UMIYA CONSTRUCTION CO,HIMATNAGAR vs. THE DY. CIT, CIRCLE-2(1)(1), AHMEDABAD

Shri Deepak Shah, the Ld. AR of the assessee submitted that this was a case of reopening beyond four years. He explained that the transaction of the assessee with M/s Mehta Finance was duly explained in the course of original assessment and there was no failure on the part of the assessee to disclose fully and truly any material facts. The Ld. AR contended that the case was reopened on the basis of wrong information and the assessee has not taken any accommodation entry from M/s Mehta Finance, as alleged by the AO. Rather the assessee had advanced loan to M/s Mehta Finance on which interest was received and duly accounted for. The Ld. AR, therefore, contended that not only the

Per Contra Shri Abhijit, the Ld. Sr. DR, supported the order of the lower authorities.

We have considered the rival submissions. It transpires that a search operation u/s 132 of the Act was conducted at the premises of M/s Mehta Finance wherein it transpired that M/s Mehta Finance was involved in providing accommodation entries by accepting cash. Shri Dipak Rasiklal Mehta, while explaining the seized documents, had admitted that Annexures-17, 18, 19 and 20 were vouchers containing entries of cash receipts against which cheque or RTGS payment was made. It was explained that the name of the parties who had deposited cash was duly entered in the vouchers appearing in these annexures. On the basis of this incriminating evidence, the AO had concluded that the assessee had taken accommodation entries of Rs. 56,62,430/- by depositing cash of equivalent amount with M/s Mehta Finance. It transpires that the AO had reopened the case and made the addition in a mechanical manner without correctly appreciating the facts of the case. The transactions of the assessee with M/s Mehta Finance was duly examined in the course of original assessment completed u/s. 143(3) on 24.07.2015. In that order, the AO had recorded a finding that “Similarly loans & advances given to M/s Mehta Finance amounting to Rs.43,65,616/- on which interest charged @ 6% whereas interest allowed to other parties from loan accepted @ 12%....” Thus, a finding was recorded in the original assessment that the assessee had advanced loan to M/s Mehta Finance

In view of the above facts, the contention of the assessee that there was no failure on the part of the assessee to disclose fully and truly the material facts, is found to be correct. Therefore, the reopening as made by the AO is not found sustainable. On merits also, no addition was called for as the assessee had not received any money rather it had advanced loan to M/s Mehta Finance on which the interest was duly charged and there cannot be any question of accommodation entry in such transaction. Further, no evidence for any accommodation entry taken by the assessee was brought on record by the AO. Therefore, the addition of Rs.56,62,430/- as made by the AO is liable to be deleted on merits as

In the result, the appeal of the assessee is allowed.