Loading judgment…
Facts
The assessee, an HUF, had its case reopened for Assessment Year 2013-14 based on information that it received bogus entries from paper companies managed by Shri Vipul Vidur Bhatt. The Assessing Officer (AO) made an addition of Rs. 50,00,000/- under Section 68, citing unverified loan transactions from M/s. Sampada Chemicals Ltd. and M/s. P. Saji Textiles Ltd. The Ld. CIT(A) subsequently deleted this addition, holding that the AO relied solely on third-party material without independent verification.
Held
The Tribunal observed that both the AO and the Ld. CIT(A) failed to properly verify the documents and evidence furnished by the assessee regarding the loan transactions. It remitted the matter back to the Ld. CIT(A) for necessary verification, fresh adjudication on merits, and to provide the assessee a proper opportunity of being heard.
Key Issues
Whether the Ld. CIT(A) was justified in deleting the addition under Section 68 without independent verification of the assessee's claims and documents. Whether the addition of Rs. 50,00,000/- was beyond the scope of reasons recorded for reopening, and if bank-routed transactions are sufficient proof of genuineness.
Sections Cited
148, 133(6), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI ARUN KHODPIA
Per Smt. Beena Pillai, JM: Present appeal filed by revenue arises out of the order dated 29/09/2025 passed by NFAC, Delhi [hereinafter referred to as “Ld.CIT(A)”] for Assessment Year 2013-14, on the following grounds of appeal:-
1. 1. 1. 1. 1. 1. 1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made under Section 68, ignoring that the assessee failed to discharge the onus to establish the creditworthiness of the lender and the genuineness of the transaction as mandated under Section 68?
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in disregarding specific material and statements collected by the Investigation Wing indicating that the assessee received accommodation entries, thereby vitiating the finding of deletion of addition under Section 68?
3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition under Section 68 by holding that bank-routed transactions are sufficient proof of genuineness, contrary to settled law that mere banking transactions do not establish genuineness or creditworthiness?"
The appellant craves the leave to add, substitute, modify, alter, delete or amend all or any ground of appeal either before or at the time of hearing.”
2. The assessee is an HUF and filed its return of income for the year under consideration on 29/09/2013, declaring total income at Nil. Subsequently, the case of the assessee was reopened by issuing notice u/s 148 dated 12/07/2018 based on information received from the Investigation Wing, Mumbai. The Ld. AO noted that, as per the information received, the assessee was beneficiary of bogus entries from certain companies which were considered to be paper companies managed by Shri Vipul Vidur Bhatt and his related entities. The Ld. AO, therefore, formed a belief that income chargeable to tax escaped assessment. 2.1. The assessee was accordingly called upon to furnish details in respect of the transactions unearthed by the Investigation Wing during the search conducted in the case of Shri Vipul Vidur Bhatt and other related entities. A show cause notice dated 10/12/2018 was issued calling upon the assessee to explain as to why Rs. 25,00,000/- should not be added to the total income of the assessee being the alleged accommodation entry received from M/s. Sampada Chemicals Ltd., one of the entities managed by Shri Vipul Vidur Bhatt. In response to the notice, the assessee submitted that it had taken secured loans of Rs. 14,00,000/- and Rs. 11,00,000/- on 29/10/2012 and 30/10/2012, respectively. It was further submitted that the said loans were repaid on 08/10/2013. The assessee, in support of its contention, furnished bank statements reflecting the said transactions. 2.2. However, the Ld. AO did not accept the submissions of the assessee. The Ld. AO observed that the assessee had not furnished loan confirmation from M/s. Sampada Chemicals Ltd. at the first instance and also noted that a notice u/s 133(6) was issued to M/s. Sampada Chemicals Ltd., to which no response was received. Based on the Investigation Wing report, the Ld. AO came to the conclusion that M/s. Sampada Chemicals Ltd. was one of the entities managed and controlled by Shri Vipul Vidur Bhatt, who was allegedly involved in providing bogus accommodation entries to beneficiaries in lieu of commission through the paper companies managed by him. 2.3. The Ld. AO further noted that the assessee also received Rs. 25,00,000/- from M/s. P. Saji Textiles Ltd., which was also considered to be a paper company controlled and managed by Shri Vipul Vidur Bhatt. Accordingly, the Ld. AO treated both transaction to be accommodation entries and made addition of Rs. 50,00,000/- in the hands of the assessee u/s 68 of the Act. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld.CIT(A).
3. After considering the submissions of the assessee, the Ld.CIT(A) observed as under:- “5. (i). I have carefully considered the reassessment order, the submissions of the Appellant and the material available on record. The reassessment order reveals that the addition of Rs. 50,00,000/- has been made solely on the basis of general information received from the Investigation Wing, Mumbai and the statement of Shri Vipul Vidur Bhatt. Except relying on such third-party material, the assessing officer has not carried out any independent enquiry to establish that the specific transactions in the hands of the Appellant were in fact accommodation entries. No effort of analysing the bank statements of the either side have been made, which is foundational. (ii). It is further noticed that the reassessment order is cryptic in nature and contains no independent analysis of the evidences filed by the Appellant nor absence of the foundational document has been discussed. The order does not record any finding on the repayment of loans along with interest in the same financial year, which was specifically brought to the notice of the assessing officer as well as of this appellate authority.
6. In such circumstances, an addition made merely on borrowed satisfaction and without independent verification of both the parties cannot be sustained. Reliance solely on the general statement of a third party, without linking material to the Appellant’s case and without analysing the bank statements, falls short of the requirements of law as laid down in several judicial pronouncements, including the decisions cited by the Appellant.
Accordingly, I am not inclined to confirm the addition of Rs. 50,00,000/- made under section 68 of the Act. The grounds of appeal are allowed and the addition is directed to be deleted.”
Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal before the Tribunal.
The Ld.AR submitted that the Ld.AO received specific information that the assessee received Rs. 25,00,000/- from M/s. Sampada Chemicals Ltd., a paper company allegedly managed by Shri Vipul Vidur Bhatt, who was an entry operator and provided accommodation entries to beneficiaries. The Ld. AR submitted that the Investigation Wing report, extracted in the assessment order, specifically states that the assessee received Rs.25,00,000/- from M/s. Sampada Chemicals Ltd., and even the reasons recorded for reopening indicated that only Rs. 25,00,000/- had escaped assessment. 4.1. The Ld.AR submitted that, however, before concluding the assessment, the Ld.AO, based on the bank statements furnished by the assessee, noted that the assessee received Rs. 25,00,000/- from M/s. P. Saji Textiles Ltd., which was also stated to be a company managed by Shri Vipul Vidur Bhatt. The Ld. AR submitted that without conducting any further enquiry, the Ld. AO proceeded to make addition of Rs. 50,00,000/-, which was beyond the scope of the reasons recorded for reopening the assessment. 4.2. The Ld. AR further submitted that, the details furnished by the assessee were never properly verified by the Ld. AO in respect of the loans obtained by the assessee from M/s. Sampada Chemicals Ltd., and its subsequent repayment. It is submitted that, merely on the ground that, notice issued u/s 133(6) to the alleged creditor was not responded, the Ld. AO proceeded to make the addition in the hands of the assessee. He submitted that the addition made is beyond the scope of the reasons recorded, as the reasons recorded never suggested the name of M/s. P. Saji Textiles Ltd. He vehemently supported the view taken by the Ld.CIT(A). 4.3. On the contrary, the Ld. DR submitted that the Ld.CIT(A), while deleting the addition, considered the assessment order to be cryptic in nature, however, he himself without carrying out any independent enquiries of the evidence filed by the assessee allowed the claims of assessee. The Ld. DR thus submitted that the impugned order passed by the Ld.CIT(A) does not justify the relief granted to the assessee. We have perused the submissions advanced by both sides in light of the record placed before us.
Admittedly, it is noted that the reasons recorded pertain only to the alleged accommodation entry received by the assessee from M/s. Sampada Chemicals Ltd.. During the course of the assessment proceedings, upon verification of the bank statements furnished by the assessee, the Ld. AO noticed another loan transaction reflected in the accounts of the assessee from M/s. P.
Saji Textiles Ltd., which was also stated to be one of the paper companies managed by Shri Vipul Vidur Bhatt. It is observed that both the authorities below have not verified the documents furnished by the assessee in accordance with law. The Ld.CIT(A), while deleting the entire addition, also did not carry out the necessary verification to justify the deletion of the addition. 5.1. In the interest of justice, we deem it fit to remit this issue back to the file of the Ld.CIT(A) for necessary verification in light of the reasons recorded by the Ld. AO and the evidences furnished by the assessee in support of its claim. The Ld.CIT(A) is directed to pass a speaking order on merits in accordance with law after granting proper opportunity of being heard to the assessee. Accordingly, the grounds raised by the Revenue stand partly allowed for statistical purposes. In the result, the appeal filed by the Revenue stands partly allowed for statistical purposes. Order pronounced in the open court on 16/03/2026 Sd/- Sd/- (ARUN KHODPIA) (BEENA PILLAI) Accountant Member Judicial Member Mumbai Dated: 16/03/2026 SC Sr. P.S.
(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.