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Facts
The assessee's appeal was against an order upholding an addition of Rs. 34,00,000/- as a genuine unsecured loan treated as an accommodation entry. The reassessment proceedings were initiated based on information from an investigation wing regarding accommodation entries provided by a group.
Held
The Tribunal held that the reassessment was based on a change of opinion and that the assessee had provided evidence of repayment of the loan through RTGS. Citing High Court decisions, the Tribunal found that the loan, having been repaid and not doubted by revenue authorities, could not be added.
Key Issues
Whether the reassessment proceedings were validly initiated based on change of opinion, and whether the addition of unsecured loan was justified when repayment evidence was provided.
Sections Cited
147, 143(3), 250, 68
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(AY: 2014–15) (Physical hearing) Innocent Infrastructure Private Vs. NFAC/ITO 12(2)(4) Limited, 002, Gulmohar Room No. 146B, Complex, Station Road, Aayakar Bhavan, M.K.Road, Goregoan East, Mumbai-400020. Mumbai-400063. PAN: AABCI 9076 Q (Appellant) .. (Respondent) Assessee by Mr. Suchek Anchaliya Revenue by Shri. Vijay Kr. G. Subramanyam, Sr. DR Date of Hearing 21/04/2025 Date of Pronouncement 21/04/2025 Orde under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICAIL MEMBER, 1. This appeal has been preferred against the impugned order dated 24.12.2024 passed in Appeal no. CIT(A) 20, Mumbai/10267/2019-20 by the Ld. Commissioner of Income–tax(Appeals)/ National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”] under section 250 of the Income-Tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment year [A.Y.] 2014- 15. The assessee has raised following grounds of appeal: “
1. On the facts and in the circumstances of the case and in law, the Ld. NFAC erred in not considering that the assumption of jurisdiction by the Ld. A.O. is bad in law as the conditions laid down under the Act for initiating reassessment proceeding u/s 147 of the Act have not been fulfilled.
2. On the facts and circumstances of the case and in law, the Ld. NFAC erred in not holding that the initiation of reassessment proceedings u/s 147 of the Act was bad in law as it was based on mere change of opinion because all relevant details relating to the impugned unsecured loan were available with the Ld. A.O. at the time of the original scrutiny assessment proceedings u/s 143(3) of the Act.
3. On the facts and circumstances of the case and in law, the Ld. NFAC erred in upholding the addition genuine unsecured loan amounting to Rs. 34,00,000/- by treating the same as accommodation entry without appreciating that the appellant had discharged the onus cast upon it to prove the identity, creditworthiness and genuineness by submitting the relevant documentary Innocent Infrastructure Private Limited evidences and that the appellant had received the unsecured loan for business purposes through banking channel and the same was repaid subsequently through banking channel.
4. On the facts and circumstances of the case and in law, the Ld. NFAC erred in not holding that there was violation of principles of natural justice as the Ld. A.O. had not provided the appellant with any material/corroborative evidence to substantiate Ld. A.O.'s case and had also not provided the opportunity to cross examine to the appellant while relying on a third-party statement in making the addition.
On the facts and circumstances of the case and in law, the assessment order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961, dated 30.12.2019 is invalid in view of Circular No. 19/2019, dated 14.09.2019, as the said order was issued manually without a valid computer-generated DIN quoted on the body of the said order and also without recording the reasons in writing with prior approval of the Chief Commissioner/Director General of Income Tax.
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.”
2. The rival submissions of learned authorized representative (Ld. AR) of the assessee and the learned Senior Departmental representative (Ld. DR) have been heard and record perused. The Ld. AR of the assessee submitted that he has raised legal ground against the validity of reopening as well as against the addition of unsecured loan. The Ld. AR of the assessee submits that case of assessee for AY 2014-15 was reopened on the basis of information of Investigation Wing (Mumbai) that such action was carried out on Gautam Jain and his group on 30.10.2013. It was revealed in the search action that Gautam Jain and his group were engaged in providing accommodation entry of bogus unsecured loan, sale and purchase of different king of material. The Assessing Officer (AO) reopened the case without any verification of fact. The assessment in case of assessee was completed under section 243(3) on 28.12.2016. During the assessment, the AO made complete scrutiny including in the issue of Innocent Infrastructure Private Limited unsecured loan. On satisfaction of AO no addition in the assessment order passed on 18.12.2016. Thus, the reopening which was based on third party information was nothing but a change of opinion. It is settled law that the issue on which the AO made verification of fact, accepted in scrutiny, cannot be reopened. Otherwise, it is a change of opinion. Reopening on change of opinion is not valid. On merit of the case, the Ld. AR of the assessee submits that during reassessment proceeding, the assessee in response to show cause notice date 23.12.2019, vide its reply dated 24.12.2019 specifically stated that loan availed by assessee from Maniratnam Exim Pvt. Ltd. was repaid subsequently, complete evidence of loan from Mani Ratnam Exim Pvt. Ltd. were provided to the AO. The assessee also furnished the details of repayment of loan. The Ld. AR of the assessee submit that once repayment of loan is accepted in subsequent period, no addition on account of such loan under section 68 as has been held by Hon’ble Jurisdictional High Court in HR Mehta V. ACIT [2016] 72taxmann.com (Bom) and Gujarat High Court in CIT(A) V. Ayachi Chandrashekhar Narsangji 42 taxmann.com 251(Guj) and in PCIT V. Ambe Trade Corpe Ltd. 145taxmann.com 27(Guj). The decisions of jurisdictional High court and of Gujarat High Court have been followed in a series of decision including in the decision of this bench in Shri. Rajuram Savaji Purohit V. ITO and Shri. Rajesh Manohar Patil V. CIT(A) ITA No. 2504/MUM/2023. The Ld. AR of the assessee submitted that assessee has good case on legal issue as well as in merit.
On the other hand the Ld. DR for the revenue submits that so far as legal ground/submission against the validity of reopening is concerned, the Ld. CIT(A) has not given any finding on such grounds of appeal
. Therefore, in absence of 3. Innocent Infrastructure Private Limited finding of first appellate authority, this issue cannot be agitated before second appellate authority. So far as repayment of alleged loan is concerned, it has been proved on record that Maniratnam Exim Pvt. Ltd. was entity managed by Gautam Jain and his associate, which was engaged in providing accommodation entry of loan. Once loan was not genuine, its repayment may be routing entry for squaring of such entry. Otherwise, repayment is not verified by lower authority. Therefore, matter may be restored back to the file of Ld. CIT(A) for seeking remand report from AO on such issue as well.
4. I have considered the rival submissions of both the parties and I have gone through orders of lower authorities carefully. I have also deliberated on case laws relied by Ld. AR of the assessee. I find that AO while passing the assessment order on 30.12.2019 under section 143(3) r/w 147 made addition on unsecured loan of Rs. 34,00,000/- received from Maniratnam Exim Pvt. Ltd. The AO while making such addition solely relied upon the report of investigation wing (Mumbai) that Maniratnam Exim Pvt. Ltd. was engaged in providing accommodation entry. I find that in response to show-cause notice dated 23.12.2019, the assessee in its reply dated 24.12.2019 specifically stated that loan has been repaid through RTGS and evidence to that effect was also furnished. The AO has not verified such fact. Copy of reply of assessee is available at Pg. 32 to 38 of paper book. I find that assessee has furnished the evidence about repayment of loan through RTGS on 08.07.2013 i.e. even before passing the original assessment order under section 143(3) on 28.12.2016. On perusal of bank statement of Maniratnam Exim Pvt Ltd, copy of which is available at page No. 42 of paper book, I find that such loan was repaid on 4 Innocent Infrastructure Private Limited 08.07.2013. I find that Hon’ble Gujarat High Court in CIT V. Ayachi Chandrashekar Narsangji (Supra) held that while loan has been paid subsequently which has not been doubted, the addition of loan cannot be made. Similarly, view was taken by coordinate bench of this Tribunal on Rajesh Manohar Patil V. CIT (Supra) and in Rajuram Savaji Purohit V. ITO (Supra). Thus, considering the fact that impugned loan has already been dated, and the same is not doubted by revenue authorities. Therefore, the same cannot be added in the hand of the assessee. Thus, the assessee succeeded on merit. Considering the fact that assessee succeeded on merit, therefore, adjudication of legal issue against the validity of reopening has become academic. Order pronounced in open court on 21 .04.2025.