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Facts
For Assessment Year 2019-20, the AO added Rs. 80 lakhs as unexplained cash credit under Section 68 and disallowed Rs. 37,23,906/- interest under Section 69C, alleging the loan from M/s. Aneri Fincap Ltd. was an accommodation entry. The Ld.CIT(A) subsequently deleted these additions, finding M/s. Aneri Fincap Ltd. was not an accommodation entry provider and the loan was genuine, a decision supported by previous tribunal orders for earlier assessment years and a group company case.
Held
The Tribunal affirmed that the assessee had discharged its primary onus by providing extensive documentation to establish the identity, creditworthiness, and genuineness of the loan transaction. It found that the AO failed to properly consider this evidence, including the lender's response to a Section 133(6) notice, and that an unverified field enquiry was insufficient to prove the transaction was bogus. Consequently, the Tribunal upheld the Ld.CIT(A)'s decision to delete the additions and dismissed the Revenue's appeal.
Key Issues
Whether the Ld.CIT(A) was justified in deleting the addition for unexplained cash credit under Section 68 and disallowance of interest under Section 69C, where the loan was alleged to be from an accommodation entry provider.
Sections Cited
147, 143(3), 68, 115BBE, 69C, 131, 133(6), 45-IA
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Income Tax Appellate Tribunal, MUMBAI “D” BENCH : MUMBAI
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
Assessment Year : 2019-20 ACIT-24(1), Ramesh Kumar Jain, 601, 6th Floor, B-502, Oberoi Skyheight, Piramal Chambers, vs. Cross Road Lokhandwala, Lalbaugh, Parel, Andheri (W), Mumbai-400012. Mumbai-400053. PAN : ADIPJ4196P (Appellant) (Respondent) For Assessee : Shri Rushabh Mehta For Revenue : Shri Uma Shankar Prasad, CIT-DR Date of Hearing : 11-06-2025 Date of Pronouncement : 24-07-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Ld. Commissioner of Income Tax(Appeals)-48, Mumbai [„Ld.CIT(A)‟], dated 29-11-2024, pertaining to Assessment Year (AY) 2019-20, wherein the Revenue has taken the following grounds of appeal:
1. "Whether on the facts and circumstances of the case and in law, the Ld CIT(A) was justified in deleting the addition of Rs.80,00,000/- on account of unexplained cash credit under section 68 of the Income Tax Act 1961 received from an accommodation entry provider." 2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance u/s 68 on account of unexplained cash credit ignoring the decision of the Hon'ble Supreme Court in the case of NRA Iron & Steel Pvt Ltd Vs Principal Commissioner of Income tax Central-1 2019 (103 taxmann.com 48 (SC)/(2019) 262 taxman 74 and further affirmed by the Hon'ble Supreme Court in (2020) 117 taxmann.com 752 (SC)/19(2020) 273 taxman 14(SC)?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in the deleting the disallowance of Rs.37,23,906/-on account of interest payment against such bogus unsecured loans? 4. The appellant craves leave to amend or alter or add a new ground which may be necessary.
2. Briefly the facts of the case are that assessment in this case was completed u/s. 147 r.w.s. 143(3) of the Income Tax Act, 1961 („the Act‟) vide order dt. 24-11-2023, wherein the AO brought to tax a sum of Rs. 80 lakhs as unexplained cash credit u/s. 68 r.w.s. 115BBE of the Act, holding that the assessee is a beneficiary of accommodation loan entry taken from a paper company, namely, M/s. Aneri Fincap Ltd. Further, interest on such loan paid by the assessee amounting to Rs. 37,23,906/- was also disallowed as unexplained expenditure u/s. 69C r.w.s. 115BBE of the Act.
3. The assessee thereafter carried the matter in appeal before the Ld.CIT(A). The Ld.CIT(A) referred to the order passed by his predecessor dt. 17-10-2022 for A.Y 2017-18; wherein similar addition made u/s. 68 in respect of loan taken from M/s. Aneri Fincap Ltd. and interest thereon was deleted by his predecessor. The Ld.CIT(A) further noted that the Revenue carried the matter in appeal and it was dismissed by the Co-ordinate Bench of the Tribunal vide its order dt. 28-06-2023. The Ld. CIT(A) further referred to the decision of his predecessor in assessee‟s group company case of M/s. GM Cables & Switches Private Limited for the AY. 2018-19, dt. 21-06-2023 and following the same, it was held that M/s. Aneri Fincap Ltd. is not an accommodation entry provider and loan taken by the assessee company is genuine in nature. The Ld.CIT(A) further referred to the documentation submitted by the assessee in the form of copy of ITR, bank statement, annual financial statements, TDS certificates etc., and has held that the assessee has duly proved the identity, creditworthiness and genuineness of the transaction and the addition so made by the AO was deleted. Against the said order, the Revenue is in appeal before us.
During the course of hearing, the Ld. DR referred to the assessment order and in particular, the statement of Shri Rajesh G. Mehta, the person who controlled M/s. Aneri Fincap Ltd among various other entities wherein he has stated that there is no business carried out in these companies and the company existed on paper and are used by several persons to generate bogus sales and purchases and for which he gets a commission for letting other persons to use these companies. It was accordingly submitted that the AO was in possession of a specific information basis which the case of the assessee was reopened and has relied upon the statement of Shri Mehta where he has admitted that M/s Aneri Fincap Ltd is a paper company. Further, summons u/s. 131 of the Act were issued to the Directors of M/s. Aneri Fincap Ltd., however, they have not appeared before the AO. It was further submitted that a notice u/s. 133(6) of the Act was also issued on 06-11-2023 to M/s. Aneri Fincap Ltd., and there was no response which was received till the time of passing of the assessment order. It was further submitted that the AO also deputed his inspector to visit last given address of M/s. Aneri Fincap Ltd. and he reported that the said premises was locked and on enquiry from the security guard, he was informed that the company has moved from the said premises, however, no new address or location was made available. It was accordingly submitted that the AO has duly established that M/s. Aneri Fincap Ltd. was a paper entity, without carrying out any business activities and the assessee being a beneficiary of the accommodation entry of loan from M/s. Aneri Fincap Ltd., the addition has been rightly made by the AO. It was submitted that the Ld.CIT(A) has failed to appreciate the same and has allowed the necessary relief to the assessee.
It was further submitted that as far as the order passed by the Co- ordinate Bench of the Tribunal for the earlier assessment years wherein the similar transaction from M/s. Aneri Fincap Ltd. was subject matter of dispute, the Co-ordinate Bench of the Tribunal has dismissed the appeal of the Revenue not on merits, but for the reason that there was no incriminating material which has been found during the course of search. In this regard, our reference was drawn to the order of the Co-ordinate Bench of the Tribunal for the AY. 2017-18, which is available at page Nos. 122 to 127 of assessee‟s Paper Book.
It was further submitted that the Ld. CIT(A) has relied on the order of the group company, namely, M/s. GM Cables & Switches Private Limited, for the AY. 2018-19, dt. 21-06-2023, wherein the issue involved was interest expenditure amounting to Rs. 6,42,834/- on loan taken from M/s. Aneri Fincap Ltd. It was submitted that due to low tax effect, the said decision may not have been appealed by the Revenue, however, the same does not mean that the said decision has been accepted by the Revenue. Further reliance was placed on the decision of the Hon‟ble Supreme Court in the case of NRA Iron & Steel Pvt. Ltd., vs. PCIT, 103 taxmann.com 48 (SC). It was accordingly submitted that the order of the Ld.CIT(A) be set aside and that of the AO be sustained.
In his submissions, the Ld.AR supported the order and the findings of the Ld.CIT(A). It was submitted that there is no dispute that for AY. 2017- 18, the Co-ordinate Bench of the Tribunal has dismissed the appeal of the Department not on merits, but on account of the fact that there was no incriminating material found during the course of search. At the same time, it was submitted that the Ld.CIT(A) has relied on the order of the group company in the case of M/s. GM Cables & Switches Private Limited (supra) and it was submitted that even though the issue involved in the said matter relates to the interest expenditure on loan taken from M/s. Aneri Fincap Ltd., at the same time, the Ld.CIT(A) has gone into examining the merit of the loan transaction and as evident from the reading of the order, the Ld.CIT(A) has recorded the findings that the assessee has provided sufficient material to establish that M/s. Aneri Fincap Ltd. is not an accommodation entry provider and the loan transaction was genuine. It was accordingly submitted that following the said decision, the Ld.CIT(A) in the instant case has rightly arrived at the finding that M/s. Aneri Fincap Ltd., is not an accommodation entry provider and the loan taken is genuine in nature.
In this regard, our reference was also drawn to recent decision of Coordinate Vishakhapatnam Benches in case of group company in the case of M/s. GM Cables & Switches Private Limited for A.Y 2019-20 (ITA No. 32/Viz/2025 dated 20/05/2025) wherein loan transaction with M/s Aneri Fincap Ltd has been held as genuine loan transaction and relevant findings read as under: 6. We have heard both the sides and perused the material available on record. From the submissions of the Ld. AR, we find that the assessee has taken unsecured loans from M/s. Aneri Fincap Ltd amounting to Rs. 1.50 Crs during the FY 2015-16 and 2016-17. This fact was not disputed by the Revenue and the Ld. CIT(A) has considered that the unsecured loans to be genuine transaction and not merely an accommodation entry while adjudicating the appeals for the FY 2015-16 and 2016-17 in the assessee's own case. It is also noticed that the assessee has taken Rs. 66.25 lakhs as unsecured loans from M/s. Aneri Fincap Ltd during the impugned assessment year which was again considered as accommodation entry and not genuine in nature by the Revenue. The findings of the Ld. CIT(A) in para 6.5 is reproduced below for reference:
“6.5. During the appellate proceedings as well as assessment proceedings, the appellant has duly provided the identity by submitting the PAN and copy of ITR of M/s. Aneri Fincap Ltd. Further, to prove the genuineness of the transaction the appellant has submitted its bank statement reflecting the said transaction along with TDS certificates which shows that TDS had been deducted on the interest paid. Further, with respect to the creditworthiness, the appellant has submitted annual accounts and bank statements of the lender also. As per MCA portal the status of lender company is shown as "active" It shows that M/s. Aneri Fincap Limited is a genuine company. Thus, the addition of Rs. 66,25,000/-on account of unsecured loan and Rs. 9,98,317/- on account of interest on the loan deserved to be deleted. Accordingly, the AO is directed to delete the addition made of Rs. 66,25,000/-U/s. 68 of the Act and Rs. 9,98,317/-U/s. 69C of the Act. Hence, the ground of appeal no.2 is allowed."
7. We find that the Ld. CIT(A) has examined the creditworthiness and the bank statements of the lender M/s. Aneri Fincap Ltd. No adverse material has been brought before us by the Revenue to state that the transaction is a bogus entry. Further, as submitted by the Ld. AR, the assessee has not entered into any sale or purchase transaction with M/s. Aneri Fincap Ltd but has only taken unsecured loan during various years. In the light of these facts and circumstances as cited above, we find no infirmity in the order of the Ld CIT(A) thereby dismissing all the grounds raised by the Revenue.
9. Further, it was submitted that the assessee has duly discharged the initial onus cast on him in terms of identity, creditworthiness and genuineness of the transactions, the necessary documentary evidence have been duly submitted before the AO, which he has failed to consider however, the same has been subsequently duly considered and appreciated by the Ld.CIT(A) while allowing necessary relief to the assessee. In this regard, it was submitted that the assessee has made following submissions before the AO establishing the business credentials of the lender company and the same read as under: “3. Business credential of the lender companies and replies to specific observation made provided by Your Honour:- a) ANERI FINCAP LIMITED M/s. ANERI FINCAP LIMITED is a limited company duly registered on Bombay Stock Exchange and has its registered office at Flat No. 101, Vasu Villa, Amar Jyoti Soc. Compound, Opp. Telephone Exchange, S. V. Road, Kandivali (West), Mumbai-400067.
M/S ANERI FINCAP LIMITED is a registered Non-banking financial Company (NBFC) with RBI and is engaged in the business of finance and investments. The Company is a NBFC Company has registration under section 45-IA of the Reserve Bank of India Act, 1934. We are enclosing herewith copies of financial statements of alleged company as at 31.03.2019 (relevant year of loan taken). On perusal of the same it is evident that the company was having sufficient bank balance of its own during the period when the loans were granted. The company has no borrowings or any facility from banks. Further it be seen that the accumulated networth of the company is Rs. 5,58,48,237/- as on 31-03-2019, the details of which is as under- Particulars Amount in Rs Share capital 3,01,31,000 Reserves & Surplus 2,57,17,237 Total 5,58,48,237 From the above table, it becomes very clear that the lender company is high net worth company and is capable of giving loans to other companies. Hence, the credit worthiness and capacity of the lender company stands substantiated. We also wish to state that interest has been regularly charged by the lender on the principal loan amount and tax has been duly deducted by the assesseon the same. For the year under consideration, M/s. Aneri Fincap Limited has been actively involved in its business of advancing loans and investing in various concerns as can be seen from the financials of the said companies which shows that substantial amount of revenue was earned over the years details of which is as under- Financial year Heads of Income Gross Revenue (Rs.) FY 2016-17 Revenue from Operations 19,52,63,965 FY 2017-18 Revenue from Operations 22,16,53,628 FY 2018-19 Revenue from Operations 24,33,52,602
Further, our reference was drawn to the submissions made before the Ld.CIT(A) and the relevant contents thereof reads as under: “8. During the year under consideration, the appellant had taken unsecured loan from M/s Aneri Fincap Ltd amounting to Rs. 80,00,000/- and interest accrued on overall loans is Rs. 57,67,507/-. 9. The assessee had submitted the following evidences at the time of assessment proceedings to substantiate the genuineness of the transaction, identity and creditworthiness of the alleged lender company enclosed in paper book page no: Duly signed confirmation of accounts as received from lenders confirming the transactions entered in FY 16-17 and FY 18-19 ITR Acknowledgment and computation of income of the party for FY 16-17 to F.Y. 18-19 Copy of PAN Card of the lender Audited financial statements of the lenders reflecting the creditworthiness of the lenders for FY 16-17 to F.Y. 18-19 Bank statements of the lenders reflecting the transactions and source of funds of loan received (for FY 18- 19 the bank statements are enclosed in paper book-11 at page no. 15 to 17) Bank statements of the assessee company duly confirming the corresponding transaction 10.On submission of the above-mentioned documents, the appellant company has duly discharged its onus to substantiate the loan transaction viz: a. Identity: PAN, ITR acknowledgement filed by the lender; b. Genuineness: Confirmation from the party, Audited Financial statements and bank statements of the assessee, TDS Certificate; C. Creditworthiness: Annual Accounts of the lenders and Bank statements of the lender.
11. The ld. Assessing Officer has not found any short comings or deficiencies in the documents submitted by the appellant in support of the alleged unsecured loans from the aforesaid party and has made the addition without controverting the vital evidences submitted before him.
12. With regards to addition of unsecured loan and interest thereon on the alleged lender company we wish to state as under:- Loan of Rs.80,00,000/- and interest on loan of Rs. 57.67,507/- from M/s. Aneri Fincap Ltd: On perusal of the financial statements of the above-mentioned party for AY 2019-20 (Refer page no. 58 to 79 of paper book), it can be observed that the returned income of the alleged company for the year under consideration was Rs.79,20,620/-, Turnover was Rs.24,33,52,602/-, profit was Rs.68,70,374/-and net worth of Rs.5,58,48,237/-. The lender company has a turnover of Rs.24,33,52,602/, which substantiates that business activities are carried out in real sense.
The said company's status on MCA website is also "ACTIVE" enclosed in paper book- II at page no. 18 which further justifies the genuineness of the transaction.
Apart from the networth, the lenders also had sufficient bank balances out of which the loans had been advanced to the appellant. Thus, the adequate balance in the bank account of the party clearly proves the creditworthiness of the lender too.”
It was further submitted that regarding non-compliance to the notice issued u/s. 133(6) of the Act to M/s. Aneri Fincap Ltd., it was submitted that M/s. Aneri Fincap Ltd., has duly complied to the said notice on 22- 11-2023, providing all the requisite information documentation and in this regard, our reference was drawn to the acknowledgment of the response to the notice so submitted, which is available at assessee‟s Paper Book, pages 1 - 2. It was submitted that though the AO has passed the order on 24- 11-2023, however, the response to notice u/s. 133(6) of the Act which was filed on 22-11-2023 was not taken into consideration for the reasons best known to the AO.
It was further submitted that regarding field enquiry carried out by the Inspector, the assessee was never confronted with the report of the Inspector, who has carried out such enquiry nor the AO has intimated the assessee about such field enquiry nor any opportunity was given to the assessee in order to file any response in this regard. It was submitted that in any case the security guard has also stated that M/s. Aneri Fincap Ltd., has since shifted to a new place and he is not aware of the address of the new premises. Therefore, the same cannot be held against the assessee in terms of holding M/s. Aneri Fincap Ltd., as a paper entity as the same entity has merely shifted from its earlier address to new address.
13. Further referring to the statement of Shri Rajesh G. Mehta, it was submitted that he was asked about purchase and sale bills to various entities of One World Group, however, the assessee is nowhere connected to the One World Group and has taken unsecured loan from M/s. Aneri Fincap Ltd., and, therefore, there is a complete disconnect between the statement so relied on by the AO and the transaction under consideration and the addition which has been finally made in the hands of the assessee. It was accordingly submitted that without any cogent evidence, no adverse interference could have been drawn by the AO. Further, the AO has not disputed the documentation placed on record by the assessee or has found anything adverse against the assessee. It was accordingly submitted that the order of the Ld.CIT(A) be sustained and appeal of the Revenue be dismissed.
14. We have heard the rival contentions and perused the material available on record. The transaction under consideration relates to unsecured loan transaction amounting to Rs 80 lacs entered into by the assessee with M/s Aneri Fincap Ltd during the financial year 2018-19 relevant to impugned assessment year 2019-20. During the course of assessment proceedings, it is noted that the assessee company has obtained and submitted the documentation to corroborate the said transaction by way of the audited financial statements of the lender company incorporating and reflecting the subject loan transaction, the bank statements of the lender company demonstrating sufficient bank balance at the time of advancing the funds, PAN of the lender company and copy of tax return showing returned income of Rs 79,20,620/-, confirmation from the lender company confirming the subject transaction, status of the lender company as an active (on MCA website) and registered NBFC engaged in the business of finance and investments having reported turnover of Rs.24,33,52,602/-, net profit of Rs.68,70,374/- and net worth of Rs.5,58,48,237/- for the year under consideration besides the fact that the transaction has been entered into through the banking channel, tds liability has been discharged on the interest accrued/paid on the loan amount and the fact that the loan has been subsequently repaid during the financial year 2000-21 relevant to assessment year 2021-22. There is no adverse finding recorded by the AO disputing the documentation so submitted by the assessee and therefore, the onus cannot be shifted back on the assessee. All the AO has done is that he has issued a notice u/s 133(6) to the lender company and even though the same was responded to by the lender company as evident from record placed before us and available to the AO before passing of the assessment order but not considered by the AO. Secondly, the AO has deputed his inspector to visit the premises of the lender company wherein he was informed that the lender company has since shifted to another premises and the same therefore is not a basis to hold the said company as a non-existent paper company except that the lender company address couldn‟t be verified from last known address. There is nothing on record in terms of any action taken by the AO in terms of reaching out to the AO of the lender company whose PAN and tax return records were on record. We therefore find that the assessee has sufficiently discharged the onus cast on him in terms of identity, creditworthiness and genuineness of the loan transaction and no adverse view can be taken in this regard. The Ld.CIT(A) has rightly considered the documentation so submitted and the addition so made by the AO has rightly been deleted by the Ld.CIT(A). Further, we find that the Coordinate Bench in assessee‟s group company case (supra) has taken a similar view which also supports the case of the assessee. In light of the same, we do not see any justifiable basis to interfere with the order of the Ld.CIT(A) and the same is hereby sustained and the ground of appeal so taken by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.