DCIT, CENTRAL CIRCLE-4(3), KOLKATA, KOLKATA vs. RAJA SHELTERS PRIVATE LIMITED, KOLKATA

Per Pradip Kumar Choubey, Judicial Member:

The present appeal has been preferred by the revenue for the assessment year 2022-23 against the order dated 11.04.2025 of the Commissioner of Income Tax (Appeals)-27, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. Brief facts of the case are that a search and seizure operation u/s 132 of the Act was conducted in respect of ‘Golden Goenka group of assessees’
on 18.12.2021
by the Directorate of Income
Tax
(Investigation), UP & Uttarakhand and the assessee was also covered in the said search & seizure operation. Further, the assessee filed its return of income u/s 139(1) of the Act on 14.10.2022 declaring a current year loss of Rs.2,02,324/-. The return was processed u/s 143(1) of the Act on 03.11.2022 at a current year loss of Rs.2,02,324/-. Being the year of the search, return of the instant year was selected for scrutiny through
CASS and notices u/s 143(2) & 142(1) of the Act were issued along with Raja Shelters Pvt. Ltd

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detailed questionnaire and assessment order u/s 143(3) of the Act was passed on 22.03.2024 making an addition of Rs.6,28,00,000/- as unexplained cash credit u/s 68 of the Act on account of unsecured loan.
3. Aggrieved by the said order, the assessee preferred appeal before the ld. CIT(A), wherein, the appeal of the assessee has been allowed on merits.
4. Being aggrieved and dissatisfied, the revenue preferred appeal before us by taking following grounds:

2,56,00,000/-
Raja Shelters Pvt. Ltd

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M/s Mainland Finance Pvt Ltd.
29,00,000/-
M/s Jajodia Finance Limited
1,05,00,000/-
M/s JNB Sidhu Finance Pvt Ltd.
61,00,000/-
M/s Radha Fincom Limited
25,00,000/-
M/s Aalekkha Supply Pvt Ltd.
1,52,00,000/-

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or discrepancy in the details furnished to prove identity, creditworthiness and genuineness of the transaction. His submission is that the said loan transaction was done through proper banking channels and all the said lender companies have sufficient net worth to provide the said loan to the assessee company and the net worth of the six companies as per their
Audited Accounts are hereinbelow:
No. Name of the loan creditors Turnover during the Year
Net Worth
M/s Sri Salasar Suppliers Pvt
Ltd.
1781.26 lakhs

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6.1
We also find that the Assessing Officer relied on the statement of Sri Girdhari Lal Goenka recorded during the search operation but the statement was later on retracted and the same has no evidentiary value.
It is pertinent to note here that the assessee submitted relevant documentary evidences such as copies of audited accounts, bank statements, ITR filed for the relevant F.Y, loan confirmation statements and source of funds in response to summon u/s 133(6) and notice 131 of the Act in respect of all the sundry creditors. We further find that all the loan transactions were done through banking channels. We note that all the lender companies have sufficient net worth to advance the said loan to the assessee company which are as under:
No. Name of the loan creditors
Turnover during the Year
Net Worth
M/s Sri Salasar Suppliers Pvt Ltd. 1781.26 lakhs
2550.28 lakhs
M/s Mainland Finance Pvt Ltd.
1146.35 lakhs
9952.94 lakhs
M/s Jajodia Finance Limited
1200.24 lakhs
6031.74 lakhs
M/s JNB Sidhu Finance Pvt Ltd.
159.97 lakhs
2699.47 lakh
M/s Radha Fincom Limited
1541.32 lakhs
9940.81 lakhs
M/s Aalekkha Supply Pvt Ltd.
111.25 lakhs
3730.18 lakhs

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No. Name of the loan creditors
Amount of loan taken
Repaid
Current Year
M/s Sri Salasar Suppliers Pvt Ltd. 2,56,00,000/-
2,56,00,000/-
M/s Mainland Finance Pvt Ltd.
29,00,000/-
29,00,000/-
M/s Jajodia Finance Limited
1,05,00,000/-
1,82,00,000/-
M/s JNB Sidhu Finance Pvt Ltd.
61,00,000/-
61,00,000/-
M/s Radha Fincom Limited
25,00,000/-
25,00,000/-
M/s Aalekkha Supply Pvt Ltd.
1,52,00,000/-
1,98,00,000/-
Total
6,28,00,000
7,51,00,000

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22/03/2024 and I find that no query was ever raised in respect of the source of repayment of loan. Thus, the AO clearly travelled beyond the scope of Show Cause Notice/Assessment Order dated 22/03/2024 which stands in clear violation of the direction of Hon’ble Calcutta High Court.
Even otherwise, it is a settled legal principle that if an allegation or ground is not made at the stage of show cause itself, it is not permitted for the authorities to create a new ground. In support of its contention, reference is made to the judgments of the Honorable Supreme Court in the case of Birla
Corporation Ltd. v. CCE 2005 (186) E.L.T. 266/2005 taxmann.com 1293 ,
Indian Oil Corporation Ltd. v. Collector of Central Ex. 2006 (202) E.L.T.
37/2006 taxmann.com1514 (SC) and Boving Fouress Ltd. v. CCE 2006
(202) E.L.T. 389 (SC). I fail to appreciate that in absence of any query or inquiry by the AO from the assessee, how is the assessee expected to reply to the same. it is well settled in law that in absence of inquiry the AO cannot invoke Section 68 of the Act.
6.2.13.Furthermore, the fact remains that no addition has been made by AO in respect of the said admitted claim of repayment of loan and thus his attempt to negate the argument of repayment of loan is perverse. Actually, the loan has been repaid in the same and subsequent financial year by the assessee to the loan creditors. I refer to the binding judgment dated
17.12.2024 of the Hon’ble Calcutta High Court rendered in the case of PCIT vs Alom Extrusions Limited [ITAT/268/2024] wherein the Hon’ble
High Court has deleted the addition made of loan credits u/s. 68 of the Act by taking note of the fact of repayment of loan. I am supported in the said view by the judgment of the Hon’ble Gujrat High Court in PCIT vs. Merry gold Gems (P.) Ltd. [2024] 164 taxmann.com 764 (Gujarat).
6.2.20. I find that the facts of the instant case at hand is quite similar to the facts discussed by the Hon’ble juri ictional High Court in the case of Principal Commissioner of Income-tax vs. Sree leathers in [2022] 143
taxmann.com 435 (Calcutta). The facts of the said case were:
a) The assessee-firm was engaged in business of trading/retailing of footwear and leather and non-leather accessories. It had filed its return of income and same was selected for scrutiny. Subsequently, notices under sections 143(2) and 142(1) were issued on it.
b) The Assessing Officer noted that the assessee had received certain amount of unsecured loans from various companies out of which 13
companies were allegedly claimed to be paper companies. He thus made addition of amount of unsecured loans in the assessee's total income.
c)The Commissioner noted that the assessee had furnished various documents to prove genuineness and creditworthiness of alleged paper companies however same was rejected by the Assessing Officer. He thus held that it was not enough for the Assessing Officer to dismiss documents furnished by the assessee without consideration but rather should have recorded reasons in writing as to why these documents filed by the assessee did not go to establish the identity of the lender or prove the Raja Shelters Pvt. Ltd

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genuineness of the transaction. In the absence of any such finding, order passed by the Assessing Officer was held to be utterly perverse.
The Hon’ble High Court of Calcutta gave the following judgement:
“This provision of section 68 deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The crucial words in the said provision are 'assessee offers no explanation'. This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the burden of proof is on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to section 68. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. If the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds.
Further to be noted that where the assessee furnishes full details regarding the creditors, it is up to the department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee's transaction. Thus, more importantly, the onus of proving that the appellant was not the real was on the party who claims it Bearing the above legal principles in mind, in the instant case, it is clear that the Assessing Officer issued show cause notice only in respect of one of the lender FGD.
The assessee responded to the show cause notice and submitted the reply.
The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of Raja Shelters Pvt. Ltd

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transaction. There is no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the Assessing
Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression 'money laundering.'
Such usage is uncalled for as the allegations of money laundering is a very serious allegations and the effect of a case of money laundering under the relevant Act is markedly different. Therefore, the Assessing Officer should have desisted from using such expression when it was never the case that there was any allegations of money laundering. Much reliance was placed on the statement of AKA which statement has been extracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the Assessing Officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations.
The Assessing Officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the Assessing Officer ignored the basic tenets of law before invoking his power under section 68. Fortunately, for the assessee, the Commissioner (Appeals) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee.
More importantly, the Commissioner noted that all these companies responded to the notices issued under section 133(6) which fact has not been denied by the Assessing Officer. On going through the records and the net worth of the lender companies, the Commissioner (Appeals) has recorded the factual findings that the net worth of those companies is in crores of rupees and they have declared income to the tune of Rs.
45,00,000/- and 75,00,000/-. Therefore, the Assessing Officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons. However, there is no discussion on the explanation offered by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the Commissioner (Appeals) who had rightly appreciated the facts and circumstances of the case. As pointed out earlier, the Assessing Officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the Assessing Officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender.
Raja Shelters Pvt. Ltd

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In the absence of any such finding, it is held that the order passed by the Assessing Officer was utterly perverse and rightly interfered by the Commissioner (Appeals). The Tribunal reappreciated the factual position and agreed with the Commissioner (Appeals). The tribunal apart from taking into consideration, the legal effect of the statement of AKA also took note of the fact that the notices which were issued by the Assessing Officer under section 133(6) to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book.
These materials were available on the file of the Assessing Officer and there is no discussion on this aspect. Thus, the tribunal rightly dismissed the appeal filed by the revenue. [Para 5]
In the instant appeal also, the AO in spite of having all the requisite documents at his disposal failed to bring on record any reasons to justify his conclusion that the documents which were filed by the assessee along with the reply did not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. Similarly, the decision of the Hon’ble Rajasthan High Court in the case of CIT Vs A.L. Lalpuria Construction (P) Ltd (215 taxmann 12) is also found to be relevant to the present case wherein also the addition made by the AO alleging unsecured loans to be in the nature of accommodation entry was held to untenable as it was based on unconfronted oral statement of third party which was obtained prior to the search conducted u/s 132 of the Act upon the assessee. The Hon’ble Court observed that,
"2. The revenue has preferred instant appeals U/s 260A of Income-tax
Act,1961 ("Act, 1961") assailing judgment of the Tribunal dt.31-3-2010
affirming order of Commissioner (Appeals) dt. 5-3-2008, with modification that on the statement of Kripa Shanker Sharma, the income of Rs. 5 Lacs was assessed in the hands of assessee and it was observed by the Tribunal that the statement of Kripa Shanker Sharma was never confronted and no documentary evidence was supplied to the assessee, in absence whereof the income in the hands of the assessee on the basis of statement of Kripa Shanker Sharma deserves deletion.
The assessee as alleged carried out construction activities and disclosed in come from subcontract and investment in building construction. After the search U/s 132 of the Act,1961 was carried out on 12-4-2005 in the case of another assessee M/s. B.C. Purohit & Company at Jaipur & Kolkata, evidence was gathered and from the investigation it revealed that in the garb of tax consultation the owners and employees of this group were running the racket of providing accommodation entries of gifts, loans, share application money, share investment and long-term capital gains in shares. It will be relevant to record that the present assessee might have been in consultation with M/s. B.C. Purohit & Company and a member of the group and has drawn inference regarding providing accommodation entries and the assessing officer was of the view that details made available by the assessee as regards unsecured loans and share
Raja Shelters Pvt. Ltd

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application money, reference of which has been made in para-4 of its order, appears to be the accommodation entries and the present assessee was middle man and invoking Sec.68 of the Act, it was considered to be part of the income in the hands of the assessee. However, on appeal preferred before the Commissioner(Appeals) by the assessee U/s 143(3) r/w 147 of the Act, 1961 all the factual statements were examined at length and the Commissioner (Appeals), after due appreciation of material which came on record, observed that from independent enquiry the copies of bank account were obtained by the assessing officer and found that for clearing of the cheques issued by these companies either cash was deposited in the same account or in another account of the group company in fact was M/s. B.C. Purohit of which the present assessee was considered to be one of the group member. However, it was further observed that summons issued U/s 131ofthe Act were served upon all such applicant/creditors and their confirmation letters were filed and the companies were assessed to tax being the private limited companies, the existence of their separate legal entity ordinarily could not have been doubted. However, on the basis of statement of Kripa Shanker Sharma which was recorded by the search authorities as regards accommodation entries, a sum of Rs. 5 Lacs was assessed in the hands of present assessee alone and as regards other income; it was not considered to be in the hands of the present assessee. Obviously, the department being aggrieved preferred appeal before the Tribunal and at the same time, the present assessee filed cross objection regarding part of the income, to the extent of a sum of Rs.5 Lacs, as being recorded in the hands of present assessee on the basis of statement of Kripa Shanker Sharma. The Tribunal while appreciating the factual matrix came on record observed that after the summons were issued
U/s 131
of the Act,1961
to the applicant/creditors and their confirmation letters were filed and the companies were assessed to tax being private limited companies the existence of their separate legal entity ordinarily could not have been challenged more so when the identity of existence of the investor is not disputed and accordingly upheld the view of Commissioner (Appeals), at the same time further observed that merely on the basis of oral statement of Kripa Shanker Sharma recorded before the search authorities that the assessee provided accommodation entries was not sufficient for the income to be assessed for a sum of Rs. 5 Lacs in the hands of the assessee and while allowing the cross objection filed by the assessee dismissed the appeal preferred by the revenue under order impugned. We have heard the parties at length and of the view that what has been observed by the Commissioner (Appeals) & the Tribunal appears to be based on factual matrix and there appears no substantial question of law arises which may require interference by this Court to be examined in the instant appeal.
Consequently, the instant appeals are wholly devoid of merit and accordingly stand dismissed."
In addition to the aforesaid binding judgment of Hon’ble Calcutta High
Court in the case of PCIT vs Sree leathers[2022] 143 taxmann.com 435
Raja Shelters Pvt. Ltd

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(Calcutta), I am supported in my views by the following binding judgments of Hon’ble Juri ictional Calcutta High Court:
CIT vs. M/s. Data ware Private Limited reported in 2011 (9) TMI 175 (CAL)
PCIT vs Alom Extrusions Limited [ITACT/268/2024, judgment dated
17.12.2024]
PCIT vs Parwati Lakh Udyog [ITAT/2/2024, judgment dated 19.02.2024]
CIT v. Mitul Krishna Kapoor (ITA No.333 of 2009, judgment dated
09.06.2016)
PCIT vs Coal Sale Co. Ltd. [ITAT/71/2022, Judgment dt. 29.07.2022]
CIT vs. Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal) of CIT(E) -vs- Mayapur Dham Pilgrim & Visitors Trust (2022) 214 DTR 441
/ 328 CTR 984 (Cal)
CIT(E) -vs- Sanskriti Sagar [ITAT/46/2018 (GA No. 631 of 2018 dated
26.04.2022 (Cal)]
6.2.21. In view of the above discussions and various judicial pronouncements, the additions of loan amount of Rs. 6,28,00,000/- u/s 68
of the Act, made by the AO in the assessment order u/s 143(3) r.w.s 260
of the Act dated 26.06.2024, is deleted. Hence, these grounds of appeal raised by the assessee are allowed.”

[Pradip Kumar Choubey]
Accountant Member

Judicial Member

Dated: 18.12.2025. RS
Raja Shelters Pvt. Ltd

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Copy of the order forwarded to:
1. Appellant -
2. Respondent -
3. CIT(A)-
4. CIT- ,

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By order