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Facts
The revenue filed an appeal against the CIT(A)'s order deleting the addition of Rs. 1,00,00,000/- made by the AO. The addition was based on the AO's belief that the assessee received accommodation entries from three companies. The assessee provided details of these loans to establish their genuineness and creditworthiness.
Held
The Tribunal held that the Assessing Officer relied solely on the investigation wing's report without conducting his own inquiry. The assessee had discharged the onus by providing all necessary documentation for the loans, including identity, genuineness, and creditworthiness of the lenders.
Key Issues
Whether the addition made by the AO on account of alleged bogus accommodation entries is justified, or if the assessee has discharged the onus by providing sufficient evidence of the genuineness and creditworthiness of the loan transactions.
Sections Cited
143(3), 147, 68, 133(6), 142(1), 271(1)(c)
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Income Tax Appellate Tribunal, ‘F’ BENCH, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI PRABHASH SHANKAR
आदेश / O R D E R PER AMIT SHUKLA (JM): The aforesaid appeal has been filed by the revenue against order dated 07.08.2024 passed by National Faceless Appeal Centre, Delhi (hereinafter in short “ld. CIT(A)”) for the quantum of assessment passed u/s. 143(3)/147 of the Income Tax Act, 1961 (in short “Act”) for the A.Y.2012-13 2. The revenue taken following ground of appeal: - Vikasdeep Sales Private Limited “(i) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made by the Assessing Officer u/s 68 of the IT. Act, without appreciating the statement of Mr. Praveen Agarwal, Kolkata based entry provider has admitted in his statement that he used to provide accommodation entries to the beneficiaries by rotating the funds through intermediary companies and earned commission for the same ?" (ii) This case falls under the exception clause 3.1(h) of circular no. 5/2024 dated 15.03.2024 and hence monetary limit is not applicable although the Tax Effect involved is Rs. 32,44,500/-“
3. Brief facts of the case are that, assessee company has filed its return of income on 28.09.2012 declaring total income of Rs. 24,32,710/-. Later on, the case was reopened on the basis of information received from DDIT (Inv.) Kolkata that assessee has taken loan from three parties for sum aggregating to Rs. 1,00,00,000/- which was beneficiary of accommodation entry. Ld. AO has incorporated report of investigation and issued show- cause notice to the assessee. In response, assessee had submitted that these are all genuine parties and assessee has not taken any accommodation entries and had furnished the details of all the parties in the following manner:-
1. Sl.No. Particulars (i) Makesworth Projects & Developers Pvt. Ltd. - Copy of ledger confirmation for FY 2011-12. - Copy of relevant portion of bank statements - Copy of ITR for AY 2012-13. - Copy of Audited Financial Statements for FY 2011-12 (ii) Mangalmayee Hirise Pvt. Ltd. - Copy of relevant portion of bank statements. - Copy of ledger confirmation for FY 2011-12. - Copy of ITR for AY 2012-13. - Copy of Audited Financial Statements for FY 2011-12 Vikasdeep Sales Private Limited Sl.No. Particulars (iii) Parameshwar Merchandise Pvt., Ltd., - Copy of appellant’s ledger account as appearing in the books of lender for FY 2011-12 - Copy of ledger confirmation for FY 2011-12. - Copy of relevant portion of bank statements - Copy of ITR & Computation of income for AY 2012-13. - Copy of Audited Financial Statements for FY 2011-12
4. Ld. AO without examining these details or creditworthiness has simply relied upon the report of the investigation wing. The relevant observations of the ld. AO reproduced as under: - “7.2 In its submission dated 20.12.2019, the assessee furnished the copy of Company Master Data of the above companies. In this regard, it is submitted that the Company Master Data does not proves the genuineness of the unsecured loan transactions obtained by the assessee. 7.4 Further, in its submission, the assessee also furnished the copy of income tax return, copy of financial statements, bank statement and confirmation of the above entities. In this regard, it is submitted that on perusal of the Return of Income of A.Y 2012-13 of above companies, it is seen that the above companies have offered meager income for tax. The details of income of the above companies are tabulated below- Income in Sr. No NAME OF BOGUS ENTITY A.Y 2012-13 1. M/S.MAKESWORTH PROJECTS AND DEVELOPERS, 15,87,474/- 2. M/S.MANGALMAYEE HIRISE PVT LTD, 55,920/- 3. PARMESHWAR MERCHANDISE PVT LTD, 3,68,742/- 7.5 On perusal of the financial statement of the above companies, it is seen that these compaines are not involved in any genuine business activities. These companies are being used for routing accounted funds. In the balance sheet of all these companies, it is seen that there are huge share premium / loans and advances and these share premium / loans and advances have been further given as share premium or loans and advances to other companies. 7.6 To independently, verify the genuineness of the unsecured loan transactions of the assessee, notices u/s 133(6) of the act were issued and served to the above companies. However, in response, no reply was received from the above companies. Thereafter, vide notice u/s 142(1) dated 26/11/2019, the assessee was also requested to produce Vikasdeep Sales Private Limited the principle officers of above companies in the office of undersigned. However, the assessee also failed to produce the principle officers of the above companies. 7.7 It is also submitted that a Search action was conducted on Praveen Agarwal u/s 132 of the act. During the search proceedings the statement of Shri Praveen Agarwal was recorded u/s 132(4) of the Act on 12.11.2012. In the statement recorded on oath, Shri Praveen Agarwal confirmed that he is involved in the activity of providing bogus accommodation entries. In the statement, Shri Praveen Agarwal also confirmed that M/s. Parmeshwar merchandise Private Limited is a bogus company operated, managed and controlled by him for providing bogus accommodation entries. (Statement of Shri Praveen Agarwal dated 12.11.2012 is attached to this order.) During the course of search proceedings, in the case of Shri Praveen Agarwal, the statement of Shri Pramod Ramdin Sharma (an employee of Shri Praveen Agarwal) was also recorded under section 132(4) of the act on 10.11.12. In the statement recorded under oath, Shri Pramod Ramdin Sharma also confirmed that he is employee of Shri Prayeen Agarwal and Shri Praveen Agarwal is involved in the activity of providing bogus accommodation entries. Shri Pramod ramdin Sharma also confirmed that all the companies in which he is a director, were incorporated by Shri Praveen Agarwal for providing bogus accommodation entries to various beneficiaries. (Statement of Shri Pramod Ramdin Sharma dated 10.11.2012 is also attached to this order). 7.8 In view of above discussion, the amount of Rs. 1,00,00,000/- received from the above mentioned bogus companies by way of bogus accommodation entries is added to the income of the assessee u/s 68 of the Act. Penalty proceedings u/s 271(1)(c) read with Explanation 1 thereto are also initiated on this issue for furnishing inaccurate particulars of income.”
5. Ld. CIT(A) after noting down the identity, genuineness and creditworthiness of the lender companies, noted the following facts: - “i) Makeshworth Projects & Developers Ltd., Rs.2500,000 a) For identity of the lender Copy of their ITR, PAN & Company Master Data b) For genuineness of the transactions Vikasdeep Sales Private Limited Copy of ledger confirmation duly signed by the lender showing transaction details thru electronic mode of transfer by banks, details of interest credited. TDS deducted thereon etc. Copy of relevant portion of bank statements of the lender. Please note that no cash was deposited before transferring the sums to the appellant accounts. c) For creditworthiness of the lender Copy of their Audited Balance sheet showing net worth of Rs. 31 Crores. A set of these documents are also enclosed as Annexure “I” ii) Mangalmayee Hirise P. Ltd. Rs. 50,00,000 a) For identity of the lender Copy of their ITR, PAN & Company Master Data b) For genuineness of the transactions Copy of ledger confirmation duly signed by the lender showing transaction details thru electronic mode of transfer by banks, details of interest credited. TDS deducted thereon etc. Copy of relevant portion of bank statements of the lender. Please note that no cash was deposited before transferring the sums to the appellant and also copy of appellant's ledger account as appearing in the books of lender. c) For creditworthiness of the lender Copy of their Audited Balances heet showing net worth of Rs.96 Crores A set of these documents are also enclosed as Annexure 'J'. iii) Parmeshwar Merchandise P. Ltd. Rs. 25,00,000 1. Copy of their ITR, PAN & Company Master Data 2. For genuineness of the transactions Copy of ledger confirmation duly signed by the lender showing transaction details thru electronic mode of transfer by banks, details of interest credited. TDS deducted thereon etc. Copy of relevant bank statements of the lender. Please note that no cash Vikasdeep Sales Private Limited was deposited before transferring the sums to the appellant and also copy of appellant's ledger account as appearing in the books of lender. 3 For creditworthiness of the lender Copy of their Audited Balance sheet showing net worth of Rs. 90 Crores. A set of these documents are also enclosed as Annexure 'K'. The appellant, hence proved all the three ingredients of Sec.68.
1. The addition was made by treating the following amount of income as offered to tax by the lenders (Kindly refer para 7.4 of the assessment order) as meager: Makesworth Projects & Developers Ltd., Rs.158474 Mangalmayee Hirise P. Ltd., Rs.55920 Parmeshwar Merchandise P. Ltd., Rs.368742 Total Rs.2012136
6. After considering all these documents, ld. CIT(A) has deleted the addition on merits and observed and held as under: - “4. I have carefully considered the submissions of Appellant and judicial pronouncement relied therein and Assessment Order. It is a fact on the record that the Assessing Officer has made the addition of Rs.100,00,000/- on account of payment received from bogus company by way bogus accommodation entries and same is added to the total income of the assessee under section 68 of the Income Tax Act, 1961. In this regard, the appellant company has contended that the Learned Assessing Officer has erred in adding the genuine loan borrowed from following parties as cash credit: Makesworth Projects & Developers Ltd., Rs.25,00,000 Mangalmayee Hirise P. Ltd., Rs.50,00,000 Parmeshwar Merchandise P. Ltd., Rs.25,00,000 Vikasdeep Sales Private Limited Total Rs.1,00,00,000 4.1 In support of its contention, the appellant company has contended that the learned Assessing Officer has heavily relied on the information vide letter dated 01.03.2019 received from DDIT (Inv) Unit - 4 (3) Kolkata. But, as per the said information (as referred by him in para 7.1 of the assessment order), the name of the lender Company Makeshworth Projects and Developers P. Ltd. & Mangalmayee Hirise Private Limited was not mentioned. Therefore, the Ld.Assessing officer has failed to establish the fact that why the loan amount of Rs.25,00,000 & Rs.50,00,000 pertaining to said lender companies were added. 4.2 Further, with regard to loan transaction of Rs.25,00,000/- with Makeshworth Projects & Developers Ltd, the appellant company has submitted identity of the lender i.e. Copy of their ITR, PAN & Company Master Data. Further, for genuineness of the transactions, the appellant company has submitted Copy of ledger confirmation duly signed by the lender showing transaction details through electronic mode of transfer by banks, details of interest credited and TDS deducted thereon etc and Copy of relevant portion of bank statements of the lender. The appellant has further contended that no cash was deposited before transferring the sums to the appellant accounts. Further, for creditworthiness of the lender, the appellant company has submitted copy of their Audited Balance sheet showing net worth of Rs. 31 Crores. 4.3 Further, with regard to loan transaction of Rs.50,00,000/- with Mangalmayee Hirise Private Limited, the appellant company has submitted identity of the lender i.e. Copy of their ITR, PAN & Company Master Data. Further, for genuineness of the transactions, the appellant company has submitted Copy of ledger confirmation duly signed by the lender showing transaction details through electronic mode of transfer by banks, details of interest credited and TDS deducted thereon etc and Copy of relevant portion of bank statements of the lender. The appellant has further contended that no cash was deposited before transferring the sums to the appellant accounts. Further, for creditworthiness of the lender, the appellant company has submitted copy of their Audited Balance sheet showing net worth of Rs.96 Crores. 4.4 Further, with regard to loan transaction of Rs.25,00,000/- with Parmeshwar Merchandise Private Limited, the appellant Vikasdeep Sales Private Limited company has submitted identity of the lender i.e. Copy of their ITR, PAN & Company Master Data. Further, for genuineness of the transactions, the appellant company has submitted Copy of ledger confirmation duly signed by the lender showing transaction details through electronic mode of transfer by banks, details of interest credited and TDS deducted thereon etc and Copy of relevant portion of bank statements of the lender. The appellant has further contended that no cash was deposited before transferring the sums to the appellant accounts. Further, for creditworthiness of the lender, the appellant company has submitted copy of their Audited Balance sheet showing net worth of Rs. 90 Crores. Further, the fact as emanating from the master data submitted by the appellant during the course of Assessment Proceeding wherein it is mentioned that M/s Axis Trustee Services Ltd has granted a credit facility of Rs.297.42 crore to the Parmeshwar Merchandise Private Limited against the pledge of shares also lend substantive credence towards establishing the creditworthiness of the lender company. 4.5 Further, the Ld. Assessing Officer has made the addition on the basis of following observation: i. That Entities has offered meager Income for Tax. ii. That on perusal of the Financial statement of the above companies, it is seen that these companies are not involved in any genuine business activities. These companies are being used for routing unaccounted funds. iii. That notices u/s 133(6) of the Act were issued and served to the above companies. However, in response, no reply was received from the above companies. 4.6 Further, the appellant has contended that the appellant company has no contact connections with them. Hence, the appellant has submitted the latest address as appearing on MCA website and requested them to send the notices on these addresses. But, by the wordings of the Assessment Order it was noticed that the request was not considered.”
7. Thereafter he referred to various judgments specifically including the some of the judgments of the Tribunal which have Vikasdeep Sales Private Limited dealt similar issue with respect to the same investigation report, and deleted the addition.
We have heard both the parties at length and also perused the relevant findings in the impugned order. It is seen that entire premise of the ld. AO is based on the report of the investigating wing and he himself did not carried out any further enquiry. Once the assessee has filed all the details of the lender companies and that they are regularly assessed to tax and still active companies and have huge turnover and funds and all these parties have duly disclosed the loan given to the assessee and also interest paid by the assessee in their books and audited accounts and subsequently these loans has been repaid back, it cannot be held that onus cast upon the assessee has not been discharged. Before us also, the assessee has filed confirmation, copy of acknowledgement of return, their audited financial statements, profit and loss account, their bank statements etc., 9. Another important fact which has been noted by the ld.CIT(A) (supra) that all these companies had huge net worth, reserves and surplus of more than Rs. 90 crores to Rs.95 crores as compared to the loan given Rs. 50 lakhs and Rs.25 lakhs. Once all these details were provided, ld. AO should have analysed these documents to examine the genuineness and creditworthiness of the lender parties or carried out his own inquiry rather than blindly relying upon the information received from Investigation wing. Once these companies are still active and carrying out regular business activities and regularly Vikasdeep Sales Private Limited assessed to tax and have huge net worth declared, then it cannot be held that either parties are bogus or loan is non genuine. Accordingly the order of the ld. CIT (A) deleting the addition is confirmed. 10. In the result, appeal of the revenue is dismissed. Order pronounced on 19th May, 2025.