GUPTA ASHOK KUMAR,HYDERABAD vs. INCOME TAX OFFICER, WARD-1(2), HYDERABAD

1. 3 ITA.No.376/Hyd./2024 8. The Ld. CIT (A) has erred in upholding the addition of Rs.3,00,00,096/-without considering the information furnished by the appellant during the appellate proceedings.

9. The Ld. CIT(A) ought to have appreciated the fact that the amount of 3,00,00,000/- was received by the appellant from Neelgagan Suppliers P Ltd, Nightbint Barter P Ltd. Nirmal Kunj Trade Links through proper banking channel and therefore the addition is not sustainable.

10. The Ld. CIT (A) erred in holding that "the loan creditors were found to be bogus entities particularly floated for the purpose of accommodating false unsecured loan" without having any material evidence in his possession or in the possession of AO, whereas it is clearly evident that lenders are on rolls of income tax department and the financial statements of the same have been submitted in paper book submitted during the appellate proceedings, before the Ld.CIT (Appeals), 11. The Ld. CIT(A) ought to have appreciated the fact that appellant has proved the identity of lender by PAN and bank particulars, genuineness of transaction is explained by transactions through banking channels, evidence of recording of transaction in the books of accounts of lenders, Creditworthiness of the lender is explained by submitting confirmation letter clearly stating the fact of the aforesaid amount, and therefore the addition of Rs.3,00,000,00/-ought to have deleted.

12. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

3. Briefly stated facts of the case are that, the assessee is an individual, filed his return of income on 4 ITA.No.376/Hyd./2024 22.04.2019 for the assessment year 2014-2015, declaring total income of Rs.9,84,860/-, in response to notice issued under section 148 of the Act, dated 25.03.2019, the case was selected for scrutiny and during the course of assessment proceeding, the Assessing Officer called-upon the assessee to furnish the details of unsecured loans taken during the financial year 2013-2014, list of loan creditors, bank statements, details of nature of transactions made with M/s. Neelgagan Suppliers Ltd., M/s. Nirmal Kunj Trade Links Private Limited. In response, the assessee has filed financial statements for the year ending 31.03.2014 and confirmation of account statements from M/s. Neelgagan Suppliers Ltd., M/s. Nirmal Kunj Trade Links Private Limited. The assessee had also filed ledger extract in the name of Cauvery Iron & Steel (India) Ltd., relevant bank account statement etc. The Assessing Officer, on perusal of the bank statement of the assessee noticed that, the assessee on 27.12.2023 has received a sum of Rs.75 lakhs from MS. Sonali Gupta through bank account. The Assessing Officer further noted that, the assessee has 5 ITA.No.376/Hyd./2024 received Rs.1,00,00,000/- from M/s. Neelgagan Suppliers Ltd., and Rs.1,00,00,000/- from Nightbird Barter Pvt. Ltd., on 10.03.2014 and Rs.1,00,00,000/- on 13.03.2014 from M/s. Nirmal Kunj Trade Links Private Limited. Since, there was no compliance from the assessee with relevant details, the Assessing Officer issued one more show cause notice dated 29.11.2019 and called-upon the assessee to file relevant evidences, in support of loans taken from M/s. Neelgagan Suppliers Ltd., M/s. Nirmal Kunj Trade Links Private Limited. Further, in the meanwhile, it has come to the notice of the Assessing Officer that, during the course of search operation under section 132 of the Act, conducted in the case of Banka group, some incriminating documents were found and seized and statement from Sri Mukesh Banka was recorded under section 132(4) of the Act on 19.07.2018, where he has admitted to have provided accommodation entries of unsecured loans/share capital and share premium to various persons and earned commission. The Assessing Officer further noticed that, Mr. Mukesh Banka furnished a list of paper/shell companies

6 ITA.No.376/Hyd./2024 controlled and managed by him and in the list, M/s. Neelgagan Suppliers Ltd., M/s. Nirmal Kunj Trade Links Private Limited were also appeared. The Assessing Officer, in light of the above evidences, called-upon the assessee to file relevant evidences and to justify loans claimed to have been received from above companies and also loan claimed to have been received from MS. Sonali Gupta. In response, the assessee has filed all details including details of loan taken from M/s. Neelgagan Suppliers Ltd., M/s. Nirmal Kunj Trade Links Private Limited and also Nightbird Barter Pvt. Ltd., along with their financial statements, bank account and confirmation letters. The assessee had also filed confirmation letter from MS.Sonali Gupta along with her PAN and claimed that, she was an NRI and transferred funds from Abroad to the bank account of the assessee.

7 ITA.No.376/Hyd./2024 by entry provider through shell/paper companies, which is evident from the modus operandi employed by Mr. Mukesh Banka, where he claimed to have received cash from various beneficiaries and provided the accommodation entries through multi-layer transactions. Further, on perusal of relevant confirmation letter filed by the assessee from the so-called creditors, the Assessing Officer noted that, the assessee has filed stereotype confirmation letters, which is nothing, but, a fabricated document to circumvent the provisions of section 68 of the Income Tax Act, 1961. Further, the assessee did not have any business activity. Further, the assessee had borrowed huge amount of unsecured loans from various companies and the same has been immediately transferred to Cauvery Iron & Steel (India) Ltd., where the Assessee is a Director. The assessee could not explain the reasons for accepting loans and also failed to prove the genuine identity of the creditors, genuineness of transactions and creditworthiness of the creditors. Therefore, the Assessing Officer rejected the explanation of assessee and made addition of Rs.75 lakhs claimed to have 8 ITA.No.376/Hyd./2024 received from MS. Sonali Gupta as unexplained cash credit under section 68 of the Act. The Assessing Officer had also made addition of Rs.3,00,00,096/- towards loan received from three companies controlled by Mr. Mukesh Banka as unexplained cash credit under section 68 of the Act. The relevant observations of the Assessing Officer are as under :

“2.6. On verification of the assessee's explanation, the transaction between the assesse and his son Sri Bhupesh Gupta to the extent of Rs.2,00,00,000/-is supported with necessary confirmation, bank statements and identity particulars of Sri Bhupesh Gupta. The assessee's claim in respect of receipt of Rs.75,00,000/- from his daughter Smt. Sonali Gupta, no identity particulars, no confirmation are furnished by the assesse. In the absence of basic and reasonable particulars such as source for Smt. Sonali Gupta, cause necessitating transfer of funds, identity of the lender etc., the assesse's claim stands unexplained and not acceptable and the claimed loan funds are considered as unexplained cash credits and brought to tax in terms of provisions of Sec.68 of the 1.T. Act. Add: Rs. 75,00,000/-

9 ITA.No.376/Hyd./2024 that the assesse has availed huge quantum of loan funds for no valid reason and these funds were immediately pumped into the company in which he is a director and as per his admission, he is not involved in any business activity. The copies of confirmation of account copies furnished in the names of three lenders are verified and noticed that the assesse had received Rs.I crore during the F.Y. 2013-14 from each lender. From these account copies, no opening balance and no other transactions with the assessee are found which can lead to a conclusion that the assesse had no business transactions with these bogus parties. It is quite obvious that the stereotyped account confirmation copies are nothing but fabricated documents prepared and furnished just to fulfil the formality of filing confirmation. The assesse had failed to bring out any material evidence in support of his submission that he had some or other business nexus with these parties. In the absence of such commercial expediency or any other business relation, it is suspicious to accept receipt of huge funds by the assesse in the shape of unsecured loan. There was no element of interest payment, repayment status of principal amount and reason for accepting such huge funds by the assesse. A mere submission of bank statement would be a feeble submission in the backdrop of suspicious transaction. Had the fund transfer been a genuine one, there would have been no difficulty for the assesse to bring out the evidences surrounding the transaction. 3.1. In this factual matrix, the preliminary ingredients mandated by Sec.68 of the 1.T. Act such as identity, creditworthiness of the lender and genuineness of the loan transaction are all not conclusively established by the assessee beyond doubt. The unsecured loan transaction between the assesse and the three entities i.e. Neelgagan, Nirmalkunj and 10 ITA.No.376/Hyd./2024 Nightbird to the extent of Rs.3,00,00,096/- is considered to be a bogus transaction. The identity of these three lenders was found to be as shell entities. The purpose of the transaction was nowhere spelt out by either of the parties to the transaction. Further, when the identity of the lender itself is found to be a paper company, the question of creditworthiness of such lender does not arise. Accordingly, the assessee's claim of unsecured loan is liable to be rejected and the impugned loan funds from the three shell companies are treated as unexplained cash credits and brought to tax in terms of provisions of Sec.68 of the I.T. Act. Add : Rs.3,00,00,096/-”

12 ITA.No.376/Hyd./2024 the admission, he is not involved in any business activity. The copies of confirmation of accounts furnished in the name of the three creditors were verified by the Assessing Officer and concluded that, these confirmation letters are stereotyped and fabricated to circumvent the provisions of section 68 of the Act. The assessee failed to bring out any material evidence in support of his submission that, he had some business nexus with these parties. There was no element of interest, repayment status of principal amount and reason for accepting the said huge funds by the assessee. Therefore, observed that, the assessee failed to discharge the onus caste upon him in terms of section 68 of the Act and thus, the Assessing Officer has rightly made addition towards loans received from above three companies and MS. Sonali Gupta as unexplained cash credit under section 68 the Act.

13 ITA.No.376/Hyd./2024 8. CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the learned CIT(A) has erred in confirming the additions made by the Assessing Officer towards loan received from MS. Sonali Gupta for Rs.75 lakhs, even though, the assessee has filed bank statement and confirmation from the creditor, where she has confirmed loan given to the assessee on 27.12.2013 through bank account. Learned Counsel for the Assessee, further referring to various evidences including financial statements of M/s. Neelgagan Suppliers Ltd., M/s. Nightbird Barter Pvt. Ltd., and M/s. Nirmal Kunj Trade Links Private Limited submitted that, the assessee has filed all possible evidences including 2 years financial statements of the creditors, their bank statements and also confirmation letters to prove the identity of the parties, genuineness of the transactions and creditworthiness of the parties. Further, once the assessee has discharged his onus by filing relevant evidences, it is for the Department to disprove the claim of the assessee by bringing on record some evidence to disprove the claim of the assessee. The Assessing Officer, without making any 14 ITA.No.376/Hyd./2024 allegations as to correctness in the evidences filed by the assessee, has simply rejected the evidences and made additions only on the ground that, the assessee has not shown any business activity and borrowed huge amount of loans, but, the fact remains that, it is not necessary for the assessee to have business in his individual capacity and if the assessee is carrying-out business through it’s entities and borrowed loans for this purpose, it is sufficient enough to prove the genuineness of the transactions. Further, the Assessing Officer has made addition only on the basis of statement of Mr. Mukesh Banka given under section 132(4) of the Act ignoring the fact that, the said statement has been retracted by Mr. Mukesh Banka and from the above, it is undisputedly clear that, there is no basis for the Assessing Officer to allege that, the assessee is a beneficiary of accommodation entries provided by the paper/shell companies operated and controlled by Mr. Mukesh Banka. Therefore, he submitted that, the addition made by the Assessing Officer should be deleted. In this regard, the Learned Counsel for the Assessee relied upon the decision of 15 ITA.No.376/Hyd./2024 ITAT, Jaipur Bench, Jaipur in the case of ITO vs., Kedia Builders and Colonizers Pvt. Ltd., ITA.Nos.872 to 875 & 901/JP/2024, order dated 11.03.2025; decision of ITAT, Hyderabad Bench, Hyderabad in the cases of DCIT vs., Cauvery Iron & Steel India Ltd., ITA.No.972/Hyd./2017, order dated 05.07.2018; Cauvery Iron & Steel India Ltd., vs., ACIT ITA.No.914/Hyd./2014, order dated 05.07.2018 and Judgment of Hon’ble Supreme Court in the case of CIT vs., S Khaderkhan Son [2013] 352 ITR 480 (SC).

16 ITA.No.376/Hyd./2024 genuineness of the transactions and creditworthiness of the parties. Although, the assessee claims to have received loans through bank account, but, mere transfer of funds through bank account, would not sufficient to establish genuineness of transactions. Since the assessee could not explain genuineness of the transactions, the Assessing Officer has made the addition towards loans received from above parties as unexplained cash credit under section 68 of the Act. The learned CIT(A) after considering all the relevant facts, has rightly sustained the addition made by the Assessing Officer and thus, the order of the CIT(A) should be upheld.

17 ITA.No.376/Hyd./2024 as unexplained cash credit on the basis of statement recorded from Mr. Mukesh Banka under section 132(4) of the Act at the time of search, where he has admitted to have provided accommodation entries of unsecured loans to various beneficiaries through shell/ paper companies. According to the Assessing Officer, in the list furnished by Mr. Mukesh Banka, the names of M/s. Neelgagan Suppliers Ltd., M/s. Nirmal Kunj Trade Links Private Limited were appeared. The Assessing Officer on the basis of statement recorded from Mr. Mukesh Banga coupled with evidences filed by the assessee, reached to a conclusion that, the assessee could not establish the identity of the creditor, failed to prove genuineness of the transactions and creditworthiness of the parties. According to the Assessing Officer, although, the assessee has filed relevant evidences including proof of identity of creditors, bank statements, confirmation letters, but, mere transfer of funds through banking channel, is not sufficient to prove genuineness of the transactions and further, the assessee failed to prove any business connection between the lenders and the 18 ITA.No.376/Hyd./2024 assessee and further, the purpose of loan borrowed from the above parties was not explained. Therefore, the Assessing Officer concluded that, the amount received from above three companies and MS. Sonali Gupta are unexplained cash credits and thus, made addition under section 68 of the Act.

20 ITA.No.376/Hyd./2024 Therefore, in our considered view, when the Assessing Officer has made addition towards the loans on the basis of non-existing statement, he should have consider the other evidences filed by the assessee including confirmation from parties to prove loan transactions. Since the assessee has filed relevant evidences and discharged his initial onus and also established identity of the creditors, genuineness of the transactions and creditworthiness of the parties, in our considered view, the addition made by the Assessing Officer on the basis of statement of Mr. Mukesh Banka, ignoring the evidence filed by the assessee, cannot be upheld. This is because, once the assessee discharged his initial onus, then, the burden shifts to the Assessing Officer. Once burden shifts to Assessing Officer, the Assessing Officer should bring on record some evidence to disbelieve the claim of the assessee to make addition under section 68 of the Act. This legal principle is supported by the decision of Hon’ble Supreme Court in the case of CIT vs., Lovely exports Private Limited 216 CTR 195 (SC), where it has been clearly held that, once the assessee has filed the relevant evidences

21 ITA.No.376/Hyd./2024 to prove identity, genuineness of the transaction and creditworthiness of the loan creditors, then, the sum received from the loan creditors cannot be regarded as unexplained or unaccounted income of the assessee and the Department is free to proceed on the loan creditors in accordance with law. This legal principal is further strengthened by the decision of Hon’ble Supreme Court in the case of Orissa corporation Private Limited vs., CIT [1986] 159 ITR 78 (SC). Therefore, we are of the considered view that, the Assessing Officer is erred in making additions towards unsecured loans received from above three companies.

22 ITA.No.376/Hyd./2024 that, the assessee has filed relevant details to prove the loan transaction with MS. Sonali Gupta and thus, in our considered view, the Assessing Officer and the learned CIT(A) are erred in making addition towards loan received from MS. Sonali Gupta as unexplained cash credit under section 68 of the Act.

“43. We have heard the rival contentions and perused the material placed on record. In this appeal revenue challenges the finding of the ld. CIT(A) raising two ground effectively dealing with the deletion of addition of Rs.1,75,00,364/-. The revenue state that ld. CIT(A) ignored the fact that various beneficiary companies have routed their unaccounted income through M/s Bhagwat Marcom Pvt. Ltd, M/s Coolhut Marketing Pvt. Ltd, M/s Gabarial Tieup Pvt Ltd, M/s Neelgagan suppliers Pvt ltd, M/s Outlook Vintrade Pvt Ltd, M/s Subhrashi Enclave Pvt ltd and M/s Viewmore Developers Pvt. Ltd, in the form of loans and advances during the F.Y. 2013-14 and Bank Account of 23 ITA.No.376/Hyd./2024 these companies was used for layering of unaccounted fund in the form of loans and the assessee was one of such beneficiary and thereby ld. CIT(A) was not justified in deleting the additions made by AO without appreciating the facts and circumstances of the case ignoring that the assessee was involved in organized tax evasion by taking bogus accommodation entry and also has paid commission and for taking accommodation entry. Ld. CIT(A) further erred in holding that loans taken are genuine despite accepting that these companies are engaged in some suspicious activity and indulged in illegal activity and ignoring that the foundation of the addition made by the AO is the admission of Shri Mukesh Banka, an accommodation entry provider of Kolkatta vide his statement recorded u/s 131/132(4) of the Act on 30.05.2018 and 19.07.2018 that these companies are paper/shell companies.

24 ITA.No.376/Hyd./2024

S. No. Name of person from whom loan was received Amount Rs. 1 M/s Bhagwat Marcom Private Limited 25,00,056/- 2 M/s Coolhut Marketing Private Limited 25,00,028/- 3 M/s Gabarial Tieup Private Limited 25,00,056/- 4 M/s Neelgagan Suppliers Private Limited 25,00,056/- 5 M/s Outlook Vintrade Private Limited 25,00,056/- 6. M/s. Subharashi Enclave Private Limited 25,00,056/- 7. M/s. Viewmore Developers Private Limited 25,00,056/-

25 ITA.No.376/Hyd./2024 which were squared off in the subsequent year through Banking Channel as and when appellant had liquidity. This repayment aspect of the loan were considered by the revenue and there the identity of those payees were not questioned. On this aspect of the matter the Hon'ble High Court of Gujrat in case of Commissioner of Income Tax, Rajkot-1 vs Ayachi Chandrashekhar Narsangji [2014] 42 Taxmann.com 251 (Gujarat) has held that where department had accepted repayment of Loan in the subsequent year, no addition was to be made in current year on account of cash credit. It is evident that each transactions were made through banking channels and the appellant has submitted audited Balance Sheets, profit and loss accounts, Acknowledgement of ITR, Bank Statement and furnishing of sources of the amount in the hands of loan creditor as well as loan Confirmation of all lender companies including Loan Confirmation for repayment of Loan. we also find from the Master data in record of MCA Website, the lender companies are active and it have been filed its Balance Sheet in MCA Website and complying with legal requirements under the companies Act. The appellant has also enclosed copy of Assessment orders of all loan creditors whereby the department has accepted the accounts of those companies and there also no adverse view of the loan given were taken by the revenue. Thus, what the provision of section 68 mandates to the assessee-appellant that any sum credited in the books of accounts of a taxpayer that cannot be explained by the taxpayer's income or other sources is deemed to be the taxpayer's income for that year. The burden of proof lies with the taxpayer to prove that the cash credit is genuine and not an undisclosed income. The appellant has provided identify of the Loan Creditors by giving their complete Address, PAN, Loan Confirmation, Copy of Acknowledgement for filing of I.T. Return for the A.Y. 2014-15, copy of Assessment Orders, Bank Statement and Audited Statement of Accounts and that it had also provided evidences of genuineness of transaction as all the transactions are through Banking Channels and the loan creditors has categorically confirmed by furnishing supporting documents and evidences and in both the bank. The assessee appellant contented that the genuineness of the transactions cannot be doubted, relying on mere surmises without any material to prove the same as held in the case of Dhakeshwari Cotton Mills Ltd. 26 ITR 775 (SC) where the ld AO has overlooked the net worth of the lender companies and relied only on profit. It is seen that besides the loan granted to the appellant, these lender companies had also given loans to other bodies corporate as well and granting of loan to the appellant is not a 26 ITA.No.376/Hyd./2024 solitary transaction. The appellant has furnished the financials of the loan creditor companies and other details. Those details shows that the lender companies have sufficient financial capacity to provide the loans. Therefore, the appellant has discharged the onus of proving the identity, creditworthiness and genuineness of the loan creditors. The appellant has also paid interest to each loan creditor and TDS were deducted u/s 194A in respect of such interest. The loan creditors has also disclosed interest income in their respective tax returns. On the aspect of the source of the source we get support from the decision of our own Hon’ble Jurisdictional High Cout in the case of Labh Chand Bohra Vs ITO (2010) 189 ΤΑΧMAN 141 wherein the High Court held that “So far as capacity of the lender is concerned, in our view, on the face of the judgment of Hon'ble Supreme Court, in Daulat Ram's case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established, as that would amount to calling upon him to establish source of the source. In that view of the matter, since this part of the judgment runs contrary to the judgment of the Hon'ble Supreme Court, in Daulat Ram's case (supra), while this Court in a subsequent judgment in Mangilal's case (supra) relying upon Daulat Ram's case (supra), has taken a contrary view, we stand better advised to follow the view, which has been taken in Mangilal's case (supra)."

parties, adverse inference was drawn. Also, it is mentioned that summons was issued to directors of above entities u/s 131 & 131(d). We note that on this issue the assessee - appellant was not confronted with regard to non- service or non-compliance of summon nor the Inspector's report as mentioned in Assessment order was ever supplied to the assessee- appellant. As is clear from the judicial precedent cited that noncompliance to notices u/s 133(6) or 131 of the Act by itself is not sufficient to draw an adverse inference. In 159 ITR 78 (SC) Orissa Corpn. (P) Ltd it was held that when the assessee furnishes names and addresses of the alleged creditors, the burden shifts to the department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the inquiry and to establish the lack of creditworthiness and the mere issue of notice u/s 131 is not sufficient. Thus, the Appellant has discharged the primary burden of establishing the identity and genuineness of the creditor.

12. Therefore, we hold that no substantial question of law arises between the parties and while so, the present Income Tax Appeal is not maintainable.

28 ITA.No.376/Hyd./2024 13. For the foregoing reasons, D.B. Income Tax Appeal No.25/2024 is dismissed.

29 ITA.No.376/Hyd./2024

Order pronounced in the open Court on 25.07.2025.