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Facts
The Revenue appealed against an order deleting an addition of Rs. 5,50,000/-. The addition was made under Section 68 of the Income Tax Act on the grounds that the assessee had availed accommodation entries disguised as unsecured loans. However, the facts indicated the assessee had advanced a loan to a company.
Held
The Tribunal held that the very foundation for reopening the case under Section 147 and making an addition under Section 68 was factually incorrect. The transaction was a debit entry (loan given by the assessee) and not a credit entry (loan received by the assessee), thus Section 68 was not applicable.
Key Issues
Whether the addition made under Section 68 for unexplained cash credit is sustainable when the transaction was actually a loan given by the assessee to a company, and whether the reopening under Section 147 was justified on incorrect facts.
Sections Cited
147, 148, 143(3), 68, 250, 10
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “SMC”, JAIPUR
Before: SHRI GAGAN GOYAL & SHRI NARINDER KUMAR
This appeal by revenue is directed against the order of ADDL/JCIT(A)-10, Mumbai dated 19.02.2025 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The revenue has raised the following grounds of appeal: -
1. Whether on the facts and circumstances of the case and in law, the ld. CIT (A) Addl./JCIT-10, Mumbai has erred in deleting addition of Rs. 5,50,000/- made by AO treated as unexplained cash credit without appreciating the facts discussed by AO in -JP-2025 DCIT vs. Pukhraj Mosun the assessment order such as assessee was indulged in the providing accommodation entry which was proved from the seized material in the form of digital data found from the office premises of Sh. Puneet Kulthia that M/s. MPH Hotels Pvt. Ltd. where in assessee is one of the director booked a bogus accommodation entry as receipted Rs. 4,00,000/- in July 2011 and Rs. 1,50,000/- in October 2011 from the assessee.
2. The appellant craves leave or reserves right to amend, modify alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
2. The assessee, Mr. Pukhraj Mosun, is one of the directors in M/s. MPH Hotels Pvt. Ltd. For the year under consideration, the assessee filed his original return of income on 27.09.2012 declaring a total income of Rs. 30, 61,650/-. Subsequently, the case was reopened under section 147 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on the basis of information received from the office of the Director of Investigation that the assessee, bearing PAN: AKOPS5346P, had availed accommodation entries amounting to Rs. 5, 50,000/- from the concerns of Shri Puneet Kulthia, which were alleged to be dummy/paper entities. The information suggested that such accommodation entries were used to channelize unaccounted income back into business in the form of bogus unsecured loans. Accordingly, it was recorded as the reason to believe that income chargeable to tax had escaped assessment within the meaning of section 147 of the Act.
3. Pursuant to the issuance of notice under section 148 of the Act on 29.03.2019, the assessee filed his return of income declaring the same income as declared in the original return. The assessment was thereafter completed under section 143(3) read with section 147 of the Act on 27.02.2020, wherein the total income was determined at Rs. 36,11,650/-. The Assessing Officer made an addition of Rs. 5,50,000/- under section 68 of the Act on the ground that M/s.
-JP-2025 DCIT vs. Pukhraj Mosun MPH Hotels Pvt. Ltd., in which the assessee is a director, had booked accommodation entries of Rs. 4,00,000/- in July 2011 and Rs. 1,50,000/- in October 2011 from the assessee. The Assessing Officer observed that the creditworthiness of the company could not be established and the genuineness of the transaction was also not proved. He further held that the loan of Rs. 5,50,000/- was advanced by the assessee to the company, which remained unexplained, and therefore treated the same as unexplained cash credit under section 68 of the Act.
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), vide order dated 19.02.2025, allowed the appeal of the assessee and deleted the addition made by the Assessing Officer. The Revenue, being aggrieved by the appellate order, preferred an appeal before this Bench.
We have heard the rival contentions and perused the assessment order dated 27.02.2020, the order of the Commissioner of Income Tax (Appeals) dated 19.02.2025, and the reasons recorded for reopening under section 147 of the Act. From the reasons recorded, it is evident that the reopening was initiated on the basis that the assessee had availed accommodation entries from M/s. MPH Hotels Pvt. Ltd., whereas the facts on record clearly reveal that it was the assessee who had advanced a loan to the said company. Thus, in the hands of the assessee, the transaction represents a debit entry and not a credit entry. Consequently, the very reason recorded for reopening is factually incorrect, since the assessee had not availed any loan but had in fact given a loan. Therefore, the basic foundation for assumption of jurisdiction under section 147 of the Act itself is vitiated.
-JP-2025 DCIT vs. Pukhraj Mosun 6. Without prejudice to the above finding, even on merits the addition made by the Assessing Officer under section 68 of the Act cannot be sustained. For clarity, section 68 of the Act is reproduced below:
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: Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.
* 7. On a plain reading of Section 68 of the Act, it is manifest that the provision is attracted only where any sum is found credited in the books of the assessee, and the assessee either offers no explanation regarding the nature and source of such credit, or the explanation offered is not found satisfactory by the Assessing -JP-2025 DCIT vs. Pukhraj Mosun Officer. The very foundation for invoking Section 68 is, therefore, the existence of a credit entry in the books of the assessee. In the present case, the impugned amount of Rs. 5, 50,000/- does not represent any credit in the assessee’s books. Instead, it is a debit entry arising from the loan advanced by the assessee to M/s. MPH Hotels Pvt. Ltd. Since the transaction reflects an outflow of funds by the assessee and not an inflow of unexplained credits, the condition precedent for application of Section 68 of the Act is absent. Accordingly, the addition made under Section 68 of the Act is wholly misconceived and unsustainable in law.
In light of the above discussion, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) in deleting the impugned addition. Both on the ground of jurisdiction as well as on merits, the addition made by the Assessing Officer fail. Accordingly, the appeal filed by the Revenue is dismissed.
In the result, the appeal of the revenue is dismissed.
The Order is pronounced in the open court on 13th day of October 2025.