing : 30.07.2025 Date of Pronouncement : 28.08.2025 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFSC), Delhi, vide order no. ITBA/NFAC/S/250/2024-25/1072924513(1), dated 05.02.2025 passed against the assessment order by Income Tax Officer-25(3)(5), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 29.03.2016 for Assessment Year 2013-14.
Grounds taken by the assessee are as under: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in not holding the assumption of jurisdiction by the Ld. A. O. as bad in law as the assessment order is passed under section 147 r.w.s 143(3) of the Act without appreciating the fact that the Nalin Jayantilal Shah AY 2013-14 reassessment proceeding was never initiated by issuing notice under section 148 of the Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in confirming the addition of unsecured loan amounting to Rs. 3,61,57,561/- under section 68 of the Act by treating a genuine loan as accommodation entry without appreciating the fact that the appellant has discharged the onus in proving the identity, genuineness and creditworthiness of the unsecured loans received from the various parties.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in not holding that the principles of natural justice were violated and disregarding the fact that the appellant was neither provided with copies of material relied upon by the Ld. A.O. nor provided the opportunity to cross-examine the persons whose statements were relied upon by the Ld. A.O.
4. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another.”
3. The only issue involved in the present appeal is in respect of addition of unsecured loan amounting to Rs 3,61,57,561/- u/s. 68 by treating it as accommodation entry.
Brief facts of the case are that assessee filed his return of income on 25.03.2014 reporting total income at Rs 8,22,830/-. Ld. Assessing Officer observes that a search and seizure operation was carried out on 03.10.2013 in the case of Bhanvarlal Jain group. Based on information received from DGIT(Inv.), Unit-IX, Mumbai that assessee is one of the beneficiaries who obtained accommodation entries of unsecured loan of Rs 3,61,57,561/- during the year under consideration in respect of the Bhanvarlal Jain group. Case of the assessee was taken up for reassessment by invoking the provisions of section 147 r.w.s.148. Ld. Assessing Officer alleged that the companies from whom assessee had taken loans, exist for namesake and are represented by dummy Nalin Jayantilal Shah AY 2013-14 directors/partners, who are all employees of Bhanvarlal Jain group and family. Assessee was asked to prove the genuineness of the transactions in respect of unsecured loans recorded by him in his books of accounts. Details of loans taken by the assessee from five different concerns is tabulated below: SI. No. Name of the Concern PAN Amount (Rs.) 1 Ankita Exports AAFFA6854K 40,10,849 2 Malhar Exports AAEPV3695M 1,00,64,110 3 Navkar Diamonds ADCPJ7634D 91,29,835 4 Suman Exports AKNPC1507H 29,07,151 5 Navkar Diamonds APRPD9032R 1,00,45,616 TOTAL 3,61,57,561 4.1. In Para 6, ld. Assessing Officer records the submissions made by the assessee which included confirmation of loans taken, copies of income tax returns, balance sheets with annexures and relevant pages of the bank statements of the lenders, reflecting the loan transactions. According to the assessee, based on these documentary evidences, it was claimed that unsecured loans are genuine. Ld. Assessing Officer did not find the submissions made by the assessee acceptable. Further, in the assessment order, he detailed the modus operandi and the operations of Bhavarlal Jain group without anything specific pointing out to the assessee. While taking the adverse view, ld. Assessing Officer observed in para 11 that even though the assessee has filed documents to substantiate his claim, the involvement and dealings of the assessee with the Havala/Accommodation Entry Racket was not ruled out. According to him, the value of accommodation entries claimed as unsecured loans amounting to Rs. 3,61,57,561/- appearing in the name of the aforesaid parties in the balance sheet of the assessee as on 31.03.2013 is a credit which is a part and parcel of accommodation entries provided by concerns controlled by Bhavarlal Jain/Praveen Nalin Jayantilal Shah AY 2013-14 Kumar Jain and family members as established by the investigation wing of the department. He thus, made the addition u/s. 68 as unexplained cash credit.
4.2. In the first appeal before the ld. CIT(A), submissions made by the assessee were reiterated along with documentary evidences. Ld. CIT(A) also discussed about the modus operandi of the accommodation entry providers. He also referred to the search which took place in the year 2013 on the Bhavarlal Jain group. He noted that in the search, there was no stock of diamonds in any of the group concerns. According to him, assessee failed to discharge the onus in proving the identity and credit worthiness of the unsecured loan providers and the genuineness of the transactions. He thus, concluded that transaction of unsecured loans amounting to Rs.3,61,57,561/- is found to be non-genuine and upheld the addition so made by the ld. Assessing Officer, dismissing the appeal of the assessee.
Before us, ld. Counsel for the assessee placed on record the factual position summarized in the form of chart which are extracted below. These charts give details about the lender parties, the date on which the loans were taken by the assessee, the quantum of loan, interest charged thereon and the date of repayment along with the amount repaid. Assessee also furnished the summarized details in respect of each of the lender parties as to the turnover which was reported by each of the lender in their respective profit and loss account and the disclosures made in their balance sheet. The said charts are reproduced for ready reference:
5.1. Ld. Counsel also invited the attention of the Bench to the exhaustive documentary evidences which were furnished before the authorities below, forming part of the paper book containing 93 pages. The index of the paper book is reproduced to reflect the detailed submissions made by the assessee:
5.2. It was also submitted that ld. Assessing Officer had issued notices u/s. 133(6) to each of the lender party who had responded to the ld. Assessing Officer directly, giving all the details called for. These responses also form part of the paper book. It was also asserted that out of the five parties, four of these parties have already been dealt with Nalin Jayantilal Shah AY 2013-14 by the Coordinate Bench of ITAT in several cases wherein these parties have been held to be genuine. The summary of decisions wherein transactions with four parties have been dealt with and held in favour of the assessee is tabulated below:
Exports Shree Prateek Kothari Indo Unique Trading ITA No. 6341/Mum/2016 Private Limited Suman Exports Indo Unique Trading ITA No. 6341/Mum/2016 Private Limited Malhar Exports Ms. Jainam ITA No. 6099/Mum/2016 Investments Navkar Diamonds Ms. Jainam ITA No. 6099/Mum/2016 Investments 5.3. It was thus claimed by the assessee that onus casted u/s. 68 has been evidently and adequately discharged by bringing all the documentary evidences on record, none of which have been controverted by the ld. Assessing Officer nor by the ld. CIT(A). No discrepancy or deficiency has been pointed out in the documents so placed on record and nothing cogent has been brought by the authorities below to establish the non-genuineness of the transactions undertaken by the assessee. Merely because the lender parties were not produced before the ld. Assessing Officer for verification, cannot be the ground to take an adverse view. More importantly, when the loans have been repaid by the assessee.
Per contra, ld. Sr. DR placed a written submission on record dated 02.07.2025, reiterating the stance taken by the authorities below. As a rebuttal to the evidence furnished by the assessee, ld. DR submits through the written submission that assessee had failed to produce the lenders for verification or provide independent evidence beyond self- Nalin Jayantilal Shah AY 2013-14 serving documents He thus, placed a reliance on the doctrine of pre- ponderance of probabilities to substantiate the addition made by ld. Assessing Officer.
We have heard both the parties and perused the material on record. We have given thoughtful consideration to the documentary evidences and explanation given thereon. Admittedly, it is a fact on record that ld. Assessing Officer had proceeded on the basis of information received from the investigation wing of the department. Details called for in the course of assessment proceedings were placed on record by the assessee for which index of the paper book containing all the relevant documents is already extracted above. It is also a fact on record that all the lenders have responded directly to the Assessing Officer on the notices issued u/s. 133(6) giving all the details and confirming the transaction undertaken by them with the assessee. Nothing has been brought on record by the ld. Assessing Officer to controvert the documents and the details furnished by the assessee as well as by the lenders in response to notices u/s. 133(6). Mere reliance placed on the information received from the Investigation Wing is not sufficient to taint the transactions undertaken by the assessee which are corroborated by all the documentary evidences establishing the identity and creditworthiness of the lenders and genuineness of the transactions. Ld. CIT(A) has also dismissed the appeal summarily without discussing the submissions made by the assessee.
7.1. Furthermore, out of the five lenders, four lenders have already been dealt by the Coordinate Bench in their respective decisions, whereby these four lenders had been held to be genuine. In these given set of facts and circumstances, backed by corroborative documentary Nalin Jayantilal Shah AY 2013-14 evidences, establishing the genuineness of the transaction undertaken by the assessee as well as the judicial precedents referred above in respect of four lenders, we do not find any reason to uphold the addition so made.
7.2. We also draw our force from the decision of the Hon’ble jurisdictional High Court of Bombay in the case of PCIT v. Paradise Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Bom) wherein it was held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies (lender companies in the present case), the burden would shift on the revenue to establish their case. We also draw our force from the decision of Hon’ble Jurisdictional High Court of Bombay in the case of CIT vs. Orchid Industries Pvt. Ltd. 397 ITR 136 (Bom) wherein it was held that mere non-compliance of summon under section 131 would not disprove the transaction and other documents filed on record cannot be brushed aside by the Ld. Assessing Officer.
7.3. Also, it is relevant to quote the decision of Hon’ble jurisdictional High Court of Bombay in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR 100 (Bom) wherein it was held as under: “In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.'' Nalin Jayantilal Shah AY 2013-14 7.4. Accordingly, on the conspectus of the above narration, addition made by ld. Assessing Officer u/s. 68 on account of unsecured loans from the aforesaid parties including interest thereon is deleted. Grounds raised by the assessee in this respect are allowed.
In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 28th August, 2025