INCOME TAX OFFICER, JAIPUR vs. KEDIA BUILDERS AND COLONIZERS PRIVATE LIMITED, JAIPUR

5.11 Therefore, I find that there was relevant material in the form of report of the Investigation wing which establishes a live-link for the information & the conclusion to enable a reasonable person to form a prima-facie belief for escapement of income. Therefore, I am of the considered view that the AO had formed 'reason to believe that accommodation entry in the form of bogus unsecured loan has been brought in by the appellant and that it had failed to disclose fully and truly all material facts necessary for assessment.

5.12 It was also contended by the appellant that no independent enquiry was done by AO on the information provided by some other source and hence he draws a borrowed satisfaction. The appellant further submitted that reopening is merely a review of AO's own assessment as made u/s 143(3) of the Act. The appellant submitted that the AO failed cross examine the adverse witness before recording & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur the reason but formed a reasoned believe merely on suspicion. I find that various courts have held that reassessment on the basis of information from Investigation Wing is valid.It has also been held by courts that where reassessment proceedings were initiated on basis of information received from Investigation wing, merely because these transactions were scrutinized by Assessing Officer during the original assessment, reassessment could not be held unjustified. 5.13 In the case of Yogendra kumar Gupta Vs ITO 51 com 383 (SC), the Hon'ble Supreme Court dismissed the SLP against the High Court judgment which held that where subsequent to completion of original assessment, Assessing Officer. on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee.

5.14 In the case of Avirat Star Homes Venture (P.) Ltd. [2019] 102 com 60 (Bombay), Hon'ble Bombay High Court has held- Where information was received from investigation wing about certain companies that were involved in giving accommodation entries of various natures to several beneficiaries and assessee was one of them, information supplied by investigation wing to Assessing Officer, thus, formed a prima facie basis to enable Assessing Officer to form a belief of income chargeable tax having escaped assessment.

5.15 In the case of PCIT Vs Paramount Communication (P.) Ltd. (2017-TIOL-253- SC-IT), Hon'ble Supreme Court dismissed SLP of assessee. Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record to initiate valid reassessment proceedings.

5.16 In the case of Aradhna Estate (P.) Ltd.Vs DCIT [2018] 91 com 119 (Gujarat). Hon'ble Gujarat High Court held that where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinized by Assessing Officer during the original assessment, reassessment could not be held unjustified.

5.17 In the case of Ankit Financial Services Ltd. Vs DCIT [2017] 78 Com 58 (Gujrat), Hon'ble Gujarat High Court held that where material of another person indicated that assessee had received bogus an applications through accommodation entries, since assesses was beneficiary, initiation of opening was justified.

5.18 In the case of Aaspas Multimedia Ltd. v. DCIT [2017] 83 taxmann.com 82 (Gujarat), Hon'ble Gujarat High Court held that where reassessment was made on basis of information received from Principal DFT (Investigation) that was beneficiary of accommodation entries by way of share application provided by a third party, same was justified.

5.19 In the case of Ankit Agrochem (P) Ltd. Vs JCIT [2018] 89 com 45 (Rajasthan), Hon'ble jurisdictional Rajasthan High Court held that where DIT informed that assessee-company had received stars application money from several entities which were only engaged in business of providing bogus accommodation entities to beneficiary concerns, reassessment on basis of said information was justified.

5.20 In the case of ITO vs. Purshottam Dass Bangur (1997) 224 R 382 (0) the Hon'ble Supreme Court has clearly held that letter from Deputy Director (Investigation) constitutes information and masons to believe that income have escaped assessment. In fact herein the Hon'ble Supreme Court has also held that merely because the notice was sent on the next day of the receipt of the information from the DOIT (Inv.) does not mean the ITO has not applied his mind.

5.21 The appellant has argument put forth argument that the issues raised during the reopening of the assessment had already been dealt with in the original assessment. I do not find that the reopening is merely a review of AO's own assessment as made uls 143(3) of the Act, as the reopening even on the same issue examined in original assessment is on account of new tangible material which was not there during the original assessment, and therefore it does not amounts to a change of opinion and is permissible. A new material/information had come to the knowledge of the AO after the original assessment proceedings Therefore, I find that there was relevant material on the basis of which the AD formed a reason to believe that the appellant has failed to disclose fully and truly all material facts necessary for assessment and that income chargeable to tax has escaped assessment. Thus, AO is justified in initiating reassessment proceedings u/s 147 of the Act.

5.22 Further, I find that the that the AO has addition of Rs. 25 lacs on account of M/s Neel Gagan Suppliers (P) Ltd which was already made in the order passed u/s 143(3) of the Act. It is seen that the assessment order u/s 143(3) of the Act was passed on 29.12.2016 in the case of the appellant for the A.Y 2014-15. wherein it is seen that the AO has noted as under:- "3.1 During the course of assessment proceedings, it was found that the assessee has shown unsecured loans from various persons. To verify the existence and creditworthiness and genuineness of transaction a notices u/s 133(6) were issued to these companies. But no response was received from Mis Neelgagan Suppliers Pvt. Ltd.

3.2 Thus keeping in view of the above, the assessee was asked vide Order Sheet entry dated 21.12.2016 to show cause why not the amount of Rs 25,05,178/- taken as loan from M/s Neelgagan suppliers Pvt Ltd be treated as bogus and addition be made u/s 68 of the Income tax Act." 5.23 The assessment was completed u/s 143(3) of the Act on 29.12.2016 by the AO making addition of Rs 25,05,178 on ground that the loan alleged to have been & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur taken from M/s Neelgagan suppliers Pvt Ltd is not proved and bogus. Aggrieved, the appellant went in appeal before the Ld CIT(A), Ajmer and the Ld CIT(A) passed the appeal order on 15.02.2019 in Appeal No 601/2-016-17/JPR deleting the addition. The Ld CIT(A) has held as under:- “4.4 It is seen that the appellant had received loan of Rs 25 lakhs from M/s Neelgagan Supplies Pvt. Ltd. on 25.03.2014 which was repaid along with interest on 11.03.2015 after deducting the TDS of Rs 28,333/- on interest of Rs 2,54,992/- paid by the appellant to M/s Neelgagan Suppliers Pvt. Limited. The loan of Rs 25 lakhs was received through RTGS. The appellant has filed copy of the bank statement of M/s Neelgagan Suppliers Pvt. Ltd. For the relevant period. It can be seen from the bank statement that either immediately before or after issue of cheque of Rs 25 lakhs to the appellant by M/s Neelgagan Suppliers Pvt. Ltd. On 25.03.2014, there was no cash deposit in the bank account of M/s Neelgagan Suppliers Pvt. Limited. The appellant has filed confirmatory letter, copy of IT. Return of A.Y 2014-15 of M/s Neelgagan Suppliers Pvt. Ltd., Balance Sheet dated 31.03.2014 & Profit & Loss Account for the period ending 31.03.2014 of M/s Neelgagan Suppliers Pvt. Limited. It can be seen that the net worth of M/s Neelgagan Suppliers Pvt. Ltd. As on 31.03.2014 was Rs. 2,48,19,924/- The appellant has also filed copy of mater date downloaded form site of ROC. The status of M/s Neelgagan Suppliers Pvt. Ltd. has been shown as 'active'. The AO has not brought on record any evidence to show that the appellant had paid cash out of his unaccounted income to M/s Neelgagan Suppliers Pvt. Ltd. or its representative or middleman for obtaining any accommodation entry of loan of Rs 25 lac from M/s Neelgagan Suppliers Pvt. Limited. I am of the considered view that when the appellant has filed each and every document to prove identity and creditworthiness of the person from whom the unsecured loan of Rs 25 lac was received by the appellant and the AO has not brought on record any evidence to show that any unaccounted income was introduced by the appellant in the form of unsecured loan introduced un the name of M/s Neelgagan Suppliers Pvt. Ltd., then just because the AO could not enforce compliance of the notice issued u/s 133(6) to M/s Neelgagan Suppliers Pvt. Ltd., no addition u/s 68 could have been made by the AO in respect of unsecured loan of Rs 25 lac received from Mis Neelgagan Suppliers Pvt. Ltd. And interest of Rs 5,178/- debited in respect of interest accrued on such unsecured loan. Therefore, in view of the facts discussed by the AO and the various decisions relied upon by the appellant, the addition of Rs 25,05,178/- (Rs 25,00,000+ Rs 5,178) made by the AO u/s 68 is hereby deleted."

5.24 I find that the same amount of Rs 25 lakhs from M/s Neelgagan Suppliers Pvt. Ltd. has been again added by the AO in the assessment u/s 147/148 dated 13.12.2019. This amount to double addition of an amount which has already been deleted by the Ld CIT(A) in appeal. Once, an addition has been made in the assessment order passed u/s 143(3) of the Act, the AO cannot resort to making a fresh addition on the same issue as the addition has been deleted by the Ld CIT(A) and if the AO is aggrieved, the further course of action is appeal to the Hon'ble Tribunal but he cannot make any more addition on the same amount on ground of & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur reassessment. Therefore, the addition made of Rs 25,00,056 on account of unsecured loan from M/s Neelgagan Suppliers Pvt. Ltd. is not valid as the further addition made in the re-assessment order tantamount to double addition and therefore is directed to be deleted. The appeal on Ground Nos 1. 1.1, 1.2, 2 and 2.1 are thus treated as partly allowed. xx xx xx x 6.3 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The appellant during the course of appeal proceedings has submitted the documents regarding loan taken and repayment from the lender companies as under: M/s. Bhagwat Marcom Pvt. Ltd • Copy of ITR Acknowledgement for the A.Y. 2014-2015 • Bank Statement of M/s. Bhagwat Marcom Pvt. Ltd • Audited Statement of Accounts M/s. Coolhut Marketing Pvt. Ltd. N • Copy of ITR Acknowledgement for the A.Y. 2014-15 • Bank Statement of M/s. Coolhut Marketing Pvt. Ltd- • Audited Statement of Accounts. M/s. Gabarial Tie-up Pvt. Ltd. • Copy of ITR Acknowledgement for the A.Y. 2014-2015. • Bank Statement of M/s. Gabarial Tie-up Pvt. • Audited Statement of Accounts. M/s. Neelgagan Suppliers Pvt. Ltd. • Copy of ITR Acknowledgement for the A.Y. 2014-2015. • Bank Statement of M/s. Neelgagan Suppliers Pvt. Ltd. • Audited Statement of Accounts. M/s. Outlook VintradePvt. Ltd. • Copy of ITR Acknowledgement for the A.Y. 2014-2015. • Bank Statement of M/s. Outlook VintradePvt. Ltd. • Audited Statement of Accounts. M/s. Subhrashi Enclave Pvt. Ltd. • Copy of ITR Acknowledgement for the A.Y. 2014-2015. • Bank Statement of M/s. Subhrashi Enclave Pvt. Ltd. • Audited Statement of Accounts. M/s. Viewmore Developers Pvt. Ltd. • Copy of ITR Acknowledgement for the A.Y. 2014-2015.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • Bank Statement of M/s. Viewmore Developers Pvt. Ltd. • Audited Statement of Accounts 6.4 I find that the appellant had taken unsecured Loan taken from M/s. Bhagwat Marcom Pvt. Ltd., M/s. Coolhut Marketing Pvt. Ltd., M/s. Gabarial Tieup Pvt. Ltd.. M/s. Neelgagan Suppliers Pvt. Ltd., Mis. Outlook Vintrade Pvt. Ltd., M/s. Subhrashi Enclave Pvt. Ltd. and M/s. Viewmore Developers Pvt. Ltd. It is also seen that these loans were short term loans in nature which were squared off in the subsequent year through Banking Channel as and when your appellant had liquidity. 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 transaction 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. I 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.

6.5 Under Section 68 of the Income Tax Act, 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 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). I find that the 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 solitary transaction. The appellant has furnished the financials of the loan creditor companies and other details as under:- 6.6 Therefore, it is seen from the above that the lender companies have sufficient financial capacity to provide the loans. Therefore, the appellant has discharged the & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 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.

6.7 The Hon'ble ITAT Delhi in the case of KMG International Ltd Vs ACIT in Date of Judgement/Order: 21/07/2023 Related Assessment Year : 2007-08 has held that addition under section 68 towards unsecured loan amount unjustified as identity and creditworthiness of creditors and genuineness of transaction duly proved by way of documentary evidences.

6.8 The Hon'ble jurisdictional Rajasthan High Court in the case of Labh Chand Bohra Vs ITO (2010) 189 ΤΑΧMAN 141 held as under:

"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)."

6.9 The Hon'ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd. 159 ITR 78(SC) held as follows:

"13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further."

6.10 The Hon'ble Agra Tribunal in the case of S.K. Jain Vs ITO (2004) 2 SOT 579 (Agra) observed as under.

"The creditors have confirmed that they have advanced loan to the assessee. In most of the cases, transactions have been routed through bank account. Therefore, asking source of such deposits will amount to asking source of the source which is not permitted under the law as held by the Hon'ble High Court of Patna in the case of Sarogi Credit Corpn. vs. CIT 1975 CTR (Pat) 1: (1976) 103 & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur ITR 344 (Pat) and the decision of the Ahmedabad Bench of the Tribunal in the case of Rohini Builders vs. Dy. CIT (2002) 76 TTJ (Ahd) 521: (2001) 117 Taxman 25 (Ahd)(Mag).

Once it is established that the amount has been invested by a particular person, be he is a family member or close relative then the responsibility of the assessee is over. The assessee cannot ask that person, who advanced the loan, whether money advanced is properly taxed or not."

6.11 The Hon'ble Calcutta High Court in the case of CIT Vs Dataware Pvt Ltd. [ GA to.2856 of 2011] had deleted similar addition u/s 68 with reference to unsecured loan creditors. The relevant extracts of the decision is reproduced below:

"In our opinion, in such circumstances, the Assessing officer of the assesses cannot take the burden of assessing the profit and loss account of the creditor when admitted the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into than return of the creditor and brand the same as unworthy of credence.

So long It is not established that the return submitted by the creditors has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established."

6.12 The Hon'ble Supreme Court in the case of CIT Vs Orissa Coprn (P.) Ltd [159 ITR 78) has held as follows:

"In this case the assessee had given the names and addresses of the alleged creditors was in the knowledge of the revenue that the said creditors were the income-tax assessee. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assesses, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit- worthy or wear such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to file conclusion that the assessee had discharged he burden that lay on him, than it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise"

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 6.13 The Guwahati High Court in the case of Nemi Chand Kothari Vs CIT [136 Taxman 213) observed that the assessee had obtained loans though account payee cheques and ha had also furnished the name & address of the creditor. In light of the aforesaid observations, they further held as follows: "Once the assessed had established that he had received the said amounts from 'N' and 'P' by way of cheques, the assessee must be taken to have proved that the creditors had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. On failure on the part of the creditors to show that their sub creditors had creditworthiness' to advance the said amounts to the assessee, these amounts as a corollary, could not have been and ought not to have been, under the law, treated as the assessee's income mom the undisclosed sources, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or ware owned by, the assessee."

6.14 I find that the AO has stated that third party enquiries were made by issuing notices u/s 133(6) and by making field inquiries (by sending Inspector) in the name of such companies, however as no reply was received from such parties, adverse inference was drawn. Also, it is mentioned that summons were issued to directors of above entities u/s 131 & 131(d). I find from the assessment order that the 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 appellant. Various courts have held that noncompliance to notices u/s 133(6) or 131 of the Act by itself is not sufficient to draw an adverse inference. In the case of Phool Singh Vs. ACIT (ITAT Delhi) in it has been held by Hon'ble ITAT that. "Merely because 133(6) notices issued to the party returned un-served though it was the same address, which was supplied by supplier while filing its income tax return, no fault can be put on the shoulder of assessee. In159 ITR 78 (SC) Orissa Corpn. (P) Ltd it was held that when the assessee fumishes 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.

6.15 The Hon'ble Supreme Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018 has held as under:

S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination.

6.16 The Hon'ble jurisdictional Rajasthan High Court in the case of CIT vs Pooja Agrawal in D.B. Income Tax Appeal No. 385/2011 has held that so far as assessee has furnished all the supporting documents in the shape of copy of contract notes regarding purchase and sale of shares, copy of D-mat account etc, the fact of transaction entered into cannot be denied simply on the ground that in his statements appellant denied having made any transactions. Further as payments and receipts were made through account payee cheques and transactions were routed through Kolkata Stock Exchange and there was no evidence that the cash has gone back in appellant's account, it was held by the Court that simply mentioning that findings were on the basis of appraisal report prepared by Investigation wing after considering all the material facts available on record is not sufficient. The Hon'ble Court confirmed the finding of the Tribunal that "The AO has failed to prove through any independent enquiry or relying on some material that the transactions made by the appellant through share P.K. Agrawal were non genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohit."

6.17 The Hon'ble Jaipur bench of ITAT vide order dated 31.08.2022 in Manohar Lal Chug vs. ITO in has held that: the case of "6.3. The issue of penny stock and consequent additions made has elaborately dealt with by ITAT Jaipur Bench in the case of Pramod Jain & Others (supra) and relying on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Pooja Agarwal, 160 DTR 0198 (Raj.) deleted the addition by observing as under: "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any 30 Shri Manohar Lal Chugh, Jaipur, cogent material to show that the assessee has brought back his unaccounted income in the shape of long-term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/ merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly, we delete the addition made by the AO on this account." On further appeal by the department to the Hon'ble Rajasthan High Court, the Hon'ble High Court by referring to the decision of CIT vs. Pooja Agarwal in DB IT Appeal No. 385/2011 dated 11.09.2017 (Raj) (HC) held that nosubstantial question of law arise in this case. 6.4. Thus in view of the above discussion and taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Hon'ble Jurisdictional High Court including the decision in case of CIT vs. Pooja Agarwal (supra) as well as in case of PCIT vs. Pramod Jain & Others (supra), we allow the claim of exemption under section 10(38) of the Act

6.18 In the case of Shree Barkha Synthetics Ltd. Vs. Asstt CIT, 2006, 55 taxman 289, Raj, it has been held as under.

"The principle relating to burden of proof concerning the assessee is that where the matter concerns money receipts by way of share application from investors through banking channel, he has to prove the existence of the person in whose name the share application is received. Once the existence of the investor is proved, it is not further the burden of the assessee to prove whether that person himself has invested the said money or some other person has made investment in the name of that person. The burden then shifts on to the revenue to establish that such investment has thas come from the assessee itself [Para 16]”

6.19 The Hon'ble ITAT, Ahmedabad in the case of DCIT Circle-1(1)(1). Ahmedabad Vs. J. P. Fincorp Services Pvt. Ltd. [ITA No.2517/Ahd/2016] has held as follows: 29. In view of the above, we are of the opinion that, though the transactions of the loan received by the assessee are not free from any doubt but in either of the case, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. [Para- 29]

6.20 Further, the Hon'ble ITTA, Kolkata in the case of Bataji Solutions Limited Vs. Assistant Commissioner of Income Tax Circle-2(1), Kolkata (ITA. No. 572/KOL/2022] pronounced on February 20, 2023 has held as follows:

“9. Apropos to Ground No. 2 regarding the issue of unexplained cash credit amounting to Rs.25,00,000/- under section 68 of the Act is concerned, we find that the assessee took loan from M/s. Ambala TrafinPvt. Limited. It is not in dispute before us that the aforesaid loan was interest-bearing loan taken through normal banking channel and was repaid back in the same financial year through banking channel and tax at source has been deducted on the interest paid thereon and all the documentary evidence in order to explain alleged credit has been duly placed before the lower authorities. Since no specific discrepancy has been observed by the lower authorities and the said loan being taken and repaid during the year itself and also considering the income of Rs 15. 10 crores offered by the assessee, we do not find any reason to question the genuineness of the said loan. We, therefore, reverse the finding of the Id. CIT(Appeals) and delete the addition of 6.21 The Hon'ble ITAT Surat in the case of Rajhans Construction (P.) Ltd. v.ACIT [IT APPEAL NO. 1450 (AHD) OF 2016] [[2022] 140 taxmann.com 370 (Surat- Trib.)] has held that:

6.22 The Hon'ble Supreme Court dismissed the SLP filed by the revenue against the decisions of Hon'ble HC of Delhi in case of PCIT-4 vs Hi-Tech Residency Pvt Ltd (96 Taxmann.com 403) wherein it was concluded that addition made u/s 68 deleted, where assessee had discharged its onus of establishing identity, genuineness and creditworthiness of both investors to whom shares were allotted by assessee as well as lenders from whom unsecured loans were taken. Also, the Hon'ble Gujarat High Court in the case of CIT-1 vs Apex Therm Packaging Pvt Ltd (42 taxmann.com 473) has held that where name, address, PAN, copy of IT Returns, balance sheet, profit and loss account of all creditors/lenders as well as their confirmation had been furnished, Assessing Officer could not make addition on account of unsecured loan and interest thereon. Therefore, I find that in the present case where the name, address, PAN, copy of IT Returns, balance sheet, profit and loss account of all creditors/ lenders as well as their confirmation had been furnished, AO was not justified in making addition on account of unsecured loan.

6.23 I find that the foundation of the addition made by the AO is the admission of Shri Mukesh Banka 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. controlled and managed by Shri Mukesh Banka. However, it is also seen that Shri Mukesh Banka has retracted his statement vide Two Separate Affidavit dated 01/06/2018 and 23/07/2018. Therefore, the statement by itself cannot be solely relied as a fool proof evidence. The Hon'ble jurisdictional ITAT Jaipur in the case of DCIT V/s Saurabh Mittal, has noted as under:

"We further note that the assessee produced copy of affidavit of Shri. Anil Agrawal who has retracted his statement before the Investigation Wing, Kolkata however, without going into controversy of the retraction of the statement we find that the statement cannot be used by the AO without giving an opportunity to cross examination of Shri Anil Agrawal."

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 6.24 It may be noted was completed u/s 143(3) of the Act on 29.12.2016 by the AO making addition of Rs 25,05,178 on ground that the loan alleged to have been taken from M/s Neelgagan suppliers Pvt Ltd is not proved and bogus. Aggrieved, the appellant went in appeal before the Ld CIT(A), Ajmer and the Ld CIT(A) passed the appeal order on 15.02.2019 in Appeal No 601/2-016-17/JPR deleting the addition. The Ld CIT(A) has held as under:-

"4.4 It is seen that the appellant had received loan of Rs 25 lakhs from M/s Neelgagan Supplied Pvt. Ltd. on 25.03.2014 which was repaid along with interest on 11.03.2015 after deducting the TDS of Rs 28,333/- on interest of Rs 2,54,992/- paid by the appellant to M/s Neelgagan Suppliers Pvt. Limited. The loan of Rs 25 lakhs was received through RTGS. The appellant has filed copy of the bank statement of M/s Neelgagan Suppliers Pvt. Ltd. For the relevant period. It can be seen from the bank statement that either immediately before or after issue of cheque of Rs 25 lakhs to the appellant by M/s Neelgagan Suppliers Pvt. Ltd. On 25.03.2014, there was no cash deposit in the bank account of M/s Neelgagan Suppliers Pvt. Limited. The appellant has filed confirmatory letter, copy of IT. Return of A.Y 2014-15 of M/s Neelgagan Suppliers Pvt. Ltd., Balance Sheet dated 31.03.2014 & Profit & Loss Account for the period ending 31.03.2014 of M/s Neelgagan Suppliers Pvt. Limited. It can be seen that the net worth of M/s Neelgagan Suppliers Pvt. Ltd. As on 31.03.2014 was Rs, 2,48,19,924/-. The appellant has also filed copy of mater date downloaded form site of ROC. The status of M/s Neelgagan Suppliers Pvt. Ltd. has been shown as 'active'. The AO has not brought on record any evidence to show that the appellant had paid cash out of his unaccounted income to M/s Neelgagan Suppliers Pvt. Ltd. or its representative or middleman for obtaining any accommodation entry of loan of Rs 25 lac from M/s Neelgagan Suppliers Pvt. Limited. I am of the considered view that when the appellant has filed each and every document to prove identity and creditworthiness of the person from whom the unsecured loan of Rs 25 lac was received by the appellant and the AO has not brought on record any evidence to show that any unaccounted income was introduced by the appellant in the form of unsecured loan introduced un the name of M/s Neelgagan Suppliers Pvt. Ltd., then just because the AO could not enforce compliance of the notice issued u/s 133(6) to M/s Neelgagan Suppliers Pvt. Ltd., no addition u/s 68 could have been made by the AO in respect of unsecured loan of Rs 25 lac received from M/s Neelgagan Suppliers Pvt. Ltd. And interest of Rs 5,178/- debited in respect of interest accrued on such unsecured loan. Therefore, in view of the facts discussed by the AO and the various decisions relied upon by the appellant, the addition of Rs 25,05,178/- (Rs 25,00,000 + Rs 5,178) made by the AO u/s 68 is hereby deleted."

6.25 The same amount of Rs 25 lakhs from M/s Neelgagan Suppliers Pvt. Ltd. has been again added by the AO in the assessment u/s 147/148 dated 13.12.2019. This amounts to double addition of an amount which has already been deleted by the Ld CIT(A) in appeal. In the earlier grounds, the addition made of Rs 25,00,056 on account of unsecured loan from M/s Neelgagan Suppliers Pvt. Ltd. has been & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur held not valid as the further addition made in the re-assessment order tantamount to double addition and therefore has been directed to be deleted.

6.26 The Hon'ble Jurisdictional ITAT in the case of CIT Vs N. M. Agrofood Products Pvt. Ltd (ITAT Jaipur) Appeal Number:

Date of Judgement/Order: 24/08/2022 has held that assessment which are already completed after making proper inquiries cannot be allowed to again reframed merely based on the search without any fresh evidence. Addition was held unsustainable.

6.27 In view of the above facts and discussion, and the various judicial decisions as discussed above including the Hon'ble Supreme Court and the jurisdictional High Court and Tribunal as well as the decision of the Ld CIT(A) in the appellant's own case on same issue in the same A.Y 2014-15 against the order passed u/s 143(3) of the Act, I am of the considered view that that the addition of Rs 1,75,00,364 made by the AO u/s 68 of the Act is not sustainable and is directed to be deleted. The appeal on Ground Nos 3, 3.2, 3.3 and 3.4 are thus allowed.

7. Ground No 4 is directed against the AO disallowing Rs. 44,958 by treating the Interest paid on the unsecured loans as being non-genuine. I have carefully considered the facts of the case, the submission of the appellant and evidences on record.I find that TDS was deducted by the appellant on the interest paid and such interest has also been shown by the lender companies in its return of income. As the addition of unsecured loan of Rs 1,75,00,364 has been directed to be deleted in the earlier grounds, the AO is directed to allow the interest of Rs 44,958 and thus the disallowance of i is deleted. The appeal on this ground is allowed.

8. Ground No 5 is directed against the AO making addition of Rs.4,37,509 by alleging the same as commission on such accommodation entry alleged to have been taken by the appellant. I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The AO while holding the unsecured loan of appellant as accommodation entry has further presumed that a commission of the above-mentioned amount @ 2.5% might have been paid by appellant as a consideration for arranging such accommodation entries. As the addition of unsecured loan of Rs 1,75,00,364 has been directed to be deleted, the addition of Rs 4,37,509 as commission paid on it also not sustainable and the AO is directed to delete the same. The appeal on this ground is allowed.

9. Ground No. 6 is directed against the AO initiating penalty proceedings u/s 271(1)(c) of the Act. Since an appeal lies against an order levying penalty and not against initiation of penalty, the appeal on this ground is premature and is treated as dismissed.

10. Ground No. 7 is general in nature and needs no adjudication.

11. As the result, the appeal is partly allowed.”

CIT(A), revenue preferred the present appeal. While dealing with the grounds of appeal ld. DR vehemently argued that the ld. CIT(A) has not appreciated the enquiries conducted by ld. AO to established that the criteria as prescribed under section 68 of the Act has not been fulfilled for unsecured loan accounted by the assessee in his books of account whereas the ld. CIT(A) without appreciating that finding of the ld. AO directed to delete the addition and has not appreciated the merits of the case of the revenue.

Going further she argued that this is the second round of litigation though in the first round Rs. 25,05,178/- was added by the ld. AO which the ld. CIT(A) has deleted, and the revenue did not challenge that finding because of the low tax effect and the case was selected under CASS.

Whereas in the second round of litigation there is specific information as to the assessee based on the search conducted by the revenue at the premises of the companies run by Shri Mukesh Banka. In that search tangible material of providing accommodation entry to the assessee was derived and that information was passed in this case and thereby the re- opening of the case was done by the revenue as per provision of section 148 of the Act. As regards the retraction of the statement of Shri Mukesh operandi and therefore, his retraction has no bearing on the addition so made based on the detailed finding recorded by the ld. AO in the assessment order after making third party enquiries and thereby he has arrived to conclusion as to the credit appearing the books of the assessee company in the name of those shell companies. Even the retraction statement is photostat copy not certified by him. The revenue has established a detailed trail as to how those shell companies operate. As it is clear from the statement of Mr. Banka that he operates or director in the many shell companies and he has declared the techniques as to how he adopted in making the accommodation entries. The ld. AO has made 133(6), deputed inspector and issued summons none of them reveals that those depositors are having their presence. All the credits are of the similar amount and are accounted for in the books in similar fashion. Therefore, indemnity, genuineness and creditworthiness were not established. Merely the entries were made from the bank account does not automatically make the transactions as genuine. In addition the she also filed and relied on the detailed written submission which is reproduced herein below:-.

1.1. The assessment for the relevant assessment year was completed under Section 143(3) on 31/12/2016, wherein an addition of ₹25,05,178/- was made under Section 68 due to the non-verification of unsecured loans. 1.2. The assessee filed an appeal before the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)], who allowed the appeal, holding that the payment was routed through banking channels, as per the order dated 15/02/2019.( PBP No 10, para 4.4) 1.3. Although the Department disagreed with the findings of the Ld. CIT(A), it did not file an appeal due to the low tax effect, which was below the prescribed monetary threshold. (Refer: PBP No. 3) 1.4. Subsequently, a search proceeding was conducted on 21/5/2018 on Shri Mukesh Banka, an identified entry operator. Post-search investigations revealed a list of beneficiaries who had availed accommodation entries, and the assessee was identified as one of the beneficiaries. 1.5. Based on this newly discovered information, action under Section 148 of the Income Tax Act was initiated. The assessment was reopened, resulting in the following additions: a. An addition under Section 68 for unsecured loans. b. A disallowance under Section 14A.

1.6. Upon appeal, the Ld. CIT(A) upheld the validity of the reopening under Section 148 .( page no 98 para no 5.21) but deleted the additions made under Section 68 and on account of unsecured loan.

1.6 Aggrieved by the deletion of these additions, the Department has preferred the present appeal before the Hon’ble ITAT, Jaipur.

2. The Respondent's Written Submission Dated 02/11/2023:

The respondent has raised the following submissions:

2.1 Validity of Reopening of Assessment Under Section 148: a. The validity of the reopening of the assessment under Section 148 was upheld. The amount of ₹25 lakhs from M/s Neelgagan Suppliers Pvt. Ltd. was b. again added by the Assessing Officer (AO) in the reassessment order dated 13/12/2019, under Section 147/148. This amounts to a double addition of an amount that was already deleted by the Ld. CIT(A) in appeal. c. Once an addition has been made in the assessment order passed under Section 143(3), the AO cannot resort to making a fresh addition on the same issue if the addition has already been deleted by the Ld. CIT(A). If the AO is aggrieved by the deletion, the appropriate course of action is to file an appeal before the & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur Hon’ble Tribunal. The AO cannot make another addition on the same amount on the grounds of reassessment. Therefore, the addition of on account of the unsecured loan from M/s. Neelgagan Suppliers Pvt. Ltd. is not valid. The further addition made in the reassessment order tantamount to a double addition and is therefore directed to be deleted. d. Details of Unsecured Loans: The respondent had taken unsecured loans from the following entities: 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. M/s. Viewmore Developers Pvt. Ltd.

These loans were short-term in nature and were squared off in the subsequent year through banking channels as and when the appellant had liquidity. e. Findings of the AO: The AO stated that third-party inquiries were made by issuing notices under Section 133(6) and conducting field inquiries through an Inspector. However, as no replies were received from the parties, an adverse inference was drawn. The AO also mentioned that summons were issued to the directors of the above entities under Sections 131 and 131(d). However, the appellant was not confronted with the non-service or non-compliance of summons, nor was the Inspector's report, as mentioned in the assessment order, ever supplied to the appellant.

3. Findings and Submissions of the respondent: 3.1 Each transaction was made through banking channels, and the respondent submitted the following: a. Audited Balance Sheets. b. Profit and Loss Accounts. c. Acknowledgement of Income Tax Returns. d. Bank Statements. e. Sources of the amounts in the hands of loan creditors. f. Loan confirmations for all lender companies, including confirmation of loan repayments. g. The Master Data from the MCA Website shows that the lender companies are active and have filed their Balance Sheets with the MCA. They are compliant with the legal requirements under the Companies Act.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur h. Copies of the Assessment Orders of all loan creditors were also submitted, showing that the Department has accepted their accounts. i. The lender companies have sufficient financial capacity to provide the loans. The appellant has discharged the onus of proving the identity, creditworthiness, and genuineness of the loan creditors. j. The appellant has paid interest to each loan creditor, and TDS was deducted under Section 194A on such interest payments. The loan creditors have disclosed the interest income in their respective tax returns.

4. Rejoinder:

1. Points 1 and 2 are factually correct, and hence no counter is submitted on the same.

2. The Department, while disagreeing with the findings of the Ld. CIT(A) in first round did not file an appeal due to the low tax effect, which was below the prescribed monetary threshold (Refer: Paper Book, Page Nos. 1 to 3).

3. The addition was initially made as the assessee failed to discharge the onus of proving the identity, creditworthiness, and genuineness of the unsecured loans. These findings were detailed in the original assessment order (Refer: Paper Book, Page No. 19 to 28, finding para is 5.1.1to 5.1.5(page 19 and 20) and 6.2( page 28)). 4. The Ld. CIT(A) upheld the reopening of the assessment under Section 148, and the assessee has not challenged the validity of the reopening in any subsequent proceedings, thereby accepting the validity of the reassessment initiated by the Assessing Officer (AO)

5. Relevant Case Law: The Ld. CIT(A) refer following case law-

Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [(2007) 291 ITR 500 (SC)]: • The Hon’ble Supreme Court held that when new tangible material or information comes into the possession of the Assessing Officer, he is justified in reopening the assessment under Section 147, even if an addition on the same issue was made in the original assessment. • The Court clarified that reassessment is permissible as long as the conditions under Section 147 are satisfied, regardless of the outcome of the previous assessment proceedings. • This principle applies directly to the present case, as the AO reopened the assessment based on new information received during the post-search investigations, which revealed fresh evidence against the assessee.

5. Validity of Reopening under Section 148: • The Ld. CIT(A) upheld the reopening of the assessment under Section 148, noting that it was based on new tangible material received during post-search investigations identifying the assessee as a beneficiary of accommodation entries.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur The assessee did not challenge the validity of reopening, implicitly accepting its correctness. • Same submission by assessee as in original proceedings: The assessee submitted the same replies and documents as in the original assessment and failed to counter the specific findings recorded in the reasons for reopening. • Failure to Produce New Evidence: The assessee failed to provide any documents or evidence to discharge their onus of proving the identity, creditworthiness, and genuineness of loan creditors during reassessment proceeding signed after search on Banka Group, justifying the addition made by the AO. • CIT(A) Findings: The Ld. CIT(A) upheld the validity of reopening but erroneously deleted the addition. The reassessment was based on clear evidence and validly recorded reasons. • Justification for Addition: Since the assessee relied on old replies and failed to counter the reasons for reopening, the addition of Rs.1,75,00,364/-is valid and justified.

6. Counterarguments on Identity, Creditworthiness, and Genuineness

1. Banking Channels Are Not Evidence of Genuineness: a. The appellant claims that transactions routed through banking channels establish genuineness. However, the Hon’ble Supreme Court in CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)] and Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)] held that merely routing money through banks does not establish the genuineness of a transaction. b. In Sumati Dayal, the Court stressed that explanations deemed improbable must be rejected, and human probabilities and surrounding circumstances must be considered. c. The case ITO vs. Mahadev Dairy Pvt. Ltd. (ITAT Delhi, dated 07.07.2023) further observed that routing funds through banking channels, in the absence of evidence of creditworthiness and genuineness, cannot shield the assessee from additions under Section 68.

2. Submission of Undated Loan Confirmations:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur a. The appellant submitted undated confirmations from loan providers. As noted in NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)], such confirmations without proper dates and details hold no evidentiary value. b. The Mahadev Dairy Pvt. Ltd. case also emphasized that the assessee must provide complete and verifiable evidence to prove the genuineness of transactions. In this case, the creditors failed to comply with notices issued under Sections 133(6) and 131, further eroding the credibility of the transactions.

3. Failure of Loan Creditors to Comply:

a. The loan creditors failed to respond to notices issued under Sections 133(6) and 131. As held in CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)], the burden of proof lies on the assessee to provide satisfactory evidence explaining the source of credit entries in their books. b. When the loan creditors fail to comply or provide evidence, an adverse inference can be drawn, and the AO is justified in making an addition.

4. Active Status on MCA Does Not Prove Genuineness:

a. The appellant argues that the loan creditors were active on the MCA website, but activity on the MCA platform does not establish creditworthiness or genuineness. As held in CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)], mere compliance with MCA regulations does not absolve the assessee of the burden of proving the identity, financial capacity, and genuineness of creditors. b. The Mahadev Dairy Pvt. Ltd. case highlights that even entities appearing as active in government records can be paper companies, especially if they fail to respond to statutory notices.

5. Directors Failed to Comply:

a. The appellant is a company, and any transaction must be executed through directors or key individuals. In this case, neither the companies nor their directors complied with the notices. b. As held in CIT v. P. Mohanraj [(2013) 352 ITR 97 (Madras HC)], when the assessee fails to provide sufficient evidence regarding the identity, creditworthiness, and genuineness of creditors, the AO is justified in treating the credit entries as unexplained and making additions under Section 68.

7. Reply to CIT(A)’s Findings and Misappreciation of Facts:

1. Non-Responsive Notices Under Section 133(6):

a. Despite the AO issuing notices under Section 133(6) to verify the genuineness of the loan creditors, the creditors remained non-responsive.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur b. As held in CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)], when notices are issued but creditors fail to respond, the burden shifts back to the assessee to establish the genuineness of the transaction. c. The CIT(A) failed to appreciate that the creditors’ non-compliance raises serious doubts about their existence and the genuineness of the loans.

2. Non-Compliance with Summons Under Section 131:

a. Summons were issued under Section 131 to the directors and key personnel of the loan-providing entities, but they failed to comply. b. As emphasized in Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)], such non-compliance strengthens the inference that the transactions are not genuine. c. The CIT(A) ignored the significance of this non-compliance, which corroborates the AO’s findings.

3. Assessee Was Confronted with Reasons for Reopening and Show Cause:

a. The assessee was confronted with the reasons for reopening the assessment, and a show cause notice was issued, providing ample opportunity to furnish rebuttal evidence. b. As per CIT v. P. Mohanraj [(2013) 352 ITR 97 (Madras HC)], when the AO provides specific reasons for reopening based on credible material, and the assessee fails to provide a satisfactory rebuttal, the addition is justified. c. The CIT(A) failed to appreciate that the assessee was given multiple opportunities to provide evidence, which it failed to do.

4. Reopening Based on Bank Trail and Banka Group Search (AY 2012-13):

a. The reopening was based on a credible bank trail and material gathered during the search on the Banka Group, which revealed that the assessee was a beneficiary of accommodation entries. b. In NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)], the Supreme Court held that when new material reveals accommodation entries, the AO is justified in reopening assessments and making additions if the assessee fails to rebut the findings. c. The CIT(A) ignored this strong basis for reopening, which is supported by independent evidence.

5. Connection with the Banka Group and Submission of Retraction Copy:

a. The assessee’s submission of a retraction copy from the Banka Group establishes its connection with the group, contradicting its claim of no involvement. b. As held in CIT v. Odeon Builders Pvt. Ltd. (Civil Appeal No. 9604-9605 of 2018), such circumstantial evidence supports the AO’s findings of accommodation entries.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur c. The CIT(A) failed to appreciate that the retraction itself points to the assessee’s involvement with entities providing bogus loans.

6. Submission of Old Assessment Orders of Loan Providers:

a. The assessee submitted old assessment orders of loan providers but failed to demonstrate their current financial standing after the Banka Group search. b. As held in CIT v. Lovely Exports Pvt. Ltd. [(2008) 216 CTR 195 (SC)], filing old assessment orders or financial records is insufficient unless the identity, creditworthiness, and genuineness of the loan providers are independently established. c. The CIT(A) erroneously accepted these old records without considering their lack of relevance to the current proceedings. d. Old assessment order are 143(1)(a) intimation only.

7. Contradiction in Assessee’s Submission (MCA and Banka Retraction):

a. The assessee admitted to taking a printout from the MCA website to verify the loan providers but also submitted old assessment orders and the Banka retraction copy. b. This contradiction in the assessee’s submissions highlights its attempt to provide piecemeal and inconsistent evidence, which should not have been accepted by the CIT(A). c. In Swati Bajaj v. CIT [(2022) 447 ITR 361 (SC)], the Court emphasized that contradictory submissions weaken the credibility of the assessee’s claims.

8. Non-Submission of Post-Banka Search Status of Loan Providers:

a. The assessee failed to submit the post-Banka search status of the loan providers, including details of subsequent assessments or investigations. b. As per CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)], the failure to provide updated and relevant information justifies the AO’s conclusions and additions. c. The CIT(A) overlooked this crucial lapse by the assessee.

9. Non-Submission of Banka’s Assessment Order:

a. The assessee failed to provide the assessment order of the Banka Group, which could have clarified the nature of the transactions. b. This omission further erodes the credibility of the assessee’s claims and supports the AO’s findings. c. As per CIT v. Dataware Pvt. Ltd. [GA No. 2856 of 2011], the onus lies on the assessee to furnish all relevant evidence, and failure to do so justifies adverse conclusions.

2. Conclusion:

a. Non-compliance of creditors with statutory notices. b. The credible basis for reopening the assessment. c. The assessee’s contradictory and incomplete submissions.

2. Based on judicial precedents, including NRA Iron & Steel Pvt. Ltd., Lovely Exports, Sumati Dayal, and Swati Bajaj, the addition is justified and requested must be sustained.

3. Case Laws Related to Section 68 Addition (Relevant to Present Facts):

1. Labh Chand Bohra v. ITO [(2010) 189 Taxman 141 (Rajasthan High Court)]: o Discusses non-compliance of creditors with statutory notices and the burden shift to the assessee.

2. S.K. Jain v. ITO [(2004) 2 SOT 579 (ITAT Agra)]: o Focuses on assessing human probabilities and transactions that appear doubtful.

3. CIT v. Dataware Pvt. Ltd. [GA No. 2856 of 2011] (Calcutta High Court): o Emphasizes the importance of providing credible supporting evidence when creditors fail to respond. 4. CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)]: o Highlights the burden of proof on the assessee for unexplained credits, directly applicable under Section 68. 5. Nemi Chand Kothari v. CIT [(136 Taxman 213) (Guwahati High Court)]: o Stresses credit verification under suspicious circumstances. 6. Manohar Lal Chug v. ITO [ITA No. 312/JP/2021 (Jaipur ITAT)]: o Validates reopening and examines evidence of bogus transactions related to loan creditors. 7. Shree Barkha Synthetics Ltd. v. ACIT [(2006) 55 Taxman 289 (Rajasthan High Court)]: o Covers bogus transactions routed through accommodation entries. 8. DCIT v. J.P. Fincorp Services Pvt. Ltd. [ITA No. 2517/Ahd/2016 (ITAT Ahmedabad)]: o Examines failure to verify identity, creditworthiness, and genuineness of creditors under Section 68. 9. Rajhans Construction (P.) Ltd. v. ACIT [IT Appeal No. 1450/Ahd/2016 (ITAT Surat-Tribunal)]: o Highlights lack of evidence to support the genuineness of loans. 10. CIT v. Odeon Builders Pvt. Ltd. [Civil Appeal No. 9604-9605/2018 (Supreme Court)]: • Stresses the inability to provide relevant creditor evidence and the justification of additions.

1. CIT v. Chandrashekhar Ayachi Narsangji [(2014) 42 Taxmann.com 251 (Gujarat High Court)]: o Focused on the general burden of proof without specific linkage to creditor non-compliance.

2. KMG International Ltd. v. ACIT [ITA No. 5591/Del/2010 (ITAT Delhi)]: o Discusses the general onus to prove genuineness without specific reference to creditors' non-response.

3. PCIT-4 v. Hi-Tech Residency Pvt. Ltd. [(96 Taxmann.com 403) (Supreme Court)]: o Primarily deals with verification failures broadly without specific creditor- related focus. 4. CIT v. Apex Therm Packaging Pvt. Ltd. [(42 Taxmann.com 473) (Gujarat High Court)]: o Discusses reopening of assessments in general without addressing creditor non-compliance.

Revenue-Favorable Case Laws Applicable to Current Facts Under Section 68:

1. CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)]: o Key Finding: The Supreme Court held that the burden of proof lies on the assessee to explain the nature and source of credit entries. When creditors fail to respond to notices, the AO is justified in making an addition under Section 68.

2. Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)]: o Key Finding: The Supreme Court ruled that improbable explanations from the assessee and the lack of corroborative evidence justify additions under Section 68. Human probabilities and surrounding circumstances should guide conclusions.

3. NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)]: o Key Finding: The Supreme Court emphasized that the assessee must prove the identity, creditworthiness, and genuineness of transactions. If any of these are not established, the AO is justified in making additions. 4. Swati Bajaj v. CIT [(2022): o Key Finding: The Calcutta High Court held that reliance on mere documentation is insufficient if the surrounding circumstances indicate accommodation entries. The burden is on the assessee to provide convincing evidence. 5. CIT v. Dataware Pvt. Ltd. [GA No. 2856 of 2011] (Calcutta HC): o Key Finding: The court held that when creditors fail to respond to statutory notices or produce evidence of creditworthiness, the AO is justified in treating the amounts as unexplained. 6. CIT v. P. Mohanraj [(2013) 352 ITR 97 (Madras HC)]: o Key Finding: The court upheld additions under Section 68 when the assessee failed to establish the identity, creditworthiness, and genuineness of creditors. 7. CIT v. Odeon Builders Pvt. Ltd. [(Civil Appeal No. 9604-9605/2018) (SC)]:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur o Key Finding: The court ruled that reopening based on specific information about accommodation entries is valid, and subsequent failure of the assessee to provide evidence justifies additions under Section 68.

Common themes across these cases:

1. Burden of Proof: o The onus is on the assessee to prove the identity, creditworthiness, and genuineness of the transactions.

2. Non-Compliance with Notices: o Failure of creditors to respond to statutory notices under Sections 133(6) and 131 strengthens the case of the Assessing Officer (AO).

3. Accommodation Entries: o Courts consistently uphold additions when transactions are routed through paper companies or involve suspicious circumstances. 4. Human Probabilities: o Judicial precedents emphasize the importance of analyzing surrounding facts and probabilities over superficial documentation.

Respondent has submitted paper book. Following are the comments on same-

S.No PBPN OF Detail in Index of Remark of Revenue on Respondent Respondent Fact 1 117 to 237 ITR, Bank These entities remained statement, non-responsive. The audited documents submitted are statement with not signed by any audit report of all authorized person or 07 loan provider director of the companies post-search proceedings on the Banka Group. The last signature date is 31/07/2014, while the search occurred on 31/07/2018. Furthermore, during the assessment proceedings, the respondent failed to submit certified copies from these 07 companies, despite their details being mentioned in the reasons recorded and communicated to the assessee.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 2 238-251 Confirmation of -Same as above unsecured loan 3 252-260 Retraction of The respondent filed a Mukesh Banka copy of Mukesh Banka’s retraction, but the assessment status and admission of the retraction were not provided. Hence, this partial submission does not constitute conclusive evidence, especially since Mukesh Banka possessed details of the companies from which the respondent claimed to have taken loans. 4 261-325 Assessment These are mere order of all 07 intimations under Section loan providers 143(1)(a). The respondent misrepresented the facts before the Hon’ble Bench to mislead and gain undue advantage. 5 326 to 339 MCA data of all A detailed analysis of the financial data of all seven 07 Companies companies was carried out by the Department, which formed the basis for issuing notice under Section 148. This was subsequently confirmed by the Ld. CIT(A), and the respondent admitted the same. Moreover, while the respondent claims that these companies are active as per MCA records, they remain non- responsive to the Department's notices. An electronic address or data on the MCA portal does

Conclusion

Based on the facts and evidence provided:

1. Non-Responsiveness of Entities: The seven loan-providing entities have consistently remained non-responsive to the statutory notices issued under Sections 133(6) and 131. The failure of these entities to comply with the investigation process, despite being identified as part of the accommodation entry mechanism, casts significant doubt on the genuineness of their transactions.

2. Reliance on Outdated and Unverified Documents: The documents submitted by the respondent, including ITRs, bank statements, audited financials, and loan confirmations, are not certified or signed by authorized representatives of the entities post-search. The last dated signature on these documents predates the search proceedings, rendering them unreliable in light of subsequent findings.

3. Retraction of Mukesh Banka: The respondent’s submission of the retraction copy of Mukesh Banka is partial and inconclusive. The failure to provide the full context, including the assessment status and acceptance of the retraction, undermines its credibility, especially given the established role of Mukesh Banka in managing these entities. 4. MCA Records as Insufficient Evidence: While the respondent highlights the "active" status of the entities on the MCA portal, such electronic data does not establish their creditworthiness, identity, or genuineness. The non-compliance of these entities with Department notices further invalidates their purported authenticity. 5. Misrepresentation of Assessment Orders: The respondent relied on intimation orders under Section 143(1)(a) to establish the credibility of the loan providers. However, these orders lack the scrutiny necessary to verify the identity, creditworthiness, and genuineness of the entities, making this reliance misleading. 6. Confirmation by Ld. CIT(A): The issuance of notice under Section 148 was validated by the Ld. CIT(A) based on the Department's detailed analysis and new material gathered post-search. This acknowledgment further supports the Department's findings and the validity of the addition.

Prayer

In light of the above, the Revenue respectfully submits that:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 1. The deletion of additions made by the Ld. CIT(A) under Section 68, amounting to ₹1,75,00364/- should be reversed.

2. The addition made by the AO, based on credible evidence, including non- compliance of loan providers, their linkage to the Banka Group, and the respondent’s failure to discharge the onus of proving the identity, creditworthiness, and genuineness of transactions, should be restored.

3. Any other relief deemed appropriate in the interest of justice may kindly be granted.

This submission addresses the addition made under Section 68 of the Income Tax Act, 1961, involving loans received by the assessee from entities that were later found to be non-responsive, despite being marked as “active” on the MCA portal. The Department argues that the mere "active" status of a company on the MCA portal does not prove the identity, creditworthiness, or genuineness of transactions. This is substantiated by judicial precedents and circumstantial evidence gathered during proceedings.

1. Active MCA Status Does Not Prove Genuineness

1.1. Definition of "Active" Status: • The term "active" on the MCA portal indicates compliance with basic statutory filings, such as annual financial statements and returns. • It does not establish: o Financial capacity to grant loans. o Genuine business operations. o Genuineness of specific transactions.

1.2. Judicial Precedents: • CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)]: The Delhi High Court ruled that mere existence of companies on the MCA portal does not establish the genuineness of transactions, especially when they fail to comply with notices issued by tax authorities.

1.3. Conclusion: • The "active" status is an administrative formality and does not negate the Department’s findings of non-genuine transactions involving these entities.

2. Non-Responsiveness of Loan-Providing Entities

2.1. Non-Compliance with Statutory Notices: • Notices issued under Sections 133(6) and 131 to verify the identity and creditworthiness of these companies went unanswered.

2.2. Implications of Non-Responsiveness: • CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)]: The Supreme Court held that when creditors fail to respond to statutory notices, the burden of proof shifts back to the assessee to establish the identity, creditworthiness, and genuineness of the transactions. • The non-compliance of these companies, despite multiple opportunities, indicates their shell nature and lack of genuine business activities.

2.3. Absence of Objections by Shell Companies: • The loan-providing companies, despite being categorized as shell entities, have not objected to these allegations before any authority. • This silence strengthens the Department's case, as per the legal maxim "Qui tacet consentire videtur" (Silence implies consent).

2.4 Assessee failed to provide cross verification of loan provider company companies and Mukesh Banka. a) Mukesh banka's retraction photocopy was filed but no original verified signature was there. b) Assessee failed to produce Mukesh Banka in his support as he is relying on his retraction, evidence in its favour c) As per Assessee company it has no relation with Mukesh Banka, but, how, why, when the company received the document i.e retraction is not submitted. d) Assessee company failed to establish that when it had copy of retraction, why no one to one correspondence has been called by the company from Mukesh Banka. e) Assessee company failed to established that the statement of Mukesh Banka leads re-opening of Kedia’s company and Mukesh Banka made false declaration resulted in any suit or legal action against him as company may have engaged professionals for all assessment proceedings including appeal, that burden cost also. f) Assessee company failed to prove that they had contacted to the loan providers to appear before the department, though in the reasons itself mentioned that the loan provider were shell company controlled by Mukesh Banka. g) Assessee has not objected that: i. Name of companies identified on the basis of statement of Mukesh Banka are not in assessee books. ii. Bank accounts identified is not objected by assessee. iii. Company name identified on the basis of statement given by Mr Banka not objected by appellant before any authority.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur iv. In statement Mukesh Banka provided name of companies identified on the basis of statement of Mukesh Banka are not in assessee books modus oprendi and same is not objected by assessee. v. The companies are shell as stated by Mukesh Banka is not objected by assessee. vi. The companies behaved in similar way as shell a) non available at given address b) Non responsive even on electronic media / by post of department. vii. Company Kedia made no efforts to produce evidence that statement of Banka are having no evidentry value.

3. Failure to Prove Identity, Creditworthiness, and Genuineness

3.1. Onus of Proof on the Assessee: • As per NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)], the onus lies on the assessee to prove: • Identity of creditors: These companies were identified as paper entities. • Creditworthiness: No evidence of financial capacity to grant loans. • Genuineness: No business rationale or economic substance provided.

3.2. Contradictory Stance by CIT(A): • The CIT(A) held that additions cannot be based solely on the statement of an entry operator. However, the deletion of the same additions solely based on the active MCA status or the lack of creditor objections contradicts this stance. • If statements alone cannot justify additions, superficial compliance like active MCA status also cannot justify deletion.

4. Self-Affirmed Retraction by Mukesh Banka

Submission on the Validity of Statement and Retraction by Assessee

4. 1. 1. Statement Recorded on Oath as per Documents found during search The statements of the assessee, Mr. Mukesh Banka, were recorded under Section 132(4) of the Income Tax Act during search proceedings, based on documents and evidence found during the search. These statements, made under oath, carry significant evidentiary weight and are corroborated by documentary evidence. The Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 ITR 18 (SC)] held that a statement recorded during proceedings carries evidentiary value unless rebutted with credible evidence..

4. 1. 2. Facts Narrated as per Assessee’s Memory and Involvement The assessee narrated facts based on his direct memory, knowledge, and involvement in the matter. The statements were voluntary and reflected the factual & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur details known exclusively to the assessee. The Department has not influenced or put words into the mouth of the assessee, as the statements were made in the presence of competent officers and corroborated with documentary evidence.

4. 1. 3. Disclosure of Controlled Companies and Circumstantial Evidence The assessee admitted to controlling shell companies and disclosed their details. The circumstantial evidence revealed in the statement—details of companies, bank accounts, and transactions—were known exclusively to the assessee. Such voluntary admissions, supported by independent evidence, hold greater value as per the maxim nemo moriturus praesumitur mentire (a person is not presumed to lie on their deathbed or when under oath).

4. 1. 4. No Objection Raised by Companies or Directors Against Control by Mukesh Banka The companies and their directors, allegedly controlled by Mr. Mukesh Banka, have not raised any objections before any authority regarding the claim of being controlled by him. The absence of any objection corroborates the Department's findings and the credibility of the assessee’s statement.

4. 1.

5. Silence of Companies During and After Search Proceedings The companies alleged to be shell entities remained silent during the search proceedings and have not objected to the serious allegation of being shell companies. Their silence, both during and after the search, further substantiates the Department's findings and the statements given by the assessee.

4. 1. 6. No Legal Action Taken Against the Allegation of Shell Companies Despite being categorized as shell entities, the companies and their directors have neither filed objections nor initiated legal proceedings against the allegation. This inaction confirms their shell nature and the credibility of Mr. Banka's statement. Furthermore, the maxim falsus in uno, falsus in omnibus (false in one thing, false in everything) applies to Mr. Banka’s retraction, as his delayed and unsupported retraction casts doubt on his integrity.

4. 1. 7. Non-Responsive Shell Companies and Lack of Credibility The companies identified as shell entities were non-responsive during and after the search proceedings. The maxim qui tacet consentire videtur (silence implies consent) applies here, as these companies and their directors did not object to the allegations of being controlled by Mr. Mukesh Banka or functioning as shell entities. Further, no legal action or suit has been filed by these companies to dispute their alleged shell nature or their association with the assessee.

4. 1. 8. No Objection Raised to Identified Details of Companies, Bank Accounts, and Transactions Shell Companies' Inactivity and Failure to Dispute Details The assessee has not objected to the details of companies, bank accounts, and amounts identified based on the statement of Mr. Mukesh Banka. As per CIT v.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)], when entities fail to respond to notices or produce evidence, an adverse inference can be drawn against them.

4. 1. 9. Self-Affirmed Retraction Without Cross-Examination Has No Legal Value The self-affirmed retraction of the statement, without being subjected to cross- examination by the relevant authority or court, holds no legal validity. Judicial precedents, such as Ravi Mathur v. CIT (Rajasthan HC) and Kantilal C. Shah v. ACIT (Ahmedabad ITAT), have established that a retraction must be supported by cogent evidence and cross-examination to hold any credibility. In this case, no such steps have been taken, making the retraction baseless.

4. 1. 10. Delayed Self-Retraction Questions the Integrity of the Assessee The self-retraction by Mr. Mukesh Banka, made after a significant delay, raises serious doubts about its credibility and integrity. The original statements were made under oath during a lawful search operation and in the presence of incriminating evidence. The delay in retracting such statements appears to be an afterthought and lacks substantive justification.

4. 1. 11. Contradictions in Respondent’s Stand and Retraction The deletion of the addition based solely on a self-serving retraction, when the companies were non-responsive, lacks merit. As per Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)], surrounding circumstances and human probabilities must be considered when evaluating evidence. The fact that these companies did not respond to statutory notices and the lack of rebuttal to the Banka statement reinforce the genuineness of the original findings.

4. 1. 12. Latin Maxims Supporting Revenue’s Case:

Verba volant, scripta manent (spoken words fly away, written words a) remain): The original statement under oath, corroborated by written evidence, holds more weight than a subsequent verbal retraction. Actori incumbit onus probandi (the burden of proof lies on the claimant): b) The burden of disproving the original statement lies on the assessee, who has failed to do so convincingly. Rebus sic stantibus (things standing thus): The conditions under which the c) statement was made (under oath, supported by evidence) were genuine and cannot be altered retrospectively through a self-serving retraction.

4.2. Unilateral Retraction:

The retraction was not called for by the Department and was filed a) unilaterally. It was not subjected to cross-examination or supported by corroborative b) evidence.

4.3. Judicial Precedents:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur Ravi Mathur v. CIT [(2018) 98 taxmann.com 332 (Raj)]: A delayed and a) unsupported retraction holds no legal value. Kantilal C. Shah v. ACIT [(2011) 133 ITD 57 (Ahd)]: Self-retraction without b) immediate and convincing evidence is deemed an afterthought and lacks credibility.

5. Contradiction in Respondent’s Stance

5.1. No Rebuttal of Key Details:

The assessee has not objected to the details of companies, bank a) accounts, and loan amounts identified during the investigation. The lack of any rebuttal or evidence negating the findings of the b) Department supports the additions made.

5.2. Circumstantial Evidence: • The search proceedings revealed incriminating evidence linking these companies to the assessee. This evidence was within the knowledge of the assessee and not the Department, reinforcing the credibility of the findings.

5. 3.Legal Principles Supporting Revenue’s Case

"Falsus in uno, falsus in omnibus" (False in one thing, false in everything): a) If the companies were non-compliant in some respects, their overall credibility is questionable. "Actori incumbit onus probandi" (The burden of proof lies on the claimant): b) The assessee has failed to discharge the burden of proving the genuineness of the loans. "Rebus sic stantibus" (Things standing thus): The conditions under which c) the statements were made during the search cannot be altered by a delayed retraction or superficial compliance.

5.4 Conclusion

In light of the above, it is evident that: a) The companies providing loans were non-responsive and failed to establish their identity, creditworthiness, or genuineness. b) The mere "active" status on the MCA portal is insufficient to prove the legitimacy of these transactions. c) The self-serving affidavit filed by Mukesh Banka, without cross- examination or corroborative evidence, lacks legal validity.

5.5 Prayer a) The addition made by the AO under Section 68 be upheld as it is supported by substantial evidence and judicial precedents. b) The deletion of the addition by the CIT(A), based on superficial compliance and unsupported retraction, be set aside. c) Any other relief deemed appropriate in the interest of justice may also be granted.

6. Introduction on affidavit: The present submission addresses the validity and implications of the affidavit filed by Mukesh Banka, which attempts to retract his earlier statement recorded under oath during search proceedings. This submission also examines the legal principles governing affidavits, their evidentiary value, and their application in the context of this case.

6.2. Legal Position on Affidavits: a) Affidavit as a Statement under Oath:

An affidavit is governed by Order XIX of the Code of Civil Procedure, a) 1908, and is considered a written statement confirmed under oath or affirmation before an authorized officer. As per Section 139 of the Code of Civil Procedure, 1908, affidavits are b) valid only when made voluntarily and before an authorized officer.

6.3. Evidentiary Value of Affidavits:

As clarified by the Hon’ble Supreme Court in Kishan Chand Chellaram v. a) CIT [(1980) 125 ITR 713 (SC)], an affidavit is not conclusive evidence. It is subject to corroboration, cross-examination, and independent verification. The Supreme Court has also ruled that "an affidavit cannot be treated as b) substantive evidence unless the opposite party is given an opportunity to cross- examine the deponent."

6.4. Points on the Affidavit Filed by Mukesh Banka:

6.4.

1. Affidavit Not Called by the Department: • The affidavit retracting Mukesh Banka’s earlier statement was unilaterally filed by him and was not called for or required by the Department at any stage. • It is pertinent to note that his earlier statement, recorded during search proceedings, was made under oath and was supported by documentary evidence. • The unilateral filing of an affidavit without prior notice to the Department and without affording the Department an opportunity to cross-examine undermines its validity and credibility.

6.4.2 Banka's Role and Evidence:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • Mukesh Banka was directly involved in facilitating accommodation entries through shell companies. His earlier statement identified the shell companies, their directors, and the beneficiaries, including the assessee. • At no point did Banka, the directors of the shell companies, or the assessee object to the findings during the search proceedings or immediately thereafter. • If Mukesh Banka intended to retract his statement, he was obligated to produce corroborative evidence demonstrating that the shell companies were genuine and that the transactions were legitimate. He failed to do so.

6.4.3 Failure to Approach the Department with Evidence: • When the Department was approachable, Mukesh Banka chose not to present his affidavit before the Department for verification or cross-examination. • Instead of appearing before the appropriate authority and providing evidence supporting his retraction, he filed the affidavit unilaterally, which raises questions about its credibility and integrity. • The Department was deprived of an opportunity to cross-examine Mukesh Banka on the contents of the affidavit. As held in Mehta Parikh & Co. v. CIT [(1956) 30 ITR 181 (SC)], an affidavit must be subjected to cross-examination and cannot be accepted as conclusive evidence in its standalone form.

7. Key Observations and Issues:

7.1. Circumstantial Evidence and Non-Responsiveness: • The circumstantial evidence obtained during the search clearly demonstrated that the companies involved were shell entities controlled by Mukesh Banka. • The directors of the shell companies failed to respond to statutory notices issued under Sections 131 and 133(6). Their non-responsiveness corroborates the Department's findings that these companies were not genuine.

7.2. Contradiction in CIT(A)’s Findings: • The CIT(A) has held that a statement alone cannot form the basis for an addition. However, by relying solely on the affidavit retracting the statement, the CIT(A) has contradicted their own reasoning. • If a statement cannot be the sole basis for an addition, a self-serving affidavit without corroborative evidence cannot be the sole basis for deletion of the addition.

• 7.3. Silence of the Shell Companies: • The shell companies identified during the search have not filed any objections or initiated legal proceedings against the allegations of being controlled by Mukesh Banka.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • Their silence, both during and after the search proceedings, supports the Department’s claim that these companies were mere conduits for routing unaccounted funds.

7.4. Self-Affirmed Retraction and Delay: • The affidavit retracting the earlier statement was filed after a significant delay. This delay casts doubt on the integrity of the retraction and its motivation. • A delayed and self-affirmed retraction, without being subject to cross- examination, has no legal sanctity as per judicial precedents, including Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)].

8. Judicial Principles Supporting the Revenue’s Case: a) "Falsus in uno, falsus in omnibus": A person who lies in one instance is likely to lie in others. If Banka’s retraction is found unreliable, the rest of his submissions must also be scrutinized with skepticism.

b) "Affirmanti non neganti incumbit probatio": The burden of proof lies on the person asserting a fact. It was incumbent upon Banka and the assessee to provide credible evidence substantiating their claims. c) Judgment Reference: • In Union of India v. Pramod Gupta [(2005) 12 SCC 1], the Hon’ble Supreme Court emphasized that an affidavit lacking corroborative evidence cannot be accepted as conclusive proof. • In CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)], the Court held that explanations contrary to human probabilities must be rejected.

8.1. Conclusion and Prayer: In light of the above submissions, it is humbly submitted that:

1. The affidavit filed by Mukesh Banka lacks credibility, as it was not called for by the Department and was filed without supporting evidence.

2. The statement recorded under oath during the search proceedings remains valid and reliable, as it was based on facts known only to Mukesh Banka and corroborated by circumstantial evidence.

3. The shell companies and their directors have not challenged the findings of the Department, further supporting the Revenue's case. 4. The CIT(A) erred in relying solely on the affidavit while disregarding the corroborative evidence gathered during the search and assessment proceedings.

It is respectfully prayed that: • The addition made by the Assessing Officer under Section 68 be restored.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • The affidavit filed by Mukesh Banka be disregarded for lack of credibility and corroborative evidence • In Indian jurisprudence, the term "shell company" lacks a precise legal definition within statutory law. However, judicial interpretations and regulatory perspectives have provided clarity on its connotation. • In the case of Assam Company India Ltd. and Anr. vs. Union of India and Ors. [2019 SCC OnLine Gau 912], the Gauhati High Court observed that the term "shell company" is not explicitly defined in Indian law. The court noted that in popular parlance, a "shell company" refers to an entity without active business operations or significant assets, often perceived as being tainted. The court emphasized that labeling a company as a "shell company" without substantial evidence can have serious implications, and such categorization must be approached with caution. • Furthermore, the Securities and Exchange Board of India (SEBI) has described shell companies as entities that serve as mediums for business transactions without themselves having significant assets or operations. These companies are often used for financial maneuvers, including tax evasion and money laundering

8.2 Active Status on MCA Does Not Prove Genuineness • The assessee claims that the loan-providing companies are "active" as per the MCA records. However, the mere active status: o Indicates only that these companies have filed their basic statutory returns, such as annual financial statements. o Does not establish their creditworthiness or the genuineness of transactions, as held in CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)]. • Judicial precedents emphasize that it is the substance, not the form that determines the legitimacy of a transaction (CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)]).

8.3 Non-Responsive Entities Raise Presumption of Being Shell Companies • The companies failed to respond to: o Notices under Section 133(6) issued to verify their transactions. o Summons under Section 131 for examination of their directors. • Their non-compliance indicates that these entities may not have any genuine business operations, thereby raising a presumption of them being shell companies. • Reliance is placed on CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)], which held that non-compliance with statutory notices shifts the burden of proof back to the assessee.

8.4 Lack of Identity, Creditworthiness, and Genuineness • The assessee has failed to discharge its onus of proving the:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur o Identity of the loan providers: The companies remained silent despite being provided opportunities. o Creditworthiness: There is no evidence of financial capacity to grant loans of significant amounts. o Genuineness of transactions: No evidence of business rationale or economic substance has been provided. • The Supreme Court in NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)] laid down that these three elements must be satisfactorily proven for any transaction to be deemed genuine.

9. Contradictions in the Assessee’s Claims • The assessee has heavily relied on the active status of these companies on the MCA portal, yet: o The companies have not provided any post-search evidence of their financial strength or operational credibility. o The directors of these companies have remained unavailable for cross- examination, despite notices and summons.

10.1 Circumstantial Evidence and Human Probabilities • As per Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)], the Courts must rely on circumstantial evidence and human probabilities when faced with non-genuine transactions. • The non-responsiveness of these companies, despite their active status, raises doubts about their operational credibility.

10.2 Shell Companies: Regulatory and Judicial Stance • While "shell companies" are not defined statutorily, their characteristics have been elaborated in judicial pronouncements and regulatory guidelines. Shell companies are often: o Lacking genuine business operations. o Merely existing to provide accommodation entries for tax evasion. • Reliance is placed on Assam Company India Ltd. and Anr. v. Union of India and Ors. [2019 SCC OnLine Gau 912], where the Gauhati High Court observed that labeling an entity as a shell company requires substantial evidence but also emphasized that "active status" alone cannot negate the suspicion.

In light of the above submissions, the Revenue respectfully prays that the Hon’ble Tribunal:

1. Uphold the Original Statement Recorded Under Oath:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur o Recognize the evidentiary value of the statements made by Mr. Mukesh Banka during the search proceedings, as they were recorded under oath and corroborated by documentary and circumstantial evidence. o Reject the subsequent self-retraction by Mr. Banka as baseless, self- serving, delayed, and unsupported, especially in the absence of corroborative evidence or cross-examination.

2. Set Aside the Deletion by the CIT(A): o Reverse the deletion of the addition made by the CIT(A), as it is based solely on the self-serving retraction, which lacks substantiating evidence and does not align with the corroborative material gathered during the assessment proceedings.

3. Reinstate the Addition Made by the AO: o Reinstate the addition made under Section 68 by the AO, as it is based on credible evidence, including: � Statements made during the search proceedings. � Documentary evidence linking shell companies to the assessee. � Non-responsiveness of the loan-providing companies and their directors to statutory notices, despite being granted ample opportunity.

4. Clarify Jurisdictional Scope: o Recognize that this Tribunal is not the jurisdictional bench for Mr. Mukesh Banka. However, the statements made by Mr. Banka during search proceedings have a direct bearing on this case as they pertain to the entities providing loans to the assessee. The findings are part of a larger, corroborative evidentiary framework and are not being used in isolation.

5. Acknowledge Non-Genuineness of Shell Companies: o Note the lack of response, non-compliance with statutory notices, and the absence of any legal action by the alleged shell companies or their directors to dispute their classification as shell entities. This supports the Revenue’s case that these entities were conduits for routing unaccounted funds.

6. Reject the Self-Retraction and Superficial Compliance: o Disregard the affidavit and retraction filed by Mr. Banka, as they were not called for by the Department, were unsubstantiated, and were not subjected to cross-examination or scrutiny before any jurisdictional authority.

7. Adopt Established Judicial Principles: o Apply judicial principles from landmark cases such as CIT v. Orissa Corporation Pvt. Ltd., NRA Iron & Steel Pvt. Ltd. v. PCIT, and Sumati Dayal v. CIT, which emphasize the onus on the assessee to prove the identity, creditworthiness, and genuineness of transactions, particularly when creditors fail to respond or provide evidence.

8. Grant Other Relief as Deemed Appropriate: o Grant any other relief deemed fit in the interest of justice, ensuring that the integrity of the tax assessment process is upheld and that revenue leakage through shell companies is curtailed effectively.

Conclusion & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur The Revenue submits that the addition made under Section 68 by the AO is based on credible and corroborative evidence, while the deletion by the CIT(A) is erroneous and unsupported. The Hon’ble Tribunal is respectfully requested to:

1. Restore the addition made by the AO.

2. Clarify that the statements of Mr. Mukesh Banka are part of the evidentiary framework but are not being relied upon as sole evidence due to jurisdictional limitations.

3. Disregard the affidavit/retraction and uphold the Department’s findings. 4. Grant any other relief deemed just and equitable.

Grounds of Appeal:

1. Whether, on the facts and circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of ₹1,75,00,364/- despite the clear evidence of layering of unaccounted income through accommodation entries by various companies such as M/s Bhagwat Marcom Pvt. Ltd., M/s Coolhut Marketing Pvt. Ltd., and others? Deletion of Addition by Ld. CIT(A): The Ld. CIT(A) deleted the addition of ₹1,75,00,364/- relying on: 1. o Transactions routed through banking channels. o Documents such as loan confirmations, bank statements, and balance sheets of loan-providing entities submitted by the assessee. o The active status of the companies on the MCA portal.

Revenue's Counterarguments: a. Unaccounted Income Routed Through Layering: • Investigations revealed that the loan-providing entities, such as M/s Bhagwat Marcom Pvt. Ltd., were paper companies used for layering unaccounted funds in the form of loans. • These companies lacked substantial business activities and were solely operated to provide accommodation entries.

Relevant Case Law: • CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)]: Transactions routed through companies without genuine business activities cannot justify loan transactions. b. Non-Compliance with Notices: • Notices issued under Sections 133(6) and 131 to verify loan transactions went unanswered.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • The directors of the loan-providing entities failed to appear for examination. • Non-compliance with statutory notices raises a presumption against the genuineness of the transactions.

Relevant Case Law: • CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)]: Failure of creditors to respond to statutory notices shifts the burden of proof back to the assessee. c. Genuineness Not Established by Banking Channels: • Merely routing funds through banking channels does not establish the genuineness of a transaction. • Judicial precedents stress examining the substance of the transaction over its form.

Relevant Case Law: • CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)] and • Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)]: Courts have ruled that superficial banking transactions alone cannot prove the genuineness of credits. d. Identity, Creditworthiness, and Genuineness Not Proven: • The assessee failed to demonstrate: o Identity: The loan-providing entities were paper companies. o Creditworthiness: These companies lacked financial capacity. o Genuineness: No business rationale was provided for the loans.

Relevant Case Law: • NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)]: The Supreme Court emphasized that proving identity, creditworthiness, and genuineness is the onus of the assessee. e. Connection with Entry Operator: • Investigations revealed that the Banka Group facilitated accommodation entries for the assessee. • Bank trails linked the loan-providing companies to the entry operator.

Relevant Case Law:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • CIT v. Odeon Builders Pvt. Ltd. (Civil Appeal No. 9604-9605/2018): Evidence linking an assessee to accommodation entries justifies additions under Section 68.

Prayer:

In light of the above, the Revenue respectfully prays: To set aside the deletion of the addition of ₹1,75,00,364/- by the Ld. 1. CIT(A). 2. To restore the addition made by the AO under Section 68 for unaccounted income routed through layering.

2. Whether the Ld. CIT(A) is justified in deleting additions without considering evidence of organized tax evasion through bogus accommodation entries and commission payments.

Deletion of Additions by the Ld. CIT(A):

1. The Ld. CIT(A) deleted the additions made by the AO based on: o Banking channel evidence submitted by the assessee. o Loan confirmations and financial documents submitted by the entities. o The active status of the loan-providing entities on the MCA portal.

Revenue's Counterarguments: a. Accommodation Entries Established Through Investigation: • The loan-providing entities were found to be paper companies, controlled by entry operators, to facilitate bogus transactions. • Evidence linked the assessee to these accommodation entries, including: o Bank trails. o Evidence of commission payments to entry operators.

Relevant Case Law: • CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)]: Transactions through paper companies justify additions under Section 68. b. Non-Genuineness of Transactions:

Banking Channels Do Not Establish Genuineness: • Superficial routing of funds through banks does not prove genuine transactions.

Relevant Case Law:

Failure to Prove Identity, Creditworthiness, and Genuineness: • The assessee failed to provide convincing evidence of: o Legitimate existence of the loan providers. o Sufficient financial capacity. o Commercial rationale for granting the loans.

Relevant Case Law: • NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)]: The assessee bears the burden of proof for unexplained credits. c. Evidence of Commission Payments: • Evidence confirmed that the assessee paid commissions to entry operators for facilitating accommodation entries. • Such findings corroborate organized tax evasion by the assessee.

Relevant Case Law: • CIT v. Odeon Builders Pvt. Ltd. (Civil Appeal No. 9604-9605/2018): Commission payments further substantiate the AO's findings of bogus entries.

Prayer:

In light of the above:

1. To reverse the deletion of additions by the Ld. CIT(A).

2. To restore the additions made by the AO based on credible evidence.

Case Summary and Arguments 1. Addition of ₹1,75,00,364/- and Deletion by Ld. CIT(A) Key Contentions of the Ld. CIT(A):

1. Transactions were routed through banking channels.

2. The assessee submitted loan confirmations and financial documents.

3. The entities were shown as "active" on the MCA portal.

1. Failure to consider the foundational evidence provided by the AO, including: o The admission of Shri Mukesh Banka, who identified these entities as paper/shell companies created solely to provide accommodation entries. o Post-search investigations that corroborated the suspicious nature of these entities.

2. Revenue’s Counterarguments a. Evidence from Shri Mukesh Banka’s Statement

1. The statements of Shri Mukesh Banka, recorded under Sections 131 and 132(4) of the Income Tax Act, unequivocally establish the following entities as paper/shell companies: o M/s Bhagwat Marcom Pvt. Ltd. o M/s Coolhut Marketing Pvt. Ltd. o M/s Gabarial Tieup Pvt. Ltd. o M/s Neelgagan Suppliers Pvt. Ltd. o M/s Outlook Vintrade Pvt. Ltd. o M/s Subhrashi Enclave Pvt. Ltd. o M/s Viewmore Developers Pvt. Ltd.

Relevant Judicial Precedents: • CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)]: Courts must analyze the substance of transactions, and mere paperwork cannot establish genuineness. • Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)]: Improbable or inconsistent explanations should be rejected based on human probabilities. b. Shell Companies Engaged in Suspicious Activities

1. The Ld. CIT(A) acknowledged the suspicious activities of these companies but failed to examine the substance of the transactions.

Relevant Judicial Precedents:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)]: Transactions involving shell companies cannot be considered genuine, and the AO is justified in treating them as unexplained credits under Section 68. c. Failure to Prove Identity, Creditworthiness, and Genuineness

Relevant Judicial Precedents: • NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)]: The burden lies on the assessee to prove all three elements—identity, creditworthiness, and genuineness. d. Non-Compliance with Statutory Notices

1. Notices issued under Sections 133(6) and 131 were not responded to by the loan-providing entities.

2. The directors of these entities failed to appear for examination, further raising doubts about their credibility.

Relevant Judicial Precedents: • CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)]: Non-response to statutory notices shifts the burden back to the assessee to establish the genuineness of the transactions. e. Evidence of Organized Tax Evasion

1. Investigations revealed that the assessee engaged in organized tax evasion by: o Utilizing paper entities for routing unaccounted income. o Paying commissions to entry operators for facilitating accommodation entries.

Relevant Judicial Precedents: • Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)]: Courts should rely on human probabilities and surrounding circumstances when dealing with suspicious transactions.

Conclusion:

1. The AO’s findings were supported by credible evidence, including: o Statements of Shri Mukesh Banka identifying the loan-providing entities as shell companies. o Non-compliance with statutory notices by the entities. o Lack of identity, creditworthiness, and genuineness of the transactions.

2. Judicial precedents such as NRA Iron & Steel Pvt. Ltd., Durga Prasad More, and Sumati Dayal strongly support the AO’s conclusions.

Prayer: In view of the above, the Revenue respectfully prays: The deletion of the addition of ₹1,75,00,364/- by the Ld. CIT(A) be set 1. aside. 2. The addition made by the AO, based on the credible statement of Shri Mukesh Banka and corroborative evidence, be restored. 3. Any other relief that the Hon’ble Tribunal deems fit may also be granted.

Ld CIT(A) adopted two stands Counter-Argument on CIT(A)'s Stand in the Case of Kedia 1. Introduction

The Ld. CIT(A) upheld the reopening of the assessment under Section 148, stating that the Assessing Officer (AO) had new tangible material to justify the reopening. However, the Ld. CIT(A) simultaneously deleted the addition made by the AO on the grounds that the addition related to unsecured loans was already deleted in the original assessment proceedings and could not be re-added.

This contradictory stand of the Ld. CIT(A) highlights a lack of consistency in applying legal principles, which the Department seeks to challenge.

2. Inconsistent Stance of the Ld. CIT(A)

2.1 Confirmation of Reopening Based on New Material • The Ld. CIT(A) confirmed the reopening under Section 148 on the grounds that the AO had new material post-search proceedings (i.e., statements and findings linking the assessee to accommodation entries). This suggests the Ld. CIT(A) acknowledged the new tangible material as sufficient to reopen the assessment.

2.2 Contradictory Deletion of Additions & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • Despite confirming that the AO had valid new material, the Ld. CIT(A) deleted the additions on the ground that the issue had already been adjudicated in the original assessment order. • The argument that the AO cannot make a fresh addition after the deletion by the CIT(A) in the original assessment order is inconsistent with the acknowledgment of new material during the reassessment.

2.3 Opportunity for Department to File an Appeal • The Ld. CIT(A) stated that if the Department disagreed with the deletion in the original proceedings, an appeal should have been filed. However: o The Department did not file an appeal solely due to the low tax effect, adhering to the CBDT’s monetary thresholds for litigation. o This procedural restraint cannot undermine the merit of the AO's new findings in the reassessment proceedings.

3. Arguments against the "Double Addition" Claim

3.1 New Evidence Justifying Fresh Examination • The reopening was based on new material, such as the statement of an entry operator, corroborating the accommodation entries provided to the assessee. This evidence was not available during the original assessment. • Judicial precedent (Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [(2007) 291 ITR 500 (SC)]) clarifies that reopening can occur even on the same issue if the AO possesses new tangible material.

3.2 Original Deletion Not Binding in Reassessment • The deletion in the original assessment was based on the assessee's submission of confirmations and banking channel evidence, which the CIT(A) accepted as genuine at that stage. • In the reassessment, the AO brought new evidence to prove that these confirmations were from paper companies and the transactions were accommodation entries. Therefore, the original deletion does not bind the AO in reassessment proceedings, as the reassessment is based on independent evidence.

3.3 No Double Addition • The reassessment addition is not a double addition but a re-examination of the same transaction in light of new evidence. • Judicial precedent (NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)]) mandates that the assessee must prove identity, creditworthiness, and genuineness of transactions, especially when new evidence points to accommodation entries.

4.1 Acknowledging New Material but Disallowing Addition • By confirming the validity of the reopening, the Ld. CIT(A) accepted that new evidence existed. However, deleting the addition based on the argument that the issue was previously adjudicated undermines the rationale for reopening.

4.2 Failure to Address Fresh Findings • The CIT(A) overlooked the substantive findings from post-search investigations, such as: o Statements of entry operators confirming the fictitious nature of loan- providing entities. o Non-compliance of creditors with statutory notices issued under Sections 133(6) and 131. o Evidence of layering through banking channels.

4.3 Judicial Precedent on Reassessment • The Supreme Court in CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)] and Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)] held that reassessment based on new material is valid, especially when original findings were based on superficial evidence.

5. Supporting Judicial Precedents

5.1 Reassessment Valid Even If Original Addition Was Deleted • Rajesh Jhaveri Stock Brokers Pvt. Ltd. [(2007) 291 ITR 500 (SC)]: New tangible material justifies reopening even if the issue was previously assessed. • CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)]: Transactions involving paper companies justify reassessment and additions under Section 68.

5.2 New Evidence Overrules Prior Deletion • NRA Iron & Steel Pvt. Ltd. [(2019) 416 ITR 135 (SC)]: The burden is on the assessee to prove identity, creditworthiness, and genuineness, especially when new evidence suggests accommodation entries.

6. Prayer

In light of the above:

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 1. The deletion of the addition by the Ld. CIT(A) should be set aside as it contradicts the finding that new material justified reopening. 2. The addition made by the AO should be restored, as it is based on credible evidence of accommodation entries and corroborated by judicial precedents. 3. The Hon’ble Tribunal may grant any other relief deemed fit in the interest of justice.

Addition of unsecured loan and Ld CIT(A) stands

Introduction

The Assessing Officer (AO) made additional additions under Section 68 for unexplained cash credits, supported by specific findings. However, these were deleted by the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] on the grounds that the creditors had submitted confirmations and the transactions were routed through banking channels.

It is contended that the Ld. CIT(A) erred in deleting these additions without fully appreciating the AO's findings of non-attendance, non-compliance, and lack of satisfactory evidence provided by the respondents during the assessment or appeal proceedings.

2. Key Observations Supporting Additions

2.1 Failure to Attend or Respond to Notices • Notices under Sections 133(6) and 131 were issued to the creditors to verify the identity, creditworthiness, and genuineness of the transactions. • The creditors failed to attend or respond to these notices, resulting in non- verification of their existence, financial capacity, or the authenticity of the transactions. • As held in CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)], the failure of creditors to respond to statutory notices shifts the burden back to the assessee to substantiate the claims.

2.2 Non-Compliance with Summons • Summons issued under Section 131 to the directors or representatives of the loan-providing entities were ignored. • Non-compliance strengthens the inference that the transactions are not genuine and were merely accommodation entries, as emphasized in Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)].

2.3 Banking Channels Alone Do Not Establish Genuineness & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • Merely routing transactions through banking channels is insufficient to prove the genuineness of the loans, as held in: o CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)]. o NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)]. • Without corroborative evidence to prove identity, creditworthiness, and genuineness, such transactions cannot be considered legitimate.

2.4 Post-Search Investigations • Findings during the search and subsequent investigation revealed that the entities were either shell companies or lacked substantial business operations. • Statements recorded under oath (e.g., from entry operators) confirm that these entities were engaged in providing accommodation entries for a commission.

3. Argument for Sustaining the Balance Addition

3.1 Burden of Proof on the Assessee • Under Section 68, the burden lies on the assessee to prove the: o Identity of the creditors. o Creditworthiness of the creditors. o Genuineness of the transactions. • Despite opportunities given during the assessment and appeal proceedings, the assessee failed to provide conclusive evidence to discharge this burden.

3.2 Adverse Inference from Non-Compliance • The non-attendance of creditors and failure to respond to notices issued under Sections 133(6) and 131 justifies an adverse inference against the assessee, as held in: o CIT v. Orissa Corporation Pvt. Ltd. [(1986) 159 ITR 78 (SC)]. o CIT v. Dataware Pvt. Ltd. [GA No. 2856 of 2011]. • The Ld. CIT(A) failed to appreciate this critical lapse.

3.3 Judicial Precedents Favouring Revenue • In NRA Iron & Steel Pvt. Ltd. [(2019) 416 ITR 135 (SC)], the Hon’ble Supreme Court held that vague and unsupported confirmations cannot establish the genuineness of credits. • The same principle applies here, as the creditors failed to substantiate their financial capacity or the genuineness of transactions, despite specific inquiries by the AO.

3.4 Reopening Based on New Material & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur • The reassessment was initiated based on credible new material (post-search investigations and statements from entry operators). This material provided a strong basis for making additions. • As held in Rajesh Jhaveri Stock Brokers Pvt. Ltd. [(2007) 291 ITR 500 (SC)], reassessment based on new tangible material is valid and overrides findings in the original assessment.

3.5 Failure to Address AO’s Findings • The AO clearly outlined the following issues: o Non-response from creditors. o Non-compliance with summons. o Lack of independent evidence to verify the identity, creditworthiness, and genuineness of the creditors. • The Ld. CIT(A) did not address these findings adequately before deleting the additions, rendering the order flawed and unsustainable.

4. Prayer

In light of the above arguments:

1. Deletion of the Balance Addition by the Ld. CIT(A) Should Be Set Aside: o The balance addition under Section 68 should be reinstated, as the assessee failed to discharge the burden of proof or rebut the findings of the AO.

2. Additions Made by the AO Should Be Restored: o The AO’s findings, based on post-search investigations and corroborated by judicial precedents, justify the additions.

3. Support from Judicial Precedents: o Judicial rulings such as NRA Iron & Steel Pvt. Ltd., Durga Prasad More, and Sumati Dayal uniformly uphold additions where identity, creditworthiness, and genuineness remain unsubstantiated. 4. Further Relief as Deemed Fit: o The Hon’ble Tribunal may grant any other relief in the interest of justice.

Conclusion The Ld. CIT(A), while acknowledging the suspicious activities of the loan-providing entities, erred in deleting the additions without appreciating: The substantive evidence gathered by the AO, including the bank trails and findings from the Banka Group search. Established judicial precedents emphasizing the importance of substance over form in determining the genuineness of transactions. Judicial principles laid down in landmark rulings such as NRA Iron & Steel Pvt. Ltd. v. PCIT [(2019) 416 ITR 135 (SC)], Sumati Dayal v. CIT [(1995) 214 ITR 801 & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur (SC)], and CIT v. Nova Promoters and Finlease Pvt. Ltd. [(2012) 342 ITR 169 (Del.)] uniformly support the additions made by the AO in cases involving shell companies, accommodation entries, and tax evasion. Common Prayer In view of the above submissions, facts, and supporting judicial precedents, the Revenue respectfully prays that: The order of the Ld. CIT(A) deleting the additions made under Section 68 and on account of commission payments be set aside. The additions made by the AO, totaling ₹1,75,00,364/-, be restored, as they are based on credible evidence and in line with established judicial principles. Any other relief that the Hon’ble Tribunal deems fit in the interest of justice may also be granted.

Respectfully Submitted on Behalf of the Revenue”

S.No. Particulars Page No. 1 Scrutiny Report Proforma for A.Y. 2014-15 1-3 2 Order of CIT Appeal for A.Y. 2014-15 4-14 3 Assessment Order for A.Y. 2014-15 15-30

& others/JP/2024 & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur Kedia Builders and Colonizers Pvt. Ltd., Jaipur 1. The assessee company is a private limited company and is engaged in The assessee company is a private limited company and is engaged in The assessee company is a private limited company and is engaged in the Real Estate Business. The assessee company filed its original return of the Real Estate Business. The assessee company filed its original return of the Real Estate Business. The assessee company filed its original return of Income for the A.Y. The assessee company filed its original return of Income for Income for the A.Y. The assessee company filed its original return of Income for Income for the A.Y. The assessee company filed its original return of Income for the A.Y. 2014-2015 on 21.10.201 2015 on 21.10.2014 declaring total income of Rs. 36,32,264/ 4 declaring total income of Rs. 36,32,264/-. The case was completed u/s. 143(3) on 29.12.2016 at income of Rs. 62,69,680/ case was completed u/s. 143(3) on 29.12.2016 at income of Rs. 62,69,680/ case was completed u/s. 143(3) on 29.12.2016 at income of Rs. 62,69,680/-. The assessee company preferred an appeal against the order passed u/s. 143(3) on assessee company preferred an appeal against the order passed u/s. 143(3) on assessee company preferred an appeal against the order passed u/s. 143(3) on 29-12-2016 before the ld. CIT(A). The ld. CIT(A) ha 2016 before the ld. CIT(A). The ld. CIT(A) has passed the order in Appeal s passed the order in Appeal No. 601/2016-17/JPR on 15/02/2019 deleting the addition made of Rs. 25,05,178/ 17/JPR on 15/02/2019 deleting the addition made of Rs. 25,05,178/ 17/JPR on 15/02/2019 deleting the addition made of Rs. 25,05,178/- on account of Loan received and interest paid thereon from M/s. Neelgagan on account of Loan received and interest paid thereon from M/s. Neelgagan on account of Loan received and interest paid thereon from M/s. Neelgagan Suppliers Pvt. Ltd.

2. The case was re The case was re-opened by the Ld. AO by issuing n opened by the Ld. AO by issuing notice u/s. 148 on 14.03.2019. The ld. Assessing Officer vide assessment order dated 13.12.2019 14.03.2019. The ld. Assessing Officer vide assessment order dated 13.12.2019 14.03.2019. The ld. Assessing Officer vide assessment order dated 13.12.2019 has made addition of Rs. 1,75,00,364/ has made addition of Rs. 1,75,00,364/- u/s. 68 of the Act towards receipts of u/s. 68 of the Act towards receipts of Unsecured Loans as follows: Unsecured Loans as follows:

5. Identity of the Lenders: The identity of the lender entities has bee Identity of the Lenders: The identity of the lender entities has bee Identity of the Lenders: The identity of the lender entities has been unequivocally established through substantial documentary evidence. The unequivocally established through substantial documentary evidence. The unequivocally established through substantial documentary evidence. The assessee provided Permanent Account Numbers (PANs), certificates of assessee provided Permanent Account Numbers (PANs), certificates of assessee provided Permanent Account Numbers (PANs), certificates of incorporation, and other statutory documents for each lending entity. These incorporation, and other statutory documents for each lending entity. These incorporation, and other statutory documents for each lending entity. These & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur documents conclusively demonstrate that the lenders are legally recognized entities operating within the framework of Indian corporate law. Furthermore, the loans in question were routed through proper banking channels, with supporting documents such as bank statements and transaction details clearly reflecting the movement of funds. The traceability of funds is a critical factor in establishing the genuineness of the transactions, and the assessee has provided ample evidence to satisfy this requirement.

10. Commission and Interest Payments: The inclusion of alleged commission payments and interest payments as unexplained expenditures further highlights the flawed approach of the assessment order. The assessee has categorically denied making any such commission payments, and there is no corroborative evidence to support the revenue authorities' claims. Interest payments, on the other hand, are legitimate business expenditures incurred in the ordinary course of business. These payments have been substantiated with proper documentation, including bank statements and agreements, and cannot be disallowed without concrete evidence of wrongdoing.

11. Misplaced Reliance on Judicial Precedents: The assessment order cites judicial precedents to justify its conclusions, but these precedents are inapplicable to the present case. The decisions relied upon pertain to scenarios with materially different facts and circumstances. The assessee has complied with all statutory requirements, furnished all necessary documentation, and satisfactorily discharged the onus placed upon it under the law. The conclusions drawn in the assessment order are therefore based on assumptions and do not hold water in light of the robust evidentiary support provided by the assessee.

15. It is further submitted that no opportunity of cross-examination of Mr. Mukesh Banka was provided to the assessee, and hence, no reliance can be placed upon the same.

16. The ld. CIT(A) vide its order dated 17.04.2024 has deleted the additions made u/s. 68 by observing as under: 6.1 Ground No 3, 3,2, 3.3 and 3.5 are all directed against the AO making an addition of Rs 1,75,00,364 u/s 68 of the Act. The AO during the reassessment proceedings held that during the year under consideration, the appellant had received unsecured loans from the following companies: Sno. Name of party from whom unsecured Amount loan was received 1 M/s Bhagwat Marcom Pvt. Ltd. Rs 25,00,056 2 M/s Coolhut Marketing Pvt. Ltd. Rs 25,00,056 3 M/s GabarialTieup Pvt. Ltd. Rs 25,00,056 4 M/s Nelgagan Suppliers Pvt. Ltd. Rs 25,00,056 5 M/s Outlook Vintrade Pvt. Ltd. Rs 25,00,056 6 M/s Subhrashi Enclave Pvt. Ltd. Rs 25,00,056 7 M/s Viewmore Developers Pvt. Ltd. Rs 25,00,056 6.2 It is seen that the AO received information from the DDIT(Inv), Unit-1(3), Kolkata that a search and seizure/survey action was carried out in the case of Banka Group on 21.05.2018 and it was found on scrutiny of the findings gathered and subsequent information brought on records that Shri Mukesh Banka provides accommodation to various beneficiaries. Various beneficiaries were identified who have obtained accommodation entry in the nature of bogus unsecured loans or in other forms and the appellant was found to be one of the beneficiaries who have taken accommodation entry in the form of bogus unsecured loans. The AO observed that the parties from whom the appellant received unsecured loans have highly insufficient return income to explain the sources of funds invested in the appellant. The AO also stated that notices u/s 133(6) was issued to these parties & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur but no replies were received from them. It was also seen that the AO sough a report from the office of the DDIT Kolkata and the Inspector after visiting the addresses of the lender companies found no evidence of the physical existence of the lender companies at the given addresses. The AO stated that summons u/s 131(1) of the Act was issued to the Directors of the lender companies but no one appeared. The AO arrived at a conclusion that the transaction under consideration entered into by the appellant in taking unsecured loans form the companies managed and controlled by Mukesh Banka was not genuine. Therefore, the AO added Rs 1,75,00,364 shown as unsecured loan and treated it as unexplained income u/s 68 of the Act. 6.3 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The appellant during the course of appeal proceedings has submitted the documents regarding loan taken and repayment from the lender companies as under: M/s. Bhagwat Marcom Pvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Bhagwat Marcom Pvt. Ltd Audited Statement of Accounts M/s. Coolhut Marketing Pvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Coolhut Marketing Pvt. Ltd.– Audited Statement of Accounts. M/s. Gabarial Tie-up Pvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Gabarial Tie-up Pvt. Audited Statement of Accounts. M/s. Neelgagan Suppliers Pvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Neelgagan Suppliers Pvt. Ltd. Audited Statement of Accounts. M/s. Outlook VintradePvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Outlook VintradePvt. Ltd. Audited Statement of Accounts. M/s. Subhrashi Enclave Pvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Subhrashi Enclave Pvt. Ltd. Audited Statement of Accounts. M/s. Viewmore Developers Pvt. Ltd. Copy of ITR Acknowledgement for the A.Y. 2014-2015. Bank Statement of M/s. Viewmore Developers Pvt. Ltd. Audited Statement of Accounts 6.4 I find that the appellant had taken unsecured Loan taken from 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. It is also & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur seen that these loans were short term loans in nature which were squared off in the subsequent year through Banking Channel as and when your appellant had liquidity. 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 (Gujrat) 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 transaction 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. I 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. 6.5 Under Section 68 of the Income Tax Act, 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 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). I find that the 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 solitary transaction. The appellant has furnished the financials of the loan creditor companies and other details as under:- 6.6 Therefore, it is seen from the above 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. 6.7 The Hon’ble ITAT Delhi in the case of KMG International Ltd Vs ACIT in Date of Judgement/Order : 21/07/2023 Related Assessment Year : 2007-08 has held that addition under section 68 towards unsecured loan amount unjustified as identity and creditworthiness of creditors and genuineness of transaction duly proved by way of documentary evidences.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 6.8 The Hon’ble jurisdictional Rajasthan High Court in the case of Labh Chand Bohra Vs ITO (2010) 189 TAXMAN 141 held as under: “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).” 6.9 The Hon’ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd. 159 ITR 78(SC) held as follows: “13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income ofthe said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further.” 6.10 The Hon’ble Agra Tribunal in the case of S.K. Jain Vs ITO (2004) 2 SOT 579 (Agra) observed as under: “The creditors have confirmed that they have advanced loan to the assessee. In most of the cases, transactions have been routed through bank account. Therefore, asking source of such deposits will amount to asking source of the source which is not permitted under the law as held by the Hon’ble High Court of Patna in the case of Sarogi Credit Corpn. vs. CIT 1975 CTR (Pat) 1: (1976) 103 ITR 344 (Pat) and the decision of the Ahmedabad Bench of the Tribunal in the case of Rohini Builders vs. Dy. CIT (2002) 76 TTJ (Ahd) 521: (2001) 117 Taxman 25 (Ahd)(Mag). Once it is established that the amount has been invested by a particular person, be he is a family member or close relative then the responsibility of the assessee is over. The assessee cannot ask that person, who advanced the loan, whether money advanced is properly taxed or not.” 6.11 The Hon’ble Calcutta High Court in the case of CIT Vs Dataware Pvt Ltd. [ GA to.2856 of' 2011] had deleted similar addition u/s 68 with reference to unsecured loan creditors. The relevant extracts of the decision is reproduced below: “In our opinion, in such circumstances, the Assessing officer of the assesses cannot take the burden of assessing the profit and loss account of the creditor when admitted the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into than return of the creditor and brand the same as unworthy of credence. So long It is not established that the return submitted by the creditors has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established.” 6.12 The Hon’ble Supreme Court in the case of CIT Vs Orissa Coprn (P.) Ltd [159 ITR 78) has held as follows: “In this case the assessee had given the names and addresses of' the alleged creditors was in the knowledge of the revenue that the said creditors were the income-tax assessee. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assesses, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit- worthy or wear such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to file conclusion that the assessee had discharged he burden that lay on him, than it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise” 6.13 The Guwahati High Court in the case of Nemi Chand Kothari Vs CIT [136 Taxman 2I3) observed that the assessee had obtained loans though account payee cheques and ha had also furnished the name & address of the creditor. In light of the aforesaid observations, they further held as follows: “Once the assessed had established that he had received the said amounts from ‘N’ and 'P’ by way of cheques, the assessee must be taken to have proved that the creditors had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. On failure on the part of the creditors to show that their sub creditors had creditworthiness’ to advance the said amounts to the assessee, these amounts as a corollary, could not have been and ought not to have been, under the law, treated as the assessee’s income mom the undisclosed sources, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or ware owned by, the assessee.” 6.14 I find that the AO has stated that third party enquiries were made by issuing notices u/s 133(6) and by making field inquiries (by sending Inspector) in the name of such companies, however as no reply was received from such parties, adverse inference was drawn. Also, it is mentioned that summons were issued to directors of above entities u/s 131 & 131(d). I find from the assessment order that the 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 appellant. Various courts have held that noncompliance to notices u/s 133(6) or 131 of the Act by itself is not sufficient to draw an adverse inference.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur In the case of Phool Singh Vs. ACIT (ITAT Delhi) in it has been held by Hon’ble ITAT that,“Merely because 133(6) notices issued to the party returned un-served though it was the same address, which was supplied by supplier while filing its income tax return, no fault can be put on the shoulder of assessee.” In159 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. 6.15 The Hon’ble Supreme Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018 has held as under: S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. 6.16 The Hon’ble jurisdictional Rajasthan High Court in the case of CIT vs Pooja Agrawal in D.B. Income Tax Appeal No. 385 / 2011 has held that so far as assessee has furnished all the supporting documents in the shape of copy of contract notes regarding purchase and sale of shares, copy of D-mat account etc, the fact of transaction entered into cannot be denied simply on the ground that in his statements appellant denied having made any transactions. Further as payments and receipts were made through account payee cheques and transactions were routed through Kolkata Stock Exchange and there was no evidence that the cash has gone back in appellant’s account, it was held by the Court that simply mentioning that findings were on the basis of appraisal report prepared by Investigation wing after considering all the material facts available on record is not sufficient. The Hon’ble Court confirmed the finding of the Tribunal that “The AO has failed to prove through any independent enquiry or relying on some material that the transactions made by the appellant through share P.K. Agrawal were non genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohit.” 6.17 The Hon’ble Jaipur bench of ITAT vide order dated 31.08.2022 in the case of Manohar Lal Chug vs. ITO in ITA No. 312/JP/2021 has held that: “6.3. The issue of penny stock and consequent additions made has elaborately dealt with by ITAT Jaipur Bench in the case of Pramod Jain & Others (supra) and relying on the decision of Hon’ble Rajasthan High Court in the case of CIT vs. Pooja Agarwal, 160 DTR 0198 (Raj.) deleted the addition by observing as under :- "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any 30 ITA No. 312/JP/2021 Shri Manohar Lal Chugh, Jaipur. cogent material to show that the assessee has brought back his & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur unaccounted income in the shape of long-term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/ merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly, we delete the addition made by the AO on this account." On further appeal by the department to the Hon’ble Rajasthan High Court, the Hon’ble High Court by referring to the decision of CIT vs. Pooja Agarwal in DB IT Appeal No. 385/2011 dated 11.09.2017 (Raj)(HC) held that nosubstantial question of law arise in this case. 6.4. Thus in view of the above discussion and taking into consideration various documentary evidences produced by the assessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Hon’ble Jurisdictional High Court including the decision in case of CIT vs. Pooja Agarwal (supra) as well as in case of PCIT vs. Pramod Jain & Others (supra), we allow the claim of exemption under section 10(38) of the Act and accordingly delete the addition made by the AO. The order of ld. CIT (A) is set aside.” 6.18 In the case of Shree Barkha Synthetics Ltd. Vs. Asstt CIT, 2006, 55 taxman 289, Raj, it has been held as under: “The principle relating to burden of proof concerning the assessee is that where the matter concerns money receipts by way of share application from investors through banking channel, he has to prove the existence of the person in whose name the share application is received. Once the existence of the investor is proved, it is not further the burden of the assessee to prove whether that person himself has invested the said money or some other person has made investment in the name of that person. The burden then shifts on to the revenue to establish that such investment has come from the assessee itself. [Para 16] 6.19 The Hon’ble ITAT, Ahmedabad in the case of DCIT Circle-1(1)(1), Ahmedabad Vs. J. P. Fincorp Services Pvt. Ltd. [ITA No.2517/Ahd/2016] has held as follows: 29. In view of the above, we are of the opinion that, though the transactions of the loan received by the assessee are not free from any doubt but in either of the case, once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed. [Para- 29] 6.20 Further, the Hon’ble ITTA, Kolkata in the case of Balaji Solutions Limited Vs. Assistant Commissioner of Income Tax Circle-2(1), Kolkata [I.T.A. No. 572/KOL/2022] pronounced on February 20, 2023 has held as follows:

9. Apropos to Ground No. 2 regarding the issue of unexplained cash credit amounting to Rs.25,00,000/- under section 68 of the Act is concerned, we find that the assessee took loan from M/s. Ambala TrafinPvt. Limited. It is not in dispute before us that the aforesaid loan was interest-bearing loan taken through normal banking channel and was repaid back in the same financial year through banking & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur channel and tax at source has been deducted on the interest paid thereon and all the documentary evidence in order to explain alleged credit has been duly placed before the lower authorities. Since no specific discrepancy has been observed by the lower authorities and the said loan being taken and repaid during the year itself and also considering the income of Rs.15.10 crores offered by the assessee, we do not find any reason to question the genuineness of the said loan. We, therefore, reverse the finding of the ld. CIT(Appeals) and delete theaddition of Rs.25,00,000/- under section 68 of the Act and allow Ground No. 2 raised by the assessee.” 6.21 The Hon’ble ITAT Surat in the case of Rajhans Construction (P.) Ltd. v. ACIT [IT APPEAL NO. 1450 (AHD.) OF 2016] [[2022] 140 taxmann.com 370 (Surat-Trib.)] has held that: “22. In view of the aforesaid factual and legal discussion. We are of the view that when the unsecured loan has been paid within a short 8 span of time for which the assessee has paid interest and deducted tax thereon. Therefore, the Assessing Officer was not justified in making addition under section 68. Thus, substantial ground of appeal is allowed.” 6.22 The Hon'ble Supreme Court dismissed the SLP filed by the revenue against the decisions of Hon'ble HC of Delhi in case of PCIT-4 vs Hi-Tech Residency Pvt Ltd (96 Taxmann.com 403) wherein it was concluded that addition made u/s 68 deleted, where assessee had discharged its onus of establishing identity, genuineness and creditworthiness of both investors to whom shares were allotted by assessee as well as lenders from whom unsecured loans were taken. Also, the Hon'ble Gujarat High Court in the case of CIT-1 vs Apex Therm Packaging Pvt Ltd (42 taxmann.com 473) has held that where name, address, PAN, copy of IT Returns, balance sheet, profit and loss account of all creditors/ lenders as well as their confirmation had been furnished, Assessing Officer could not make addition on account of unsecured loan and interest thereon. Therefore, I find that in the present case where the name, address, PAN, copy of IT Returns, balance sheet, profit and loss account of all creditors/ lenders as well as their confirmation had been furnished, AO was not justified in making addition on account of unsecured loan. 6.23 I find that the foundation of the addition made by the AO is the admission of Shri Mukesh Banka 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 controlled and managed by Shri Mukesh Banka. However, it is also seen that Shri Mukesh Banka has retracted his statement vide Two Separate Affidavit dated 01/06/2018 and 23/07/2018. Therefore, the statement by itself cannot be solely relied as a fool proof evidence. The Hon’ble jurisdictional ITAT Jaipur in the case of DCIT V/s Saurabh Mittal, has noted as under: "We further note that the assessee produced copy of affidavit of Shri. Anil Agrawal who has retracted his statement before the Investigation Wing, Kolkata however, without going into controversy of the retraction of the statement we find that the statement cannot be used by the AO without giving an opportunity to cross examination of Shri Ani1 Agrawal."

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 6.24 It may be noted that the assessment in the case of the appellant was completed u/s 143(3) of the Act on 29.12.2016 by the AO making addition of Rs 25,05,178 on ground that the loan alleged to have been taken from M/s Neelgagan suppliers Pvt Ltd is not proved and bogus. Aggrieved, the appellant went in appeal before the Ld CIT(A), Ajmer and the Ld CIT(A) passed the appeal order on 15.02.2019 in Appeal No 601/2-016-17/JPR deleting the addition. The Ld CIT(A) has held as under:- “4.4 It is seen that the appellant had received loan of Rs 25 lakhs from M/s Neelgagan Supplied Pvt. Ltd. on 25.03.2014 which was repaid along with interest on 11.03.2015 after deducting the TDS of Rs 28,333/- on interest of Rs 2,54,992/- paid by the appellant to M/s Neelgagan Suppliers Pvt. Limited. The loan of Rs 25 lakhs was received through RTGS. The appellant has filed copy of the bank statement of M/s Neelgagan Suppliers Pvt. Ltd. For the relevant period. It can be seen from the bank statement that either immediately before or after issue of cheque of Rs 25 lakhs to the appellant by M/s Neelgagan Suppliers Pvt. Ltd. On 25.03.2014, there was no cash deposit in the bank account of M/s Neelgagan Suppliers Pvt. Limited. The appellant has filed confirmatory letter, copy of IT. Return of A.Y 2014-15 of M/s Neelgagan Suppliers Pvt. Ltd., Balance Sheet dated 31.03.2014 & Profit & Loss Account for the period ending 31.03.2014 of M/s Neelgagan Suppliers Pvt. Limited. It can be seen that the net worth of M/s Neelgagan Suppliers Pvt. Ltd. As on 31.03.2014 was Rs, 2,48,19,924/-. The appellant has also filed copy of mater date downloaded form site of ROC. The status of M/s Neelgagan Suppliers Pvt. Ltd. has been shown as ‘active’. The AO has not brought on record any evidence to show that the appellant had paid cash out of his unaccounted income to M/s Neelgagan Suppliers Pvt. Ltd. or its representative or middleman for obtaining any accommodation entry of loan of Rs 25 lac from M/s Neelgagan Suppliers Pvt. Limited. I am of the considered view that when the appellant has filed each and every document to prove identity and creditworthiness of the person from whom the unsecured loan of Rs 25 lac was received by the appellant and the AO has not brought on record any evidence to show that any unaccounted income was introduced by the appellant in the form of unsecured loan introduced un the name of M/s Neelgagan Suppliers Pvt. Ltd., then just because the AO could not enforce compliance of the notice issued u/s 133(6) to M/s Neelgagan Suppliers Pvt. Ltd., no addition u/s 68 could have been made by the AO in respect of unsecured loan of Rs 25 lac received from M/s Neelgagan Suppliers Pvt. Ltd. And interest of Rs 5,178/- debited in respect of interest accrued on such unsecured loan. Therefore, in view of the facts discussed by the AO and the various decisions relied upon by the appellant, the addition of Rs 25,05,178/- (Rs 25,00,000 + Rs 5,178) made by the AO u/s 68 is hereby deleted.” 6.25 The same amount of Rs 25 lakhs from M/s Neelgagan Suppliers Pvt. Ltd. has been again added by the AO in the assessment u/s 147/148 dated 13.12.2019. This amounts to double addition of an amount which has already been deleted by the Ld CIT(A) in appeal. In the earlier grounds, the addition made of Rs 25,00,056 on account of unsecured loan from M/s Neelgagan Suppliers Pvt. Ltd. has been held not valid as the further addition made in the re-assessment order tantamount to double addition and therefore has been directed to be deleted.

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur 6.26 The Hon’ble Jurisdictional ITAT in the case of CIT Vs N. M. Agrofood Products Pvt. Ltd (ITAT Jaipur) Appeal Number : Date of Judgement/Order : 24/08/2022 has held that assessment which are already completed after making proper inquiries cannot be allowed to again reframed merely based on the search without any fresh evidence. Addition was held unsustainable. 6.27 In view of the above facts and discussion, and the various judicial decisions as discussed above including the Hon’ble Supreme Court and the jurisdictional High Court and Tribunal as well as the decision of the Ld CIT(A) in the appellant’s own case on same issue in the same A.Y 2014-15 against the order passed u/s 143(3) of the Act, I am of the considered view that that the addition of Rs 1,75,00,364 made by the AO u/s 68 of the Act is not sustainable and is directed to be deleted. The appeal on Ground Nos 3, 3.2, 3.3 and 3.4 are thus allowed.

17. Since assessee company established the Identity of both the lending companies beyond doubt. Under such circumstances ld. AO at best could have assessed such amount in the hands of both the lending companies. Reliance is placed on the following judicial pronouncements, the extracts of which have been set out for the sake of convenience:- Kanhaialal Jangid vs. ACIT [2008] 217 CTR 354 (RAJ.): “….We are of the opinion that in rejecting the explanation of the assessee on the undisputed facts is founded on erroneous application of law in the matter. While it was the assessee's burden to furnish explanation relating to such cash credits, the assessee's burden does not extend beyond proving the existence of the creditor and further proving that such creditor owns to have advanced the amount credited in the account of assessee to him. However, the burden does not go beyond to put the assessee under an obligation to further prove that wherefrom the creditor has got or procured the money to be deposited or advanced to the assessee. The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee, is not relevant for the purposes of rejecting the explanation furnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 of the IT Act, unless it can be shown by the Department that the source of such money comes from the assessee himself or such source could be traced to the assessee itself. In the present case while existence of Sri Devendra Sankhla the creditor is not in doubt, and he has admitted to have advanced the loan to the assessee. The fact that the explanation furnished by Sri DevendraSankhla about his source of such advancement has not been accepted by the Revenue authority cannot lead to any presumption that the source of such advancement by Sri DevendraSankhla emanated from the assessee. Therefore, addition of Rs. 16,000 in the income of assessee as cash credit in the name of Sri DevendraSankhla cannot be sustained. Such addition of income of assessee has to be deleted from the income of assessee…”

& others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur CIT vs. Kamlaben Suresh Chandra Bhatti [2014] 44 taxmann.com 459 (Gujarat): “…Head Notes - Section 68 of the Income-tax Act, 1961 – Cash credits (Bank deposits) - During assessment proceedings, Assessing Officer made addition to assessee's income in respect of amount deposited in bank account - In appellate proceedings, Commissioner (Appeals) noted that assessee had explained source of a part of amount deposited coming from bank loan and sale of agricultural land - He thus deleted substantial portion of addition made by Assessing Officer - Tribunal confirmed order of Commissioner (Appeals) - Whether since entire issue was based on appreciation of evidence on record, no substantial question of law arose therefrom - Held, yes…” Aravali Trading Co v ITO (2008) 220 CTR (Raj) 622 “Head notes: Income- Cash Credit- Burden of proof- once the existence of the creditor is proved and such persons own the credits which are found in the books of the assessee, the assessee’s onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him….” Labh Chand Bohra v ITO (2010)189 Taxman 141 (Raj): Sec. 68: Identity and genuineness of Cash Creditor proved- No need to prove the capacity of Cash Creditor – source of source not to be enquired. ACIT, Jaipur v M/S Rajasthan Asbestors Cement Co., Jaipur (ITA NO.940/JP/2008): “Now tribunal has upheld the decision of CIT(A) after holding that once the existence of the creditor is proved and creditors have confirmed the advancement of loans, onus of the assessee stands discharged and that it is not the duty of the assessee to prove the source from which the creditors have advanced the loans”.

19. There is no evidence, to show that the money so received actually belonged to the assessee company. Nowhere the lower authorities suggested that the loan given by lending companies had actually flown from the assessee company. In absence of any such cogent evidence on record, no addition can be made to the income of the assessee merely on suspicion. This ratio is laid down by the Hon’ble Jurisdictional High Court of Rajasthan in the case of Shubh Mines & others/JP/2024 Kedia Builders and Colonizers Pvt. Ltd., Jaipur Private Limited (Income Tax Appeal No. 96/15), vide its order dated 03.05.2016, in which it was held that “In absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse…” In the case of Ashwani Gupta [2010] 322 ITR 396 (Delhi), addition was made on the basis of the statement of a third party and seized documents. Neither the seized documents were provided to the assessee nor was any opportunity of cross-examination of the adverse party given. Hon’ble Delhi High Court, following its own judgment in the case of SMC Share Brokers Ltd. [2007] 288 ITR 345 (Delhi) deleted the addition on the premise that there was violation of the principles of natural justice. Hon’ble Supreme Court in the case Andaman Timber Industries (CIVIL APPEAL NO. 4228 OF 2006), vide its order dated 02.09.2015, held that “…not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected” It was observed by the Apex Court that an order passed in violation of the principles of natural justice is a nullity as held in A.K. Kraipak vs. Union of India A/R – 1970 SC-150 RB. Shree Ram Durga Prasad and Fateh Chand vs. Settlement Commissioner 1989-SC-1038.

of the assessee is allowed. Reliance is also placed on the decision of Hon’ble ITAT Bangalore Bench in the case of Smt. Madhu Solanki – /Bang/2009 wherein it was held as under: “14…AO did not get reply from both the trade creditors and hence he proceeded to assess the outstanding balances, while accepting the purchases made during the year & payments made during the year. The AO has made the addition u/s 68 of the Act and did not invoke provisions of sec. 41(1) of the Act. On the contrary, the assessee has shown that the payments have been made in the succeeding year through banking channels. Accordingly, we are of the view that the revenue could not rely upon the decision rendered in the case of Sureshkumar T Jain. Under these set of facts, we are of the view that the AO could not have made addition of trade creditors u/s 68 of the Act..” 1.23. Attention is drawn towards the decision of Gujarat High Court in the case of Ojas Tarmake (P.) Ltd. [2023] 156 taxmann.com

75. (Gujarat), in which it was held that where assessee showed unsecured loans received during relevant assessment year and AO made addition on ground that assessee failed to discharge onus of liability as laid down under section 68, since amount of loan received by assessee was returned to loan party during year itself and all transactions were carried out through banking channels, impugned addition was to be deleted.

22. In light of the above, it is evident that the assessee has satisfactorily discharged its burden of proof under Section 68 by establishing the identity, genuineness, and creditworthiness of the lenders. The adverse findings in the assessment order are based on speculative allegations and procedural lapses, including the denial of natural justice. The acceptance of loan repayments as bona fide further reinforces the genuineness of the original loan transactions. Consequently, the additions made under Section 68 are wholly unjustified and ought to be deleted in their entirety. Any contrary inference would undermine the principles of justice and the integrity of the evidentiary process.

23. IMPORTANT: The revenue has not accepted the deletion of so-called Commission Paid by the assessee of Rs. 4,37,509/- & Interest paid of Rs. 44,958/- by the ld. CIT(A). Thus the appeal is self-contradictory. In light of above, the appeals of the revenue deserves to be dismissed.

Paper Book S. Particulars Page No. No. A. Written submissions dated 02.11.2023 filed before the Hon’ble CIT(A) A1-A96 1. Assessment order dated 29.12.2016 passed u/s 143(3) of the Act 01-16 2. Order dated 15/02/2019 passed by ld. CIT(A) Ajmer in appeal no. 601/2016- 17-27 17/JPR 3. Re-assessment Order dated 13.12.2019 Passed u/s. 147/148 of the I. T. Act, 28-50 1961 4. 51-53 Reasons recorded for reopening the assessment u/s 147 of the Income Tax Act.

118 b) Copy of Return of Income Acknowledgement Copy of Audited financial statements along with audit report for 119-133 c) A.Y. 2014-15 2. M/s. Coolhut Marketing Pvt. Ltd. a) Copy of Bank Statement 134 b) Copy of Return of Income Acknowledgement 135 136-151 Copy of Audited financial statements along with audit report for c) A.Y. 2014-15 M/s. Gabarial Tieup Pvt. Ltd 3. a) Copy of Bank Statement 152 b) Copy of Return of Income Acknowledgement 153 154-169 Copy of Audited financial statements along with audit report for c) A.Y. 2014-15 M/s. Neelgagan Suppliers Pvt. Ltd 4. a) Copy of Bank Statement 170 b) Copy of Return of Income Acknowledgement 171 Copy of Audited financial statements along with audit report for 172-186 c) A.Y. 2014-15 M/s. Outlook Vintrade Pvt. Ltd 5. a) Copy of Bank Statement 187 b) Copy of Return of Income Acknowledgement 188 Copy of Audited financial statements along with audit report for 189-204 c) A.Y. 2014-15 M/s. Subhrashi Enclave Pvt. Ltd. 6. a) Copy of Bank Statement 205 b) Copy of Return of Income Acknowledgement 206 Copy of Audited financial statements along with audit report for 207-220 c) A.Y. 2014-15 M/s. View more Developers Pvt. Ltd. 7. a) Copy of Bank Statement 221 222 b) Copy of Return of Income Acknowledgement Copy of Audited financial statements along with audit report for 223-237 c) A.Y. 2014-15 11. Loan Confirmation of all said companies including loan confirmation for 238-251 repayment of Loan 12. Retraction Statement of Shri Mukesh Banka dated 01.06.2018 252-254 13. Retraction Statement of Shri Mukesh Banka dated 23.07.2018 255-259 14. 260 Copy of Receipt of Retraction Statements being submitted by said Shri Mukesh Banka in the office of DCIT, Central Circle 4(2), Kolkata on 05.09.2019

Compilation -II

SNo. Particulars Page No 7 Sunlight Tour and Travels Pvt. Ltd. v. PCIT 2024 (11) TMI 1384 dated 12.11.2024 (Delhi High Court) 69-75

8 Punia Capital Pvt. Ltd v. ACIT 2023 (2) TMI 717 dated 15.02.2023 (Bombay High Court) 76-79

9 Arvind Sahdeo Gupta v. ITO 2023 (8) TMI 522 dated 08.08.2023 (Bombay High Court) 80-85

10 Madan Mohan Tiwari v. ITO 2021 (11) TMI 496 dated 06.10.2021 (ITAT Delhi) 86-98

11 Amar Partap Steels Pvt. Ltd. v. ITO dated 03.10.2024 (ITAT Jaipur) 99-125

COMPILATION-III

SNo. Particulars Page No 12. ACIT v. AIM Fincon 166 taxmann.com 681 (SC) dated 13.09.2024 (Supreme Court) 126

SLP preferred by the department against order of Gujarat High Court dated 23.12.2022 [166 taxmann.com 680 (Gujarat)] was dismissed by the Supreme 127-134 Court.

13. CIT v. Orissa Corporation (P) Ltd. Civil Appeal Nos. 13791380 (NT) of 1974 dated 19.03.1986 (Supreme Court) 135-142

14. PCIT v. Hi-Tech Residency Pvt. Ltd 143 2018 (7) TMI 1347 dated 19.07.2018 (Supreme Court)

SLP preferred by the department against order of Delhi High Court dated 144-145 07.07.2018 [2017 (7) TMI 737] was dismissed by the Supreme Court.

15. CIT v. Odeon Builders Pvt. Ltd. 2019 (8) TMI 1072 dated 21.08.2019 (Supreme Court) 146-147

18. CIT v. Pooja Agarwal 157-162 D.B.

dated 11.09.2017 (Rajasthan High Court)

20. CIT v. Ayachi Chandrashekhar Narsangji 0/TAXAP/992/2013 dated 02.12.2013 (Gujarat High Court) 171-174

21. CIT v. Apex Therm Packaging (P) Ltd. 2013 (12) TMI 1541 dated 20.12.2013 (Gujarat High Court) 175-177

22. CIT v. Dataware Pvt. Ltd. ITAT No. 263 of 2011; GA No. 2856 of 2011 dated 21.09.2011 (Calcutta High 178-182 Court)

2013-14 and Bank Account of 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 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.

46. So far as to the merits of the case the bench noted that revenue challenges directing the ld. AO to delete the addition of Rs. 1,75,00,364/- being the amount of unsecured loan accounted by the assessee in the name of the following parties ;

Sr. 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/-

Gabarial Tieup Pvt. Ltd.. M/s. Neelgagan Suppliers Pvt. Ltd., Mis. Outlook Vintrade Pvt. Ltd., M/s. Subhrashi Enclave Pvt. Ltd. and M/s. Viewmore Developers Pvt. Ltd., all these loans were for a short period 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 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 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 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 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)."

(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 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.

In terms of these observations, the appeal of the revenue in ITA no.

901/JP/2024 stands dismissed.

Order pronounced in the open court on 11/03/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11/03/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Income Tax Officer, Jaipur izR;FkhZ@ The Respondent- Kedia Builders and Colonizers Pvt. Ltd., Jaipur 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 872 to 875 & 901/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत