DCIT, CC - 7(3), MUMBAI vs. M/S A. M. DEVELOPERS AND REALTORS, MUMBAI

PER ANIKESH BANERJEE, J.M:

All these appeals have been filed by the revenue and by the respective assessees challenging the orders passed by the Learned Commissioner of Income
Tax (Appeals)-49, Mumbai [hereinafter referred to as "Ld. CIT(A)"], under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] in the respective hands of these assessees, on different dates for the assessment years mentioned against their respective names. The impugned orders arise from the assessments made by the Learned Deputy Commissioner of Income Tax/Assistant

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Commissioner of Income Tax, Central Circle-7(3), Mumbai [hereinafter referred to as "Ld. AO"]. The dates of the appellate orders, assessment orders and the section under which the assessments were framed are tabled below:

ASSESSEE & APPEAL NO FILED BY ASSESSMENT
YEAR
DATE OF APPEAL
ORDER
ASSESSMENT
U/s DATE OF ASSESSMENT
ORDER

1
Lotus Logistic & Developers Pvt Ltd.
AY 2008-09
28-03-2019
143(3)/147
29-03-2016
Assessee

2
Revenue

3
Revenue
2016-17
29-10-2024
143(3)
28-12-2018

4
Revenue
2017-18
29-10-2024
143(3)
29-12-2019

5
Revenue
AY 2014-15
28-03-2019
153A/143(3)
30-12-2016

6
Assessee
AY 2015-16
28-03-2019
143(3)
30-12-2016

7
Revenue

8
A.M.Developers and Realtors.
Revenue
AY 2012-13
12-02-2019
147/143(3)
22-12-2017

Lotus Buildspace LLP

9
Revenue
AY 2014-15
31-12-2018
153A r.w.s.
143(3)
19-12-2016

10
Revenue
AY 2015-16
31-12-2018
143(3)
19-12-2016

A.M.Construction

11
Revenue
AY 2011-12
15-02-2019
147/143(3)
22-12-2017

12
Revenue
AY 2012-13
15-02-2019
147/143(3)
22-12-2017

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Lotus Logistic & Developers Pvt Ltd challenging the relief granted by Ld CIT(A) and the assessees have filed appeals in ITA No.3697/Mum/2019 relating to AY 2008-09 and ITA No.3698/Mum/2019
relating to AY 2015-16 challenging the additions sustained by Ld CIT(A).
2. The facts of the case are set out in brief. All the above said entities belong to “Lotus Group”. A search was conducted under section 132 of the Act by the revenue in Lotus, Kamdhenu, Green Valley group on dated 09/10/2014. The revenue had carried out investigation in certain companies and noticed those companies were providing only accommodation entries in the form of, inter alia, share application money, unsecured loans etc. It was noticed that the assessees herein have received money from the companies alleged to be providing accommodation entries. The money was received by the assessees either in the form of share application money or as unsecured loans. On the basis of this information, the revenue carried out search operations in the hands of assessees herein. It is pertinent to note that the search team did not unearth any incriminating material to support its case that the share application money/
unsecured loans received by these assessees are only accommodation entries.
Consequent to the search operations, the assessments of the assessees herein for various years were reopened u/s 153A of the Act. The AO also reopened the assessment of M/s Lotus logistics and Developers P Ltd relating to AY 2008-09 by issuing notice u/s 148 of the Act.
2.1 In the reopened assessments, the unsecured loans or share capital received by these assessees were added by the AO to the total income u/s 68 of the Act treating them as unexplained cash credits on the reasoning that they are not real, but represent accommodation entries received by these assessees. The relevant

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Lotus Logistic & Developers Pvt Ltd interest expenditure claimed on the above said loans was assessed as unexplained expenditure u/s 69C of the Act. All these assessees had received loans or share capital from one or more of the following entities: -
(1) Bhavana Computers Pvt Ltd (BCPL);
(2) Rowland Trexim Pvt Ltd (RTPL);
(3) Divine Tradecom Pvt Ltd (DTPL);
(4) Satyam Projects Pvt Ltd (SPPL)
(5) Anandomayee Merchandise Pvt Ltd,
(6) M/s Santosh Gems Pvt Ltd,
(7) M/s RatnagarFinlease Pvt Ltd,
(8) M/s Anglo CommotradePvt Ltd and (9) M/s Valaka Engineering Pvt Ltd
The AO fully relied upon the report of the investigation wing and also the statements recorded by the investigation wing from different persons, who were alleged to be providing accommodation entries through the above said concerns.
Aggrieved by the additions made by the AO, all the assesses herein filed appeals before the Ld. CIT(A). The Ld.CIT(A) partly allowed the appeal of the assessee named M/s Lotus Logistics and Developers P Ltd in AY 2008-09 and 2015-16. Appeals of other assessment years of above said assessee and also the appeals filed by other assessees herein were allowed fully. Aggrieved by the orders passed by Ld CIT(A), the assessee M/s Lotus Logistics and Developers P Ltd as well as the revenue have filed these appeals before us for the years mentioned in the above said table on the issues decided against them.

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Lotus Logistic & Developers Pvt Ltd

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Lotus Logistic & Developers Pvt Ltd based in Kolkata in the guise of unsecured loans/advances and share capital/premium. The entities were assessed based on incriminating evidences seized during the course of search, statements recorded us. 132(4)/131 of the Act of the relevant persons which have been taken reference in the assessment orders. The assessments concluded inter-alia include M/s. Lotus Logistics &
Developers Pvt.Ltd., M/s. Lotus Build space LLP, M/s. A. M. Developers & Realtors and M/s. A. M. Constructions referred above for which department has filed appeals referred above. The assessment's in the case of M/s. Lotus Logistics &
Developers Pvt. Ltd. and M/s. Lotus Build space LLP was concluded u/s. 153A of the Act for A.Y’rs. 2014-15 and 2015-16. The assessments in the case of M/s. A.
M. Developers & Realtors and M/s. A.M. Constructions were concluded u/s. 147
r.w.s143(3) of the Act.
3. In all the assessments referred above, there are common issues on the basis of which assessed income is determined. The variation to the returned income is on account of addition u/s. 68 of the Act on account of advances/loans, share capital/share premium received from paper companies based in Kolkata. There are 4 entities based in 2. Search assessments in the case of Lotus group of entities were concluded us. 153A the IT Act (hereinafter referred as "Act") consequent to search action u/s. 132 of the Act in Lotus/Kamdhenu/Green Valley Group conducted on 09.10.2014. The additions made in the assessments of the group entities were on account of accommodation entries received from companies based in Kolkata in the guise of unsecured loans/advances and share capital/premium. The entities were assessed based on incriminating evidences seized during the course of search, statements recorded us. 132(4)/131 of the Act of the relevant persons which have been taken reference in the assessment orders. The assessments concluded inter-alia include M/s. Lotus Logistics &
Developers Pvt.Ltd., M/s. Lotus Build space LLP, M/s. A. M. Developers & Realtors and M/s. A. M. Constructions referred above for which department has filed appeals referred above. The assessment's in the case of M/s. Lotus Logistics &
Developers Pvt. Ltd. and M/s. Lotus Build space LLP was concluded u/s. 153A of the Act for A.Y’rs. 2014-15 and 2015-16. The assessments in the case of M/s. A.
M. Developers & Realtors and M/s. A.M. Constructions were concluded u/s. 147
r.w.s143(3) of the Act.
3. In all the assessments referred above, there are common issues on the basis of which assessed income is determined. The variation to the returned income is on account of addition u/s. 68 of the Act on account of advances/loans, share capital/share premium received from paper companies based in Kolkata. There

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Lotus Logistic & Developers Pvt Ltd are 4 entities based in Kolkata from which accommodation entries have been arranged through entry operators based in Mumbai and Kolkata. These entities are:
i. Bhavana Computers Pvt. Ltd. (hereafter referred as BCPL).
ii. Rowland Trexim Pvt. Ltd.(hereafter referred as RTPL).
iii.DivineTradecom Pvt. Ltd. (hereafter referred as DTPL).
iv. Satyam Projects Ltd. (hereafter referred as SPPL).
4. The evidences gathered during the course of search with respect to accommodation entries availed by the entities of Lotus Group from the above- mentioned paper companies discussed in the Assessment order are elaborated here below for kind consideration in the context of appeals filed by the Department, listed in the reference.
4.1 In the course of search action in Lotus Group of cases, registered offices of BCPL in Kolkata were covered. There were two premises which were located at:
i. 932/A/74, Jessor Road, Meghdoot Apartment, Ground Floor, Sarada Pally,
Kolkata, ii.52/2, Ram Lochan Shire Street, Belurmath, Howrah.
The premises at (i) was occupied by Shri Ankit Poddar and his family as his residence. The statement of Shri Ankit Poddar was recorded u/s. 133A of the Act on 9.10.2014 wherein he deposed that the premises occupied by him was a registered office of BCPL, DCPL and RTPL. He also deposed that he had no knowledge about business activities of the three companies and he only received letters of the three companies to hand it over to Shri Pradeep Poddar who is the Director in those companies. At the premises at (ii), statement of Shri Birendra
Kumar Tiwari was recorded. He was found to be a tenant at this premises for more than 30 years and he has deposed that neither the office of BCPL exist at the said premise nor any correspondence in the name of BCPL has been noticed by him. Therefore, it is reasonable to hold that the said addresses were merely mailing addresses in respect of the paper concerns in question and the entity never conducted any business from the said premises.
4.2 Statement of Shri Pradeep Poddar: Shri Pradeep Poddar was found to be the employee of Shri Mahesh Singhania of M/s. M K Singhania & Associates based in 9

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Kolkata. Shri Mahesh Singhania was in control of a company by name Swadha
Properties Pvt. Ltd. and Shri Pradeep Poddar was a salaried employee of Swadha
Properties Pvt. Ltd. Shri Pradeep Poddar is found to be one of the common
Directors in BCPL, DCPL and RTPL. Statement of Shri Pradeep Poddar was recorded u/s. 131 of the Act on 2.12.2014. In his statement, Shri Pradeep Poddar has deposed that he is a dummy director in BCPL, DTPL and RTPL. Further, he has also given the list of other entities which were used for providing accommodation entries to various beneficiaries including Lotus Group. It is therefore clear from the statement of Shri Pradeep Poddar that he is only a namesake Director in all the three paper entities and these entities were used for providing accommodation entries.
4.3 Fund trail in the post search investigation: In the post search investigation, the DDIT has analyzed financials and bank statements of the paper entities and also analyzed the fund trail to these entities. The DDIT has reported that 126
companies, all of them based in Kolkata have contributed funds to BCPL, DCPL and RTPL by way of share capital/share premium. It is further found that out of 126 companies, 29 companies were such that either the Directors of these companies or the entry operator associated with these companies have accepted before the department that they are providing accommodation entries. The DDIT(Inv) has further analyzed the income profile of all the 126 entities for FY.
2007-08 and 2008-09 and found that 11 companies have not filed their Return of Income for FY. 2008-09 and 6 companies were non-filers. Further, only 4
companies out of 126 have income more than 5 lakhs in either FY. 2007-08 or 2008-09. Based on such analysis, it was clear that the advances/share capital provided to BCPL. DCPL and RTPL were not out of genuine business operations or accumulated profits but again the funds were routed by way of share capital or unsecured loans from other paper companies. This establishes the fact that money which has flown as share capital/premium or advances from BCPL, DCPL and RTPL to Lotus group of entities are not genuine funds but accommodation entries routed through a web of shell companies. It was also noted that the majority of the source companies have common Directors and common communication address. The facts such as dummy Directors, common directors across multiple companies, poor operational revenues, available funds in the form of share capital and unsecured loans, investments by way of advances and investments in closely held companies by subscribing share premium etc. point towards shell companies created for routing elicit funds.

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Lotus Logistic & Developers Pvt Ltd and unearth the truth while making addition u/s. 68 of the Act in the hands of the end recipients of funds through banking channel routed through these three paper concerns in the garb of loans/advances and share premium.
4.6 The AO has also analyzed the financials of BCPL, DCPL and RTPL for the years in which advances/share capital/share premium has been received by Lotus group of entities to bring on record that the alleged entities do not have funds in the form of accumulated profits to subscribe for huge premium or provide advances. The AO has also brought on record, fact that earning per share of all the three entities is 0.01 to 0.1. Further, the AO has also highlighted the fact that despite the alleged entities not having strong financials and the backing of genuine business transactions, the entities have raised share premium of Rs.90
per share before issuing accommodation entries by way of advances/share premium.
4.7 it is also discussed in the relevant assessment orders that high net worth claimed by the alleged investor companies (BPCL,DCPL& RTPL) is an artificial net worth existing only on paper created by issuing shares at premium to paper entities. The AO has also discussed the fact that despite the alleged entities subscribing to shares of Lotus group of entities at a premium, no dividend has been paid by Lotus group till the date of their final acquisition by the group.
Further, it also a fact that interest is not regularly paid against loans and advances claimed to have been borrowed from these entities.
4.8 In the course of search proceedings, statement of Shri Amal Mondal has been recorded u/s. 131 of the Act on 9.10.2014. Shri Amal Mondal was found to be one of the employees of Shri Mahesh Singhania and employed with the company by name Sosha Credit Pvt. Ltd. This entity was controlled by Shri Mahesh Singhania who was found to be an entry operator based in Kolkata. Shri Amal Mondal has disposed his statement in the capacity of Director of M/s. Bhavana Computers and clarified that BCPL is a paper entity and provides accommodation entries.
4.9 The statement of Shri Parbhat Gothi of Kamadhenu Group was also recorded us 131 of the Act on 10.12.2014 who conceded to the fact that the entities of Kamadhenu Group have taken accommodation entries from RTPL
4.10 The AO has also brought on record, fact that shares of Lotus group of entities have been issued at a premium to the three entities when the group had not even completed any substantial project and their financial track record could not justify issue of shares at a huge premium.

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Lotus Logistic & Developers Pvt Ltd merging 8 kolkata based paper entities with alleged net worth of 100.59 crores. It is consequent to this merger, the net worth of M/s. Satyam Projects Ltd. has been projected at Rs. 103.65 crores as on 31.03.2015. Therefore, it is clear that net worth claimed in M/s. Satyam Projects Ltd. is not self-generated by genuine business activity but by using the route of merger of Kolkata based shell entities having large premium in their reserves. Out of the reserves claimed in M/s.
Satyam Projects Ltd. of Rs. 103.65 crores, Rs. 100.59 crores consist share premium of merged entities. On further investigations of the bank accounts held by M/s. Satyam Projects Ltd. it was evident that there were huge transactions with entities controlled by entry operators such as Shri Pravin Agarwal, Shri Amit
Kedia etc. Therefore, the fund trial of funds in the case of M/s Satyam Projects Ltd
4.14 The A.O. has further brought on record that in the search operations conducted by the department in the case M/s. Shah Coal Pvt. Ltd., Mr. Vinay Shah has accepted to have taken accommodation entries from M/s. Satyam Projects
Ltd. This corroborates the fact that not only Lotus group but there are other beneficiaries who have benefitted from accommodation entries provided by M/s
Satyam Projects Ltd and not only the persons who were at the helm of affairs of M/s Satyam Projects Ltd, but independent beneficiaries have also admitted to the fact of indulgence in illegitimate paper transactions and being in hand in glove with entry operators. The facts looked in entirety leaves no scope for any scope for assesses to claim relief by taking shelter of retraction statements of the entry operators which would be clearly an after thought aimed at misleading and misguiding the appellate authorities.
4.15 The Ld.CIT(A) has deleted the addition made u/s.68 of the Act with respect to loans and advances/share capital/share premium broadly on two grounds:
i. The Ld.CIT(A) has relied on apparent documents filed by the assessee such as PAN card, copies of ITR, bank statements, share application form, offer letter etc. of the investor entities.
ii. The Ld.CIT(A) has relied on the retraction statements of various entry operators filed by the assessee during the course of appellate proceedings.
4.16 It is submitted that the reliance placed by the Ld.CIT(A) on the apparent documents without considering the evidences gathered during the course of Search and post such investigations is not justified. The Ld.CIT(A) ought to have appreciated that the onus lies on the assessee to prove the genuineness of transactions particularly while the department has raised issues regarding the 14

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Lotus Logistic & Developers Pvt Ltd identity, credit worthiness and genuineness of transactions of Lotus group of entities regarding their claim of unsecured loans and share premium received from BCPL, DCPL and RTPL. The Ld.CIT(A) is not justified in holding that the onus cast on the assessee is concluded by filing documents apparent to the transaction. It is the duty of the assessee to prove the genuineness of transactions in the light of observations made by the department to avoid invoking provisions of section 68 of the Act. The Hon'ble High Court of Calcutta in the case of PCIT vs Swati Bajaj [139 taxmann.com 352] have held that the tax authorities are justified in considering circumstantial evidence and the principles of human probabilities to assess the authenticity of transactions particularly when issues of price volatility and potential manipulation with respect to penny stocks are pointed out by the Revenue. Further, the Hon'ble Apex Court in the case of PCIT(Central)-1 vs. NRA Iron & Steel Pvt. Ltd. [103 taxmann.com 48] have held that mere filing of formal documents was insufficient in the context of proving triple criteria provided in section 68 of the Act. The Hon'ble Court has further held that it would be the onus of the assessee to prove the genuineness of transactions in the light of AO's findings such as non-existence of investor companies and their lack of financial capacity. In the same decision the Hon'ble
Court has referred to previous judgments of the Hon'ble Apex Court including CIT vs. Durgaprasad More and Sumati Dayal vs. CIT, underscoring the tax authorities were entitled to look beyond superficial documentation to assess the actual substance of transactions. Both the citations quoted above reinforce the principal that in cases of significant financial inflows especially involving share capital and premiums, the taxpayer must present compelling evidence to establish the legitimacy of such transactions.
4.17 The Ld.CIT(A) was not justified in allowing relief to the assessee relying on statements of retraction of entry providers provided by the assessee. Merely because the statement is retracted, it cannot become as involuntary or unlawfully obtained. For any retraction it is necessary to establish in the eyes of law that earlier recorded statements do not state the true facts or that there was coercion, inducement or threat while recording earlier statements. It is well settled law that in case of retraction, assessee needs to provide legally acceptable evidence that permission or confession in the statement during search or survey was involuntary or was tendered under coercion or duress. In this regard reliance is placed on the following decisions:

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He submitted that the above said written submissions would apply to all the appeals herein. Accordingly, he submitted that the additions made by the AO should be sustained.
We shall now proceed to dispose of the appeals assessee wise:-
LOTUS BUILDSPACE LLP.
ITA No.1485/Mum/2010 (AY 2014-15) & ITA No. 1593/Mum/2010 (AY 2015-16)
4. Both these appeals have been filed by the revenue, wherein the relief granted by Ld CIT(A) in respect of addition made u/s 68 of the Act is being challenged in both the years.
4.1 The addition made in the hands of this assessee by the AO in both the years is related to the ‘capital introduced’ by the partner, M/s Satyam Projects Pvt Ltd
(SPPL). The Ld.AO fully relied on the report of the Investigation Department and the statement recorded from Shri Uday Shankar Mahawar, Shri Hitesh Thakkar,
Shri Jignesh Mavadia and Shri Parbat Gothi to arrive at the conclusion that the capital introduced by the said partner SPPL was out of accommodation entry received by it from different companies. Accordingly, the AO made addition of capital introduction of Rs.2,22,25,000/- in AY 2014-15 and Rs.20.87 crores in AY
2015-16. The Ld CIT(A) has deleted the above said additions made in both the above said years. Hence the revenue has filed these appeals.
5. The Ld.DR, in his argument, stated that the addition was made by the AO on the basis of the statements given by the above said persons. Even though the assessee has submitted all the relevant evidences to prove the capital of Rs.2,22,25,000/- and Rs.20.87 crores received from SPPL in both the years cited

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Lotus Logistic & Developers Pvt Ltd above, Yet it is noticed by the AO that the SPPL has accumulated funds through the accommodation entries. The various apparent evidences furnished by the assessee should be ignored, since the unaccounted money has been routed as capital introduction by the above said company. He relied on para 6.3 of the impugned assessment order, which is reproduced below:-
“6.3 Statement of Shri Uday Shankar Mahawar
A statement of Shri Uday Shankar Mahawar was recorded u/s 131 of the Act, at the office of DDIT, Unit-II(3), Kolkata, on 25-08-2014 wherein he stated that he has opened around 200 bogus companies [Jamakharchi companies) which was used to provide bogus accommodation entries like unsecured loans, share application etc. to various business concerns. The said Jamakharchi companies of Shri Uday Shankar Mahawar have no business transactions except rotation of funds. One of the several bogus companies of Shri Uday Shankar Mahawar as stated in his statement is M/s Satyam
Projects Ltd. It has also been stated by Shri. Uday Shankar Mahawar that M/s Satyam
Projects Ltd., have no credit worthiness to invest or provide loans to other companies.
Further, Shri Uday Shankar Mahawar has also stated that this company does not have any activities which can generate any profit to accumulate reserves. These companies have been created merely as a tool to redirect the unaccounted funds into other companies. (Copy of Statement of ShriUday Shankar Mahawar is attached as “Annexure “A” forming part of this order).”
5.1 The Ld.AR, on the contrary, submitted that the SPPL is a partner of the assessee company and the above said amount was received as capital contribution. He submitted that the AO has relied only upon the statements given by the above said parties for making addition and did not consider various documents produced by the assessee to prove the capital amount received from SPPL. He contended that the AO could not have relied upon the statements given by the above said parties, since all of them have retracted their statements. In this regard, the Ld A.R summarised the details of the date of recording of statements and the date of retraction as under:-
S.No.
Name of Party
Dt of statement taken
Dt. of retraction

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10/10/2014
16/10/2014
3. Shri Jignesh Mavadia
09/10/2014
16/10/2014
4. Shri Parbat Gothi
12/10/2014
18/10/2014
The Ld A.R submitted that the Ld CIT(A) has duly considered all the evidences and documents furnished by the assessee and accordingly deleted the addition.
6. We heard the rival submissions and considered the documents. We notice that the Ld CIT(A) has passed a detailed order on this issue by duly examining the various documents furnished by the assessee to discharge the burden placed upon the assessee u/s 68 of the Act. We notice that the ld CIT(A) has rendered his decision by applying applicable case law on this issue. Accordingly, we feel it convenient to extract the same below:-
“7.3. I have carefully considered the assessment order and the submissions of the Learned Counsel. The assessee was covered under search of Lotus group conducted on 09.10.2014. During the course of search, statement of Mr. Jignesh Mavadia was recorded on 09.10.2014 wherein he stated that he was a mere namesake director and that Bhagwanji M Patel told him to become a director in M/s. Satyam Projects Ltd.
Simultaneously, during the course of search, a survey was conducted on M/s Prince Ply
Agency Pvt Ltd wherein statement of Mr. Hitesh Thakkar was recorded u/s. 133A on 10.10.2014 who admitted that the company was a paper company. During the year under consideration, the appellant has received partner's contribution of Rs.5,57,25,000/- from Satyam Projects Ltd. The main issue involved in the present appeal is in relation to addition u/s, 68 of Rs.2,22,25,000/- in respect of partner's capital received by the appellant from M/s. Satyam Projects Ltd during the year under 19

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Lotus Logistic & Developers Pvt Ltd consideration. The balance amount of the loan is considered by the AO in the hands of other group concerns for the purpose of making the addition u/s. 68 of the Act. The assessee claims that no addition of Rs.2,22,25,000/- is called for as it has completely established the three ingredients viz. identity, genuineness and creditworthiness as envisaged u/s. 68 of the Act whereas the AO has treated the same to be bogus and added the same u/s. 68 of the Act. Thus, the essential dispute is with regard to the partner's contribution received by the appellant from M/s. Satyam Projects Itd and whether the assessee has discharged its onus cast upon by the provisions of section 68 of the Act.
7.4. The assessee has submitted documents as under in the course of assessment as well as before me:
(a) Copy of Memorandum of Association and Articles of Association of the investor company along with the certificate of incorporation revealing that the company was formed on 16.05.1981. (b) Copy of registration certificate issued by the RBI dated 08.06.1998 bearing Reg No.
05.02644
(c) ITR Acknowledgement alongwith computation of income of the investor
(d) Financial statement of the investor company
(e) Ledger confirmation of the investor company
(f) Bank Statement of the appellant and the investor
(g) Order of Hon'ble Calcutta High Court evidencing merger of 2 companies viz. Aisley
Dealers Pvt Ltd and Appollane Mercantile Pvt Ltd alongwith the assessee on 26.06.2008
Α.Υ.2014-15

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(h) Order of Hon'ble Calcutta High Court evidencing merger of 6 companies viz.
Goldmoon Merchandise Pvt Ltd, Jaldham Suppliers Pvt Ltd, Impression Distributors Pvt
Ltd, Deesha Dealer Pvt Ltd and Aashiana Tie-up Pvt Ltd on 15.12.2010
(i) Assessment order of the aforesaid 6 companies
(j) Form 2 filed by investor company with ROC for increase in authorised capital in Feb,
2011
(k) Copy of Due diligence Report carried out prior to merger
(l) Copy of scrutinizer report dtd. 26.09.2015 on e-voting process
(m) Copy of Internal audit report for FY 15-16
(n) Copy of secretarial report
(o) Copy of quarterly compliance report
(p) Copy of prospectus issued by investor company
7.5. I have perused the aforesaid documents. It is observed that the assessee company is a registered NBFC since 1998 which has been later merged with 8 companies through a scheme of amalgamation duly sanctioned by the Hon'ble Calcutta High Court. By providing the aforesaid documents, the assessee submits that the investor M/s. Satyam
Projects Ltd is a genuine company which has carried out so many compliances regularly with RBI/ Auditors and has also been sanctioned merger with the approval of the Hon'ble
Calcutta High Court.
From the records, it is noticed that the alleged investor was served a notice u/s. 133(6) of the Act by the AO which was duly complied. The assessee therefore submits that there is no adverse finding in this regard by the AO in his assessment order.
Apropos creditworthiness of the investor company, it is seen that initially two companies
Aisley Dealers Pvt Ltd and Appollane Mercantile Pvt Ltd having aggregate net worth of 21

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Rs. 9.53 crores merged with Satyam Projects Ltd on 26.06.2008. Later, other six companies namely Goldmoon Merchandise Pvt Ltd, Jaldham Suppliers Pvt Ltd,
Impression Distributors Pvt Ltd, Deesha Dealer Pvt Ltd and Aashiana Tie-up Pvt Ltd having aggregate net worth of Rs. 91.06 crores merged with Satyam Projects Ltd on 15.12.2010. The aforesaid companies had huge capital and reserves appearing in the balance sheet prior to the merger. Consequent to the merger, the AR submits that total net worth of the investor company was increased by Rs.100.59 cores which was then utilised by it for the purpose of its business. The AR has further pointed out that the assessment in the case of these aforesaid six merged companies was carried out wherein the share capital issued by these companies have been verified by the concerned AO.
Accordingly, the net worth of the investor company stood at Rs. 1,02,90,96,564/- which was in fact substantially examined by the revenue. Further, the turnover of the investor for the year under consideration was Rs. 2.15 crores and its returned income was Rs.
1,61,13,093/-.
The AO has relied on the statements of Shri. Hitesh Thakkar, Shri, Jignesh Mavadiya&
Shri. Uday Shankar Mahawar. In this regard, the appellant contends that the statements were not provided to it and hence the same cannot be used against it. The appellant also contends that no opportunity of cross examination of the aforesaid parties has been accorded to the assessee. The assessee further stated that the aforesaid parties have given the statement under coercion and influence of the search party and have subsequently retracted the statements which were made by them.
In his statement u/s. 133A of the Act on 10.10.2014, Shri. Hitesh Thakkar, managing director of the investor company has stated that Bhagwanji Patel has acquired M/s.
Satyam Projects Ltd in May 2014 and that he was a director for name sake only and detailed explanation in relation to Satyam Projects Ltd could be given by Bhagwanji
Patel. He has further stated that the overall affairs of the company are being looked after by Shri. Bhagwanji M Patel. He ultimately agreed that the said company is a paper company.

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Similarly, Shri. Jignesh Thakkar in the course of statement u/s. 131 of the Act on 09.10.2014 has stated that he was a clerk in Prince Ply Agency Pvt Ltd and he was a namesake director in Satyam Projects Ltd. He was unaware about the other directors of the investor company.
In his statement, Shri Uday Shankar Mahawar u/s. 131 on 25.08.2014 has also stated that he opened around 200 bogus jamkharchi companies which were used to provide bogus accommodation entries One of Such companies as stated in his statement was Satyam Projects Ltd.
However, the AR states that all the aforesaid statements relied upon by the AO are retracted by the said parties on the ground that they were based on influence and coercion of search party. The retraction affidavits of these parties have been placed in the course of assessment as well as before me. In the course of assessment proceedings,
Shri. Uday Shankar Mahawar was produced before the Id. Assessing Officer wherein he has affirmed his retraction and clarified that the earlier statement given by him was recorded under coercion. The AR also stated that Shri. Bhagwanji M Patel is the shareholder of M/s. Satyam Projects Ltd.
7.6. In light of above, it is now important to examine the validity of addition based on the aforesaid statement which have been retracted by the respective parties. I find that the assessee group was covered under search action and no document or other assets were found in the course of search which could indicate that the assessee had obtained accommodation entry. It is stated by the AR that a search is a strict measure under the Act which invades the privacy of the assessee and even in these proceedings no concrete evidence was found except for mere oral confirmation of certain parties which also stand retracted later. My attention in this regard was invited to the CBDT Instruction
F.No.286/98/2013-IT (INV.II) dated 18/12/2014 and letter dated 10/03/2003 issued by the Ministry of Finance & Company Affairs wherein it is stated that the search party must focus on collection of evidences and not merely admission/ confession of additional income. The Hon'ble Gujarat High Court has relying on the aforesaid instructions upheld

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Lotus Logistic & Developers Pvt Ltd the view that addition should not be made based on oral confession in the case of CIT v.
Ramanbhai Patel (TA no. 207 of 2008) and Chetnaben J Shah v. ITO [TA no. 1437 of 2007]. Thus, respectfully following the CBDT circular as well as the decision cited by the assessee (supra), I find that the addition cannot be sustained merely on the basis of the statements taken during the search devoid of any evidence/material to incriminate the assessee.
Section 68 is not a charging section but a deeming fiction dealing with the burden of proof. The section casts initial onus u/s. 68 of the Act on the assessee to prove identity, genuineness and creditworthiness of the transaction to the satisfaction of the AO. If the assessee fails to do so or the explanation offered by him is not satisfactory to the AO, the AO is empowered to add the same to the total income of the assessee. The said power is to be exercised judiciously by the AO. Thus, once the initial onus is discharged by the assessee, the onus shifts on the AO to bring out fallacies in evidence brought by the assessee or by bringing new evidence that indicate the transactions undertaken by the assessee are non-genuine. Thus, the section deals with an equilibrium of onus of proof and must be viewed to evaluate as to whether the evidences brought by the assessee or AO weigh more and accordingly in whose favour the equilibrium bends. In the present case, on one hand, the assessee has placed evidence in the form of voluminous documents in relation to RBI compliances, ROC compliances, audit compliances and merger sanctioned by the Hon'ble Calcutta High Court Further, the assessee has also placed on record the assessment orders of 6 merged companies for the A.Y 2010-11 and also that of the alleged investor- M/s. Satyam Projects Ltd for A.Y. 2010-11. I have also gone through the confirmation, ITR Acknowledgement financial statements of the investor company and bank statements relating to the alleged transaction of partner's contribution received of Rs.2,25,25,000/- by the assessee during the year under consideration. It is observed that the investor company is formed in 1981 and is registered NBFC since 1998 engaged into the business of finance and investment in the year under consideration. The investor company has shown substantial turnover of Rs.2.15 crores with an income of Rs. 1,61,13,093/- offered in its return of income. The 24

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Lotus Logistic & Developers Pvt Ltd transactions are also carried out through account payee cheques. Even, in the subsequent year ie AY 2015-16, it is seen that the investor company has earned substantial income of Rs. 1,16,80,862/-. Accordingly, the assessee has discharged its onus u/s 68 of the Act by substantiating even the source of source of alleged investor company.
On the contrary, the Assessing Officer has solely placed reliance on the statement of Hitesh Thakkar, Jignesh Mavadia and Uday Shankar Mahawar which has been retracted by all of them. Further, the AO has made allegation that Mis. Satyam Projects Ltd is a company run by various entry operators but have failed to bring anything concrete on record. In fact, during the course of assessment proceedings, enquiries were made by the AO in form of issue of notice u/s. 133(6) which was duly complied by the investor. Even the evidences referred above were not disputed by the Assessing Officer. It is informed that Uday Shankar Mahawar was appointed as a director in M/s. Satyam Projects Ltd on 30.10.2010 and Hitesh Thakkar and Jignesh Mavadia had been appointed as a director on 04.03.2014. Also, Shri. Uday Shankar Mahawar was produced before the Assessing
Officer who had affirmed his retraction thereby confirming that the transaction of Satyam Projects Ltd were genuine and that it is not a paper company.
7.7. The decision of the Hon'ble Juri ictional ITAT in the case of ITO v. Sringeri
Technologies Pvt Ltd [ITA No. 3924/Mum/2014] is also relevant wherein similar facts were involved before the Hon'ble ITAT and it was observed as under:
11. Having considered arguments of both the sides and materials available on record, we do not find any merit in the reasons given by the AO to come to the conclusion that the assessee has failed to prove the genuineness of transaction and creditworthiness of the parties on the ground that the assessee has filed enormous details in respect of 9 companies including their PAN details,
CIN master data, affidavits sworn before Executive Magistrate, reply to the notices issued u/s 133(6). The assessee also filed copies of assessment order passed u/s 143(3) by the department in respect of 4 companies. The assessee also filed a certificate from a Chartered Accountant certifying the active status of the company in the website of Ministry of Corporate Affairs. On going through various detailed filed by the assessee, we find that there is no reason for the AO to doubt the genuineness of transactions of creditworthiness of the parties. We further notice that all 9 companies are active in the website of ROC and also they have filed their balance-sheet upto 31-

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03-2016 and in some cases upto 31-03-2017. We further notice that the AO has furnished a report accepting the fact that all these companies are active in the website of MCA and none of the companies' name is struck off from the list published by the MCA as shell company. We further notice that the assessee has filed balance-sheet of all 9 subscribers wherein they have huge share capital and reserves and surplus to establish creditworthiness of the parties. On perusal of the balance-sheet filed by the assessee, we find that the aggregate of share capital and reserves of 9
companies is at Rs. 333.67 crores, whereas investment in assessee company is only Rs. 12 crores.
We further notice that all companies are having regular business ranging from 2 to 3 crores. The assessee also furnished copies of sales-tax returns filed with Commercial Tax Department to prove the business activity of the assessee. All these evidences go to prove an undoubted fact that these companies are not paper companies and recognized with business activity. We further observe that the assessee also filed affidavit form the directors of subscriber companies, wherein thy have explained the reasons for not receiving communication sent by the AO u/s 133(6) of the Act. They further stated in the affidavit that they have subscribed to the share capital of the company and also furnished supporting evidences to justify investment in share capital of the company. We further notice that the assessee has furnished bank statement of subscribers wherein we do not find any instance of cash deposits or transfer from other companies prior to the date of transfer to the assessee company. Therefore, we are of the view that the AO was incorrect in treating share capital alongwith share application money as unexplained cash credit u/s 68 of the Income-tax
Act, 1961.”
8.8. Having discussed the overall facts and circumstance of the present case, now I examine the case laws relied upon by the AO and the assessee in this context.
A) Case laws relied upon by the AO
(i) CIT v. Nova Promoters and Finlease (P) Ltd. [2012] 18 taxmann.com 217 (Del HC)
(a) In the case before Hon'ble Delhi High Court, statement of the third party entry provider was provided to the assessee which is not provided in the present case
(b) Two letters were filed with the investigation wing by the entry provider confirming the accommodation entries in the case before Hon'ble Delhi High Court. No such thing present in this case.
(c) In the case of Nova Promoters, Retraction was filed after a period of three years whereas in the present case, it is filed immediately or the delay is explained satisfactorily

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(d) The Entry providers failed to appear before the AO after filing retraction statement even though summoned by the AO in that case whereas in the present case, the AO has not summoned the parties and despite Shri. Uday Shankar Mahawar was produced before
AO who has confirmed his retraction.
(e) In the case before Hon'ble Delhi High Court, the name of the assessee specifically appeared in the statement provided by the entry provider whereas in the present case, no such finding is brought on record.
(f) In that case, summons was either not served or served but not complied with whereas notice u/s. 133(6) of the Act has been duly complied by the investor company in the present case.
(g) Whereas in the present case, the amalgamating companies which merged with the investor company have been assessed and copy of assessment orders provided alongwith order of amalgamation of the High Court thereby establishing the genuineness of the transaction and the creditworthiness of the lender which was absent in the case before the Hon'ble Delhi High Court.
(ii) Major Metals Ltd v. UOI [2012] 19 taxmann.com 176 (Bom HC)
The said decision was in relation to proceedings before the Hon'ble Settlement
Commission. The decision is rendered in relation to huge share premium received from the companies with no credentials and creditworthiness nor even any past performance that could justify such payment. Further, this decision was also in relation to the order passed by the ITSC which had decided its view based on the peculiar facts and material with therm. Further, the said decision has been impliedly overruled by the decision of the Hon'ble Bombay HC in the case of Vodafone India Services (P.) Ltd. v. CIT [2014] 368 ITR 1
(Bom.). The said view of the decision being overruled was again accepted by the Hon'ble
Bombay HC in the case of Khubchandani Healthparks (P.) Ltd v. ITO [2016] 68
taxmann.com 91 (Bom.). Accordingly, the decision relied upon by the AO in impugned order does not support the case of the AO.

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B) Case laws relied upon by the assessee
On the contrary, the assessee has relied upon plethora of judgements, I find that the decision of the Hon'ble juri ictional High Court in the case of CIT v. Paradise Inland
Shipping Pvt Ltd (TA No. 66 of 2016) (Bom HC) squarely applies to this case wherein it was observed as under:
5. We have given our thoughtful considerations to the rival contentions of the learned Counsel and we have also gone through the records. The basic contention of the learned Counsel appearing for the Appellants revolves upon the stand taken by the Appellants whether the shareholders who have invested in the shares of the Respondents are fictitious or not in this connection, the Respondents in support of their stand about the genuineness of the transaction entered into with such Companies has produced voluminous documents which, inter alia, have been noted at Para 3 of the Judgment of the CIT Appeals which reads thus:
"The assessment is completed without rebutting the 550 page documents which are unflinching records of the companies. The list of documents submitted on 09.03.2015 are as follows:
1. Sony Financial Services Ltd. - CIN U74899DL1995PLC068362-
Date of Registration 09/05/1995
Memorandum of Association and Article of Association
Certificate of Incorporation
Certificate of Commencement of Business
Acknowledgment of the Return of Income AY 08-09
Affidavit of the Director confirming the investment
Application for allotment of shares
Photocopy of the share certificate
Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2009. Audited account and Directors report thereon including balance sheet, Profit and Loss Account and schedules for the year ended 31.03.2010. The Bank Statement highlighting receipt of the amount by way of RTGS.
Banks certificate certifying the receipt of the amount through Banking channels."

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Lotus Logistic & Developers Pvt Ltd cannot be discarded merely on the basis of two individuals who have given their statements contrary to such public documents.
10. We find no infirmity in the findings arrived at by the ITAT as well as CIT Appeals on the contentions raised by the Appellants-Revenue in the present case and, as such, the question of interference by this Court in the present proceedings under Section 260A of the Income Tax Act would not at all be justified. Apart from that, as rightly pointed out by the learned Counsel appearing for the Respondents, the CIT Appeals had also noted that proceedings under Section 147 of the Income Tax Act cannot lead to re- verification of the records. These findings of the CIT
Appeals have not been assailed before the Income Tax Appellate Court
11. In such circumstances, we find that there is no case made out by the Appellants-Revenue for any interference in the impugned Orders passed by the Courts below.
12. Hence, the Appeal stands rejected.
The SLP filed against the said order of the High Court is also dismissed by the Hon'ble Apex Court in [2018] 93 taxmann.com 84 (SC).
8.9. I find that the addition u/s. 68 of the Act is uncalled for in the present facts and circumstances of the case in view of the discussion made above. Accordingly, the addition of Rs.2,22,25,000/- made by the AO deserves to be deleted. This ground of appeal is accordingly Allowed.”
6.1 We notice that the Ld CIT(A) has given a categorical finding that the assessee has submitted all the relevant evidences to prove identity of the creditor, creditworthiness of the creditor and genuineness of transactions. Further, it is stated that the SPPL is itself is an NBFC and the 8 companies are merged with it by the order of the Hon’ble Calcutta High Court. Further, it was submitted that the introduction of capital by a partner cannot be added in the hands of the assessee u/s 68 of the Act and for this proposition, the Ld A.R relied upon the decision rendered by Hon’ble Gujarat High Court in the case of PCIT-4 vs Vaishnodevi
Refoil & Solvex, [2018] 89 taxmann.com 80 (Guj). It was stated that the SLP filed by the revenue against the above said decision was dismissed by the Hon’ble
Supreme Court, which is reported in [2018] 96 taxmann.com 469 (SC).

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Lotus Logistic & Developers Pvt Ltd to AY 2014-15 and in ITA No.1593/Mum/2019 relating to AY 2015-16 are dismissed.
M/s A.M. CONSTRUCTIONS
ITA No.3040/Mum/2019 (AY 2012-13) & 3115/Mum/2019 (AY 2011-12)
(Revenue’s Appeal)
8. The revenue has filed these appeals, wherein it is contending the relief granted by Ld CIT(A) in respect of addition made by the AO u/s 68 of the Act in both the years.
8.1 The addition made in both these years by the AO are related to investment of Rs.2.76 crores and Rs.12.96 crores made by M/s Divine Telecom P Ltd (DTPL) respectively in the years relevant to AY 2011-12 and 2012-13 with the assessee for a Joint Venture project. M/s Divine Telecom P Ltd is stated to be controlled by Shri Pradeep Poddar, who was identified as a person providing accommodation entries by the revenue. Hence the AO reopened the assessments of both the years U/s 148 of the Act and assessed above said amounts as unexplained income of the assessee in the respective years u/s 68 of the Act. The Ld CIT(A) deleted the above said additions in both the years and hence the revenue has filed these appeals.
9. The Ld.DR submitted that the AO had taken support of the statement taken from Shri Pradeep Poddar on 02/12/2014, wherein, he had accepted the fact that these companies have provided only accommodation entries to the Lotus group.
In this regard, the Ld. DR drew our attention to the paragraph 6.15 of the assessment order and the same is reproduced as below:-

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“6.15 If sources of funds infused by Divine Rowland and Bhawna for providing unsecured loans and share application money to Lotus Group are examined then it becomes crystal clear that the above transactions made by the Lotus Group are mere accommodation entries. Some of companies identified during the course of search and survey belongs to identified entry operators. In the past these entry operators [Shri Anand Sharma, Shri
Pankaj Agarwal, Shri Vikas Choudhary, Shri Jivendra Mishra, Shri Janardan Chokhani,
Shri Narendra Kumar Jain, Shri Prakash Jajodia, Shri Subhash Kumar Agarwal, Shri Amit
Kedia, Shri Abhishek Chokani, Shri Uday Shankar Mahawar, Shri Subhash Agarwal, Shri
Praveen Agarwal] have accepted before the Department that they are in the business of providing accommodation entries and only for that purpose they have created shell companies for carrying out these activities. They provide accommodation entries in lieu of cash, by rotating these cash in numerous self controlled shell entities, which is also the fact in the case of above three entities which were acquired by the Lotus Group.”
The Ld D.R also relied upon his written submissions extracted below. Accordingly, he prayed that the order passed by Ld CIT(A) should be reversed.
10. The Ld.AR, in his argument, stated that the entire addition was made on the basis of the third-party statement and further the statement of Shri Pradeep
Poddar was retracted by an affidavit dated 09/12/2014. Further, the AO issued a notice under section 131 of the Act to Shri Pradeep Poddar and he appeared in response to the same on 22/12/2014. In response thereto, he appeared before the AO and the AO also recorded a statement on oath on 22/12/2014, wherein
Mr. Poddar affirmed the retraction affidavit dated 09/12/2014. The Ld A.R submitted that the assessee has furnished all the documents to discharge the burden placed upon it u/s 68 of the Act. He further submitted that the assessment of above said investor M/s Divine Tradecom P Ltd was completed after conclusion of search in the hands of the assessee, wherein its books of 33

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Lotus Logistic & Developers Pvt Ltd accounts have been accepted. Accordingly, he submitted that the AO could not have relied upon the statement alone disregarding the evidences furnished by the assessee to discharge the burden u/s 68 of the Act and also disregarding the assessment order passed in the hands of M/s Divine Tradecom P Ltd.
11. We have heard rival contentions and perused the record. We notice that the Ld CIT(A) has passed a detailed order on this issue. The relevant discussions made by Ld CIT(A) in paragraphs 8.12. to 8.14 of his order are extracted below:-
“8.12 In the light of the above, it is now important to examine the validity of addition based on the various statements relied upon by the AO.
Statement of Shri Pradeep Poddar
The AO has referred to the statement of Shri Pradeep Poddar dated 02.12.2014 in the reasons recorded wherein it is alleged that loan taken from M/s Divine Tradecom Pvt Ltd is in the nature of accommodation entry. The assessee submits that the statement of Shri Pradeep Poddar was recorded under duress and coercion and he was subjected to tremendous mental torture and trauma by the Investigation Officer which is quite evident from the fact that Shri Pradeep Poddar had also filed a police complaint against the Investigation Officer immediately on the very next day of the statement on oath i.e on 03.12.2014. Moreover, it is observed that Shri Pradeep Poddar has also retracted his statement so recorded vide his affidavit dated 09.12.2014 sworn before the learned
Metropolitan Magistrate at Kolkata which is within a week from which the statement was recorded. Thus, the statement which has been retracted cannot be held as evidence in isolation without any corroborative evidence against the assessee. Reference in this regard can also be made to the CBDT Instruction F.No.286/98/2013-IT (INV.II) dated
18/12/2014 and letter dated 10/03/2003 issued by the Ministry of Finance & Company
Affairs wherein it is stated that the search party must focus on collection of evidences and not merely admission/ confession of additional income. The Hon'ble Gujarat High

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Court has relying on the aforesaid instructions upheld the view that addition should not be made based on oral confession in the case of CIT v. Ramanbhai Patel (TA no. 207 of 2008) and Chetnaben J Shah v. ITO [TA no. 1437 of 2007]. Thus, respectfully following the CBDT circular as well as the decision cited by the assessee (supra), I find that the addition cannot be sustained merely on the basis of the statements taken devoid of any evidence/material to incriminate the assessee.
Statement of Shri Anand Sharma
In this regard, the assessee argued that the copy of the statement of Shri Anand Sharma had not been provided and hence, cannot be utilised against the assessee as at the very outset it vitiates the principles of natural justice. I have gone through the statement of Shri Anand Sharma referred to by the AO in the impugned order. It is found that the statement of Shri Anand Sharma is relevant only to the lender company as alleged by the AO that accommodation entries from various companies of Shri Anand Sharma were obtained by M/s Divine Tradecom Pvt. Ltd. Thus, what is relevant is the fact that M/s
Divine Tradecom Pvt. Ltd might have obtained accommodationentries, which in fact gets overruled, in view of the re-assessment order passed for AY 2008-09 wherein no addition in this regard have been made in hands of M/s Divine Tradecom Pvt. Ltd. Further, the AO has not made any further enquiry in the assessment proceedings to establish such allegations. Merely on the basis of statement of Shri Anand Sharma without any corroborative evidences brought on record, the AO has failed to discharge his onus in alleging the genuineness of transaction with M/s Divine Tradecom Pvt. Ltd.
Statement of Shri Ashok Agarwal
The AO has referred to the statement of Shri Ashok Agarwal who is the chairman of the Lotus group. He has stated that the source of the lender company to make investments in group is its old reserves and surplus; however, he doesn't know how these reserves have been created in the books of accounts. I find that the statement given by Shri Ashok
Agarwal regarding the source of the lender company cannot be relied upon as M/s.

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Divine Tradecom Pvt. Ltd.as it has already been reassessed after the search was conducted on the assessee group and hence the source of source stands explained and accordingly statement has no relevance. Also, he has denied all the statements of the alleged entry providers which he has confronted with and has maintained that the transactions are genuine.
Statement of Shri Ankit Poddar
The AO has placed reliance on the statement of Shri Ankit Poddar who has no connection with the appellant firm. He has mentioned that he was not aware about the business activities of M/s. Bhawna Computers P.Ltd., M/s Divine Computers P. Ltd. & M/s.
Rowland TreximP.Ltd. Infact he only receives letters of the said companies and hands over the same to Shri Pradeep Poddar, who is the Director in those companies and accordingly thestatement of Shri Ankit Poddar has no relevance with the case of the appellant firm.
Statement of Shri Amal Mondal
The statement of Shri Amal Mondal is in relation to M/s. Bhawna Computers P. Ltd. and not M/s. Divine Tradecom Pvt. Ltd. and therefore his statement has no relevance in the case of the appellant firm.
Statement of Shri Parbat Gothi
Shri Parbat Gothi is neither a shareholder or a director in the appellant firm and his statement has no evidentiary value, in fact he has also retracted his statement. Further, he has mentioned that certain entities of his group have obtained accommodation entries by way of unsecured loans from M/s. Rowland Trexim P. Ltd. and has nowhere mentioned about M/s. Divine Tradecom Pvt. Ltd. and therefore his statement cannot be relied upon.
8.13 Section 68 is not a charging section but a deeming fiction dealing with the burden of proof. The section casts initial onus u/s. 68 of the Act on the assessee to prove

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Lotus Logistic & Developers Pvt Ltd identity, genuineness and creditworthiness of the transaction to the satisfaction of the AO. If the assessee fails to do so or the explanation offered by him is not satisfactory to the AO, the AO is empowered to add the same to the total income of the assessee. The said power is to be exercised judiciously by the AO. Thus, once the initial onus is discharged by the assessee, the onus shifts on the AO to bring out fallacies in evidence brought by the assessee or by bringing new evidence that indicate the transactions undertaken by the assessee are non-genuine. Thus, the section deals with an equilibrium of onus of proof and must be viewed to evaluate as to whether the evidences brought by the assessee or AO weigh more and accordingly in whose favour the equilibrium bends.
In the present case, on one hand, the assessee has placed evidence in theform of ledger confirmation, bank statement, ITR acknowledgement, Computation of Income, signed financials of the investor company, reassessment order of the investor company and copy of the MOU entered into between the investor company and the appellant firm.
8.14 It is the contention of the Assessing Officer that the on-money generated by the assessee group has been brought back as loans and share capital through Kolkata companies but inspite of the search undertaken in the appellant's group nothing incriminating was found during the search and no evidence of either receipt of on-money or generation of any other kind of unaccounted income was found. No evidence of any cash transaction has been brought out either by the Investigation wing or by the Assessing Officer. As the assessee proved the trail of money which is through banking transactions, the onus shifts to the Assessing Officer to prove the assessee wrong but the Assessing Officer has not brought anything contrary to what has been submitted by the assessee.”
11.1 We notice that the entire addition was made by the AO in both the years on the basis of statement recorded from a third party, but all the parties have retracted their statement. Further, Mr. Pradeep Poddar was again examined after rectraction and he has confirmed the retraction in the said statement taken

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Lotus Logistic & Developers Pvt Ltd on oath on 22/12/2014. We notice that the assessee has furnished all the documents to discharge the burden placed upon it u/s 68 of the Act. We notice that the AO has not disproved those documents, i.e., he has not discharged the burden shifted to his shoulders.
11.2 It is the case of the revenue that the Ld CIT(A) has granted relief on the basis of apparent documents furnished by the assessee and the retraction statements without considering the detailed investigation carried out by the revenue to prove that those companies were providing only accommodation entries. But the moot point is that the provisions of sec.68 creates a fiction to treat the cash credits as deemed income of the assessee, provided that the assessee did not discharge the initial burden placed upon it u/s 68 of the Act, viz., the identity of the creditors, credit worthiness of the creditor and the genuineness of transactions. Admittedly, the assessee has furnished all those documents and discharged the burden. There should not be any doubt that the taxing statutes should be interpreted strictly and the deeming fiction made therein should be interpreted very strictly. On the contrary, the AO has relied upon the statements given by the third parties and did not disprove the documents furnished by the assessee. With regard to the alleged bad financial position of lenders/investors, we notice that the AO has referred to the profit position of those companies. However, what is required to be seen is whether the lender/investor was possessing cash when the loan was given or investment was made. It is the finding of the Ld CIT(A) that they were having sufficient balance in their bank accounts, which in turn, would prove the credit worthiness.
Hence, we are of the view that the AO was not justified in relying upon the statements given by the third parties disregarding the documents, which show

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Lotus Logistic & Developers Pvt Ltd the position otherwise. It is also stated that the assessment of M/s Divine
Tradecom P Ltd was completed subsequently and its books of accounts have been accepted.
11.4 Accordingly, we do not find any infirmity in the decision of the Ld.CIT(A) in deleting the addition in both the years. Accordingly, no interference is required on this issue in both the years.
12

Accordingly, both the appeals of the revenue bearing
ITANo.3115/Mum/2019 relating to AY 2011-12 and ITA No.3040/Mum/2010
relating to AY 2012-13 are dismissed.
M/s LOTUS LOGISTICS & DEVELOPERS PVT LTD
13
This assessee has filed appeals for AY 2008-09 and 2015-16. The revenue has filed appeals for AY 2008-09, 2014-15, 2015-16, 2016-17 and 2017-18 in respect of this assessee.
14. We shall first take up the appeals filed by both the parties for AY 2008-09 in ITA No.3697/Mum/2019 (Assessee) & ITA No. 4058/Mum/2019 (Revenue).
14.1 The assessment of this year was reopened by the AO. The Ld A.R raised a legal contention with regard to the validity of reopening of assessment. Since this legal issue goes to the root of the matter, we prefer to adjudicate this legal ground first.
14.2 The Ld A.R submitted that the assessee filed its return of income for this year on 28-09-2008 and the same was processed u/s 143(1) of the Act.
Subsequently, the assessing officer reopened the assessment by issuing notice u/s 39

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148 of the Act and completed the assessment on 31.12.2011 by passing order u/s 143(3) of the Act. The assessing officer has again reopened the assessment by issuing notice u/s 148 of the Act on 25-03-2015. The impugned assessment order is the order passed in the second reopening proceedings. During this year, the assessee had received share application money from certain companies, which were stated as accommodation entries by the investigation wing. On the basis of the report of the investigation wing, the AO has held that the share application money received by the assessee is bogus and equal amount was required to be assessed in the hands of the assessee company. The contention of the Ld A.R is that the AO has reopened the assessment after four years from the end of the assessment year without showing that there was failure on the part of the assessee to disclose all material facts fully and truly. It was also contended that the AO has formed belief that there was escapement of income on the basis of borrowed satisfaction, since he simply relied upon the report of the investigation wing and did not carry out any preliminary enquiry to examine the applicability of the said report in the facts of the assessee. Hence, there was no application of mind by the AO. Accordingly, he contended that the impugned reopening of assessment is not valid in the eyes of law. The Ld A.R placed his reliance on the following case law:-

(a) Hindustan Lever Ltd vs. R B Wadkar, Mumbai (2004)(137 Taxman 479)

(b) Crompton Greaves Ltd vs. ACIT (55 taxmann.com 59)(HC)

(c) Feng Shui Realtors (P) Ltd vs. ITO (2024)(160 taxmann.com 401)(HC)

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Lotus Logistic & Developers Pvt Ltd

“Reason for re-opening the case u/s, 148:
A letter received from the Office of the Dy. Director of Income-tax (Inv.)-
Unit-3(1) & 3(2), Mumbai bearing No, DDIT(Inv.) Unit 3(1) & 2/T,B, matter/2014-15 dated 05.03.2015 wherein it has been stated that a Search / Survey action was conducted on lotus/Kamdhenu/ Green Valley group by his charge on 09.10.2014. During the Search/Survey it has been noticed that M/s. Lotus Logistics & Developers Pvt. Ltd. had received
Share Application Money of Rs. 14,76,10,000/- from various Kolkata based Company during the F.Y-2007-08. Out of this Rs.1,00,00,000/- had been received from the Divine Tradecom Pvt. Ltd. Rs.1,16,50,000/- was received from Rowland Trexim Pvt. Ltd. Statement of Sri Pradeep Poddar,
Director of M/s. Divine Tradecom, and M/s Rowland Trexim Pvt. Ltd. and many other Kolkata based companies was recorded u/s. 131 on 02.12.2014, wherein he stated that he had used these above companies to 41

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Lotus Logistic & Developers Pvt Ltd provide accommodation entries to the Lotus Group. The Lotus Logistics and Developers Pvt. Ltd. is a company of Lotus Group.

Thus, it is clear that the Share Application Money received by M/s. Lotus
Logistics and Developers Pvt. Ltd. was bogus and equal amount was required to be assessed in the hand the assessee company as "Undisclosed
Cash Credit”.

Since, income has been escaped assessment to the extent of claim of ‘Share Application Money’ received by M/s. Lotus Logistics and Developers Pvt. Ltd., the assessment for the A.Y-2008-09 is required to be re-opened as per provisions of section 148 of the I.T. Act.

Considering involvement of huge un-assessed income and the time limit for re- assessment of income is more than 4 years, kind approval of Ld. CIT is required for reopening of assessment u/s. 148.”

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Lotus Logistic & Developers Pvt Ltd preliminary enquiries to find out that the generalized statements so given by certain persons that they were providing accommodation entries, would apply to the share capital money received by the assessee, i.e., no independent enquiry was done by the AO. Thus, we are of the view that there is merit in the contentions of the assessee that the AO has entertained belief about escapement of income on the basis of borrowed satisfaction without independent application of mind. Hence, we are of the view that the reopening of assessment of Asst.
Year 2008-09 is bad in law. We take support of the decision rendered by Hon’ble taxmann.com 300)(Delhi). In this case also, the AO reopened the assessment on the basis of information received from the investigation wing that the above said assessee has received accommodation entries in the form of loans. The AO reopened the assessment on the basis of said information. The Hon’ble Delhi
High Court held as under:-
“19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue.
This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material.
20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment.
But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a 43

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Lotus Logistic & Developers Pvt Ltd known entry operator" the source being "the report of the Investigation
Wing".
21. The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one.
Therefore, I have reason to be believe that an income of Rs. 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... "
22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression
'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash"
is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom.
23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out.
However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing.
Thereafter, the Hon’ble Delhi High Court referred to various decisions and finally held as under:-
“34. Recently in Agya Ram (supra), it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record…" It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere

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Lotus Logistic & Developers Pvt Ltd receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments."
35. In the decision of this Court dated 16th March 2016 in W.P. (C) No.
9659 of 2015 (Rajiv Agarwal) it was emphasized that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment."
36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'.
The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.”
Accordingly, we hold that the reopening of assessment of AY 2008-09 is liable to be quashed on this reason alone.
14.6 We earlier noticed that the assessing officer had completed the assessment earlier u/s 143(3) r.w.s 147 of the Act. The present reopening is after expiry of four years after the end of the relevant assessment year, i.e., AY 2008-09. In that case, it is necessary for the AO to show that there was failure on the part of the assessee to disclose truly and fully all material facts necessary for completion of assessment, as mandated by the first proviso to sec.147 of the Act. The said proviso reads as under:-
“Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to 45

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Lotus Logistic & Developers Pvt Ltd tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year”
The Hon’ble Bombay High Court has held in the case of Feng Shui Realtors P Ltd
(2024)(160 taxmann.com 401)(Bom) that, if there was no allegation in reasons recorded that there was any failure on the part of assessee to truly and fully disclose all material facts necessary for its assessment for relevant assessment year, then impugned notice should be quashed and set aside. However, in the case of Crompton Greaves Ltd vs. ACIT (2015)(55 taxmann.com 59)(Bom), it was held that there is no requirement that there must be cogent and clear indication in the reasons supplied that in fact there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment and if not so mentioned, the same would not be fatal. However, the Hon’ble juri ictional held that, if from the reasons, no case of failure to disclose is made out, then certainly assumption of juri iction u/s 147 and 148 would be ultra vires. In the instant case, we noticed earlier that the AO has simply repeated the information received by him from the investigation wing, which would only lead to suspicion and not belief. It could not also be culled out from the reasons recorded by the AO that there was failure on the part of the assessee to disclose all material facts truly and fully.
14.7 Hence, the reopening of assessment of AY 2008-09 is liable to be quashed for more than one reason as discussed above. We order accordingly. In view of the above, we set aside the order passed by Ld CIT(A) in AY 2008-09 and quash the assessment order.

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Lotus Logistic & Developers Pvt Ltd

M/s LOTUS LOGISTICS & DEVELOPERS PVT LTD
ITA No.3698/Mum/2019 (Assessee) & ITA No. 4039/Mum/2019 (Revenue)
17. Both these cross appeals are related to AY 2015-16. Following additions were made by the AO in this year:-

(a) Advance taken from M/s Satyam Projects Ltd -
Rs.2.81 crores
(b) Loans taken from M/s RatangarFinlease Pvt Ltd Rs.20.00 lakhs and from M/s Anglo Commotrade Pvt Ltd Rs.30.00 lakhs, both aggregating to Rs.50.00 lakhs.
(c) Disallowance of interest expenditure on loans u/s 69C amounting to Rs.47,37,500/-.
The Ld CIT(A) confirmed the addition of loan of Rs.30.00 lakhs taken from M/s
Anglo Comtrade P Ltd and also the disallowance of relevant interest expenditure.
The Ld CIT(A) deleted the remaining additions. Hence, both the parties are in appeal before us on the issue on the issues decided against each of them.
18. The first issue relates to the addition of advance amount of Rs.2.81 crores received by the assessee from M/s Satyam projects Ltd assessed by the AO u/s 68

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Lotus Logistic & Developers Pvt Ltd of the Act as unexplained cash credit. The assessee promoted a building known as “Lotus Trade Centre”. The assessee received a sum of Rs.11.81 crores from M/s Satyam Projects Ltd as advance towards purchase of three units in the above said building. It was noticed that M/s Satyam Projects had received Rs.9.00 crores from two other group concerns named M/s Lotus Buildspace LLP (Rs.7.50 crores) and M/s Pruthvi Builders & Developers (Rs.1.50 crores). The AO accepted the advance to the extent of Rs.9.00 crores as explained. Accordingly, he assessed the balance amount of Rs.2.81 crores as unexplained cash credit u/s 68 of the Act.
18.1 The Ld CIT(A) deleted this addition and hence the revenue is in appeal.
The Ld.CIT(A) noticed that the assessee was able to prove the identity, creditworthiness and the genuineness of transactions in respect of the above said loan. The observations of the Ld.CIT(A) in paras 8.4 to 8.5 are as under: -
“8.4. The assessee has submitted documents as under in the course of assessment as well as before me:
(j) Copy of Memorandum of Association and Articles of Association of the investor company along with the certificate of incorporation revealing that the company wasformed on 16.05.1981. (k) Copy of registration certificate issued by the RBI dated 08.06.1998 bearing Reg No.
05.02644
(l) ITR Acknowledgement alongwith computation of income of the investor
(m) Financial statement of the investor company.
(n) Confirmations of the investor company and the assessee of the three properties
(o) Copy of Cancellation Deed of LTC Building of all three properties i.e 1006, 1301 and 1005A along-with allotment letters,
(p) Bank Statement of the investor for AY 2015-16
(q) Order of Hon'ble Calcutta High Court evidencing merger of 2 companies viz. Aisley
Dealers Pvt Ltd andAppollane Mercantile Pvt Ltdalongwith the assessee on 26.06.2008

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Lotus Logistic & Developers Pvt Ltd

(r) Order of Hon'ble Calcutta High Court evidencing merger of 6 companies viz.
GoldmoonMerchandise Pvt Ltd, Jaldham Suppliers Pvt Ltd, Impression Distributors Pvt Ltd,
Deesha Dealer Pvt Ltd and Aashiana Tie-up Pvt Ltd on 15.12.2010
(s) Assessment order of the aforesaid 6 companies
(t) Form 2 filed by investor company with ROC for increase in authorised capital in Feb,2011
(u) Copy of Due diligence Report carried out prior to merger
(v) Copy of scrutinizer report dtd. 26.09.2015 on e-voting process
(w) Copy of Internal audit report for FY 15-16
(x) Copy of secretarial report
(y) Copy of quarterly compliance report
(z) Copy of prospectus issued by investor company
(aa) Copy of assessment order u/s 143(3) r.w.s 147 of the Act dated 21.12.2017 of M/s
Satyam Projects Limited

From the records, it is noticed that the alleged investor was served a notice u/s. 133(6) of the Act by the AO which was duly complied. The assessee therefore submits that there is no adverse finding in this regard by the AO in his assessment order.

Apropos creditworthiness of the investor company, it is seen that initially two companies -
Aisley Dealers Pvt Ltd and Appollane Mercantile Pvt Ltd having aggregate net worth of Rs.
9.53 crores merged with Satyam Projects Ltd on 26.06.2008. Later, other six companies namely Goldmoon Merchandise Pvt Ltd, Jaldham Suppliers Pvt Ltd, Impression Distributors
Pvt Ltd, Deesha Dealer Pvt Ltd and Aashiana Tie-up Pvt Ltd having aggregate net worth of Rs. 91.06 crores merged with Satyam Projects Ltd on 15.12.2010. The aforesaid companies had huge capital and reserves appearing in the balance sheet prior to the merger.
Consequent to the merger, the AR submits that total net worth of the investor company was increased by Rs.100.59 cores which was then utilised by it for the purpose of its business. The AR has further pointed out that the assessment in the case of these aforesaid six merged companies was carried out wherein the share capital issued by these

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Lotus Logistic & Developers Pvt Ltd companies have been verified by the concerned AO. Accordingly, the net worth of the investor company stood at Rs.1,03,65,04,772/- which was infact substantially examined by the revenue. Further, the turnover of the investor for the year under consideration was Rs. 1.82 crores and its returned income was Rs. 1,16,80,862/-

The AO has relied on the statements of Shri. Hitesh Thakkar, Shri. Jignesh Mavadiya, Shri.
Uday Shankar Mahawar and Shri Parbat Gothi. In this regard, the appellant contends that the statements were not provided to it and hence the same cannot be used against it. The appellant also contends that no opportunity of cross examination of the aforesaid parties has been accorded to the assessee. The assessee further stated that the aforesaid parties have given the statement under coercion and influence of the search party and have subsequently retracted the statements which were made by them.
In his statement u/s. 133A of the Act on 10.10.2014, Shri. Hitesh Thakkar, managing director of the investor company has stated that Bhagwanji Patel has acquired M/s.
Satyam Projects Ltd in May 2014 and that he was a director for name sake only and detailed explanation in relation to Satyam Projects Ltd could be given by Bhagwanji Patel.
He has further stated that the overall affairs of the company are being looked after by Shri. Bhagwanji M Patel. He ultimately agreed that the said company is a paper company.
Similarly, Shri. Jignesh Thakkar in the course of statement u/s. 131 of the Act on 09.10.2014 has stated that he was a clerk in Prince Ply Agency Pvt Ltd and he was a namesake director in Satyam Projects Ltd. He was unaware about the other directors of the investor company.
In his statement, Shri Uday Shankar Mahawar u/s. 131 on 25.08.2014 has also stated that he opened around 200 bogus jamkharchi companies which were used to provide bogus accommodation entries One of Such companies as stated in his statement was Satyam
Projects Ltd.
In the statement recorded on oath of Shri Parbat Gothi u/s 131 on 12.10.2014, he had admitted that M/s Hawa Realty Pvt Ltd had also indulged in obtaining bogus accommodation entry of unsecured loans from M/s Satyam Projects Limited in lieu of cash. There is no mention of the name of the assessee with whom transaction has been carried out. Also, he is not a director or a shareholder in the assessee company. Hence, his statement has no value and cannot be relied upon.
However, the AR states that all the aforesaid statements relied upon by the AO are retracted by the said parties on the ground that they were based on influence and coercion of search party. The retraction affidavit of these parties have been placed in the course of assessment as well as before me. In the course of assessment proceedings, Shri.
Uday Shankar Mahawar was produced before the Id. Assessing Officer wherein he has affirmed his retraction and clarified that the earlier statement given by him was recorded

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Lotus Logistic & Developers Pvt Ltd under coercion. The AR also stated that Shri. Bhagwanji M Patel is the shareholder of M/s.
Satyam Projects Ltd.”
The Ld CIT(A) noticed that the AO had issued notice u/s 133(6) of the Act to M/s
Satyam Projects Ltd and the same was duly complied with by the investor.
Further, Shri Uday Shankar Mahawar was produced before the AO and he has confirmed his retraction. The Ld CIT(A) also given a finding that the various case laws relied upon by the AO are not applicable to the facts of the present case.
Accordingly, the Ld CIT(A) took the view that the addition could not have been made by the AO u/s 68 of the Act. In this regard, he placed his reliance on the decision rendered by the co-ordinate bench in the case of ITO vs. Sringeri
Technologies P Ltd (ITA No.3924/Mum/2014) and also the decision rendered by the Hon’ble Bombay High Court in the case of Paradise Inland Shipping P Ltd (ITA
No.66 of 2016).
18.2 We heard the parties on this issue and perused the record. The Ld. DR argued that the additions were made by the AO on the basis of statements recorded fromShri. Jagdish Purohit, Shri Hitesh Thakkar, Mr. Jignesh Mavadiya, and Shri Uday Shankar Mahavar. He submitted that the Ld CIT(A) should not have recognized the retraction of these statements. He reiterated his contentions that the apparent documentary evidences should be ignored and the addition made by the AO should be confirmed. On the contrary, the ld A.R submitted that the Ld
CIT(A) has passed a detailed order with proper reasoning and hence the same does not call for any interference.
18.3 Having heard rival submissions, we are of the view that the order passed by Ld CIT(A) on this issue does not call for any interference. We notice that the Ld

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Lotus Logistic & Developers Pvt Ltd

CIT(A) has given a clear finding that the assessee has discharged the initial burden placed upon it by proving the identity of the investor, the credit worthiness of investor and the genuineness of the transactions. Further, the above said investor is one of the partners in a group concern of the assessee. We notice that the AO has placed reliance on the statements given by certain persons, which has later been retracted. One of the persons has confirmed the retraction before the AO also. Hence, we are of the view that the AO could not have placed sole reliance on the statement given by certain persons by totally disregarding the evidences available in that regard. Further those statements are contrary to the financial statements and bank statements of the investor. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting the addition of Rs.2.81 crores made by the AO.
19. The next issue relates to addition of loans aggregating to Rs.50.00 lakhs. The AO had made the addition of loans taken from M/s Ratangar Finlease P Ltd and M/s Anglo Commotrade P Ltd (referred above) u/s 68 of the Act on the basis of statements given by Shri Jagdish Purohit and Shri Dhruva Narayan Jha.
19.1 The Ld CIT(A) noticed that the statement given by Shri Jagdish Purohit was not confronted with the assessee. Even otherwise, it is seen that the above said person was not a director in both the above said companies. Accordingly, he held that the AO could not have relied upon his statement. With regard to the statement taken from Shri Dhruva Narayan Jha, the AO noticed that he was a director in M/s Anglo Comtrade P Ltd only and he is not connected with M/s
Ratangar Finlease P Ltd. Hence Ld CIT(A) deleted the addition of loan of Rs.20.00
lakhs taken from above said company. However, he confirmed the addition of 52

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Lotus Logistic & Developers Pvt Ltd loan of Rs.30.00 lakhs taken from M/s Anglo Commotrade P Ltd, since Shri Druva
Narayan Jha was a director of that company and he himself had admitted that his company is providing accommodation entries. Both the parties are in appeal on this issue.
19.2 We heard the parties on this issue and perused the record. Following observations made by Ld CIT(A) in respect of the above said two loans are relevant here:-
“7.5 The assessee has submitted following documents in support of the alleged unsecured loan transaction:

(a) ITR Acknowledgement along-with computation of income of the lenders
(b) Financial statements of the lender companies
(c) Loan confirmation of the lender company for AY 2015-16
(d) Bank Statement of the lender companies highlighting the loans given to the assessee
(e) Copy of name of companies in which Shri Dhruva Jha was/is director on MCA since
1986 till date
(f) Copy of names of the directors in M/s RatangarFinlease Pvt Ltd since 1994 till date
(g) Retraction Statement of Shri Jagdish Purohit dated 30.01.2015
(h) CBDT Letter F.No.286/98/2013-IT (lnv II) dt. 18.12.2014
(i) Judgement of Hon'ble Gujrat High Court (Ramanbhai B Patel and Chetnabhen J Shah)

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Lotus Logistic & Developers Pvt Ltd amount and has also relied on statements of certain parties to allege that the loan transaction entered with the alleged companies were in the form of accommodation entries.”
A perusal of the documents furnished by the assessee would show that the assessee has discharged his initial onus, but the AO has not discharged the onus shifted to his burden. We noticed that the Ld CIT(A) had held that the statement given by Shri Jagdish Purohit has to be ignored, since that statement was not confronted with the assessee and further, he was not a director in both the above said companies. Similarly the statement given by Shri Dhruva Narayan Jha was ignored by Ld CIT(A) in respect of M/s Ratangar Finlease P Ltd, since he was not a director in that company. But Ld CIT(A) has confirmed the loan of Rs.30.00 lakhs taken from M/s Anglo Commotrade P Ltd, since Shri Dhruva Narayan Jha was a director in that company. However, it is not shown that the statement so given by Shri Dhruva Narayan Jha was confronted with the assessee. In that scenario, we are of the view that the Ld CIT(A) was not justified in confirming the addition of Rs.30.00 lakhs solely on the basis of statement of Shri Dhruva
Narayan Jha by totally disregarding the documents furnished by the assessee.
19.3 Accordingly, we confirm the decision rendered by Ld CIT(A) in respect of addition of Rs.20.00 lakhs relating to M/s Ratangar Finlease P Ltd. For the reasons discussed above, we reverse the order passed by Ld CIT(A) in respect of loan of Rs.30.00 lakhs taken from M/s Anglo Commotrade P Ltd and direct the AO to delete the addition of Rs.30.00 lakhs.
20. The next issue relates to the disallowance of interest expenditure made by the AO u/s 69C of the Act. During the year under consideration, the assessee has paid interest aggregating to Rs.47,37,500/- on four loans. The AO noticed that 54

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Lotus Logistic & Developers Pvt Ltd two loans taken from M/s Anglo Commotrade P Ltd and M/s Ratangar Finlease P
Ltd were treated by him as unexplained cash credit and accordingly added u/s 68
of the Act. He noticed that the loans taken from M/s Aarohi Commodities P Ltd and M/s Anandomayee Mercandise P Ltd were treated as unexplained cash credits in the earlier years. Accordingly, the AO disallowed interest expenditure claimed on these loans u/s 69C of the Act. The details of loans and interest expenditure are tabulated as under by the AO.
S.No.
Name of concern
Unsecured loan
Interest paid
Operator name
1
Aarohi Commodities P Ltd
-
7,83,333/-
Shri Pravin Jain
2
AnandomayeeMerchandise P Ltd
-
15,06,833/-
Shri Jagdish Purohit
3
Anglo Commotrade P Ltd
30,00,000/-
12,16,667/-
Shri Jagdish Purohit
4
RatangarFinlease P Ltd
20,00,000/-
12,30,667/-
Shri Jagdish Purohit
Total
50,00,000/-
47,37,500/-

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Lotus Logistic & Developers Pvt Ltd allowed as deduction. Accordingly, the order passed by Ld CIT(A) in respect of interest relating to M/s Ratangar Finlease P Ltd is confirmed and the order passed by him in respect of loan taken from M/s Anglo Commotrade is reversed. The AO is directed to allow interest expenditure relating to both the above said loans. In the succeeding paragraphs, we are confirming the relief granted by Ld CIT(A) in respect of addition of loan of Rs.1.60 crores taken from M/s Arohi Commodities P
Ltd in AY 2014-15. Hence, we confirm the order of Ld CIT(A) in deleting the interest disallowance relating to the above said loan.
20.3 In respect of loan taken from M/s Anandomayee Merchandise P ltd, the Ld
CIT(A) has noted that the loans have been taken during the financial years relevant to AY 2010-11 and 2012-13. We notice that the addition made in AY
2010-11, being unabated assessment year, has been deleted by us in a separate order passed for that year, following the decision rendered by Hon’ble Supreme
Court in the case of Abhisar buildwell Ltd (civil appeal no.6580 of 2021)(459 ITR
212)(SC), since no incriminating material was found by the search team relating to that year. The Ld A.R submitted that the addition made by the AO in AY 2012-13
has been deleted by Ld CIT(A) and the revenue did not challenge the same before
ITAT. Thus, we notice that the additions made in respect of loans taken from M/s
Anandomayee Merchandise P Ltd in the years relevant to Asst.Year 2010-11 and 2012-13 have been deleted and in that case, the disallowance of relevant interest expenditure is not justified.
21. In the result, appeal of the assessee bearing ITA No.3698/Mum/2019is allowed & appeal of the revenue bearing ITA No. 4039/Mum/2019 is dismissed.

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Lotus Logistic & Developers Pvt Ltd

M/s LOTUS LOGISTICS & DEVELOPERS PVT LTD
22. The revenue has filed appeal in ITA No. 4057/Mum/2019 for AY 2014-15. The additions made by the AO in this year are:-

(a) Share application money of Rs.26.59 crores assessed u/s 68 of the Act.

(b) Unsecured loan of Rs.3.60 crores assessed u/s 68 of the Act

(c) Disallowance of interest on loans u/s 69C of the Act.
The Ld CIT(A) deleted all these three additions and hence the revenue has filed this appeal.
23. The first and second issue relates to the addition made u/s 68 of the Act.
During the year relevant to AY 2014-15, the assessee had received share application money of Rs.26,59,63,357/- from M/s Divine Tradecom Pvt Ltd (DTPL).
It had also received loan of Rs.1.60 crores from M/s Arohi Commodities P Ltd and Rs.2.00 crores from M/s Valaka Engineering P Ltd, both aggregating to Rs.3.60
crores. The AO noticed that the report given by the investigation wing contained the statements given Shri Ashok Agarwal, Shri Amal Mondal & Shri C Parbat Gothi, wherein they had admitted to have given accommodation entries in the form of Share application money and unsecured loans. Accordingly, the AO held that the share application money and unsecured loans (referred above) received by the assessee are liable to be assessed as unexplained cash credit under section 68 of the Act.
23.1 The third issue relates to the disallowance of interest expenses. Since the above said loans were assessed as unexplained income, the AO disallowed related interest expenses of Rs.21,26,400/- as unexplained expenditure u/s 69C of the Act.

3697/Mum/2019 & Others

Lotus Logistic & Developers Pvt Ltd

3697/Mum/2019 & Others

Lotus Logistic & Developers Pvt Ltd money and unsecured loans from shell companies. Accordingly, he submitted that the additions made by the AO should be sustained. He reiterated the arguments advanced in other cases, which were dealt by us in the preceding paragraphs.

“7.3 I have carefully considered the assessment order and the submissions of the learned counsel. As per the Appraisal Report, specific information was received by the AO revealing that Shri Pradeep Poddar has admitted in his statement that unsecured loan taken from M/s. Divine Tradecom Pvt. Ltd. is nothing but an accommodation entry. In the impugned assessment order, the AO has also referred to the statement of Shri Anand
Sharma who has admitted that he has created 500 companies to provide accommodation entries and these companies do not have creditworthiness of its own; few of which in turn have invested / lent money to M/s. Divine Tradecom Pvt. Ltd. The Id. AO has also relied upon the statements of Shri Ashok Agarwal, Shri Anikt Poddar, Shri Amal Mondal and Shri
Parbat Gothi.

The appellant claims that no addition of Rs.26,59,63,357/- is called for as it has completely established the three ingredients viz.
identity, genuineness and creditworthiness as envisaged u/s. 68 of the Act, whereas the AO has treated the same to 59

3697/Mum/2019 & Others

Lotus Logistic & Developers Pvt Ltd be unexplained and added the same u/s. 68 of the Act solely on his surmises. Thus, M/s.
Lotus Logistics and Developers Pvt. Ltd.

The only issue is with regard to the share application money received by the appellant from M/s. Divine Tradecom Pvt. Ltd. and whether the appellant has discharged its onus cast upon by the provisions of section 68 of the Act.

(b) ITR Acknowledgement along-with computation of income of the investor company

(c) Financial statements of the investor company

(d) Bank Statement of the investor company highlighting the share application money invested

(e) Copy of duly signed Share Application forms of the investor

(f) Copy of the Return of Allotment (Form 2) filed with the