MEGHJI MANSUKHLAL DODHIA,BHIWANDI vs. DCIT-CC-3, THANE, THANE

For A.Y. 2016-17, the Assessing Officer further made addition of Rs. 1,00,00,000/- under section 68 in respect of unsecured loan received from M/s Vinam Finance Private Limited, holding that the assessee failed to satisfactorily prove identity, creditworthiness and genuineness of the lender.

The Assessing Officer rejected the submissions and proceeded to make additions. Thereafter, assessments for A.Ys. 2012-13 to 2016-17 were completed on 30.09.2021 under section 143(3) read with section 153A of the Act. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) and charged interest under sections 234A, 234B and 234C of the Act. The relevant particulars of assessments are summarized below:

The assessee preferred appeals before CIT(A). The CIT(A) recorded that the search action was validly conducted and that assessments under section 153A were properly framed. The appellate authority held that the seized documents represented actual cash transactions and that the Assessing Officer was justified in invoking section 69D. The CIT(A) did not accept the contention that the documents were merely proposed borrowals or dumb documents.

In respect of A.Y. 2016-17, the CIT(A) also upheld the addition of Rs. 1,00,00,000/- under section 68, holding that the assessee failed to satisfactorily discharge the onus cast upon him. The CIT(A) further upheld levy of interest and initiation of penalty proceedings.

Pending disposal of the appeals, the assessee filed stay applications for all five assessment years seeking stay of recovery of outstanding demand. It is stated that no amount has been paid towards the disputed demand and no security has been offered. The assessee has sought complete stay of recovery till disposal of (6) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia appeals. Since the appeals themselves were heard on merits, the stay applications were also taken up together.

Aggrieved by the orders of CIT(A) the assessee is in appeal before us raising following grounds of appeal:

The appellant craves leave to add to, alter, amend, modify and/or delete all or any of the foregoing grounds of appeal. The appellant prays before the Hon‟ble Tribunal to delete the additions made by the AO and confirmed by the Ld. CIT (A) and/or any other relief as the Hon‟ble Tribunal may deem fit.

The Ld. Authorised Representative submitted that the addition under section 68 in respect of unsecured loan received from M/s Vinam Finance Private Limited has been made solely on (13) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia the basis of statements recorded by the Investigation Wing from Shri Sushil Goyal, an alleged entry operator, certain alleged dummy directors namely Shri Bhavik Jakharia and Shri Minesh Dodhia, and Shri Bhadresh Dodhia. It was contended that the Assessing Officer has not conducted any independent inquiry in the case of the assessee and that the entire addition rests upon third-party statements and an investigation report without any direct evidence linking the assessee with accommodation entries. It was further submitted that copies of such statements were never furnished to the assessee despite specific request and no opportunity of cross-examination was granted. According to the Ld. AR, reliance upon such material without affording opportunity to confront and cross-examine the deponents is violative of principles of natural justice. It was also pointed out that Shri Bhadresh Dodhia subsequently retracted his statement by way of notarized affidavit dated 08.03.2020 and therefore the evidentiary value of the statement stands seriously diluted.

The Ld. AR further submitted that the assessee had duly discharged the onus cast under section 68 by placing on record all primary evidences including confirmation from the lender company, PAN details, MCA master data showing the company as active, bank statements evidencing receipt of loan through banking channels, ledger accounts and proof of repayment through banking channels. It was contended that the lender company was ―MCA Active‖ at the time of receipt and repayment of the loan and that the transaction was routed entirely through (14) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia banking channels. No material, according to the Ld. AR, has been brought on record to demonstrate that any cash was paid at the time of receipt of loan or that any cash was received back at the time of repayment. It was argued that once identity of the lender, genuineness of the transaction and prima facie creditworthiness are established through documentary evidence, the initial burden under section 68 stands discharged and the burden shifts upon the Revenue to bring cogent material on record, which has not been done in the present case.

On the jurisdictional aspect, the Ld. AR submitted that no incriminating material whatsoever relating to the alleged unsecured loan was found during the course of search. It was contended that the addition under section 68 has been made purely on the basis of information received from the Investigation Wing and third-party statements and not on the basis of any seized material relatable to the respective assessment years. The Ld. AR further submitted that for certain assessment years under consideration, the assessments were completed and were not pending as on the date of search and therefore such years fall within the category of unabated assessments. It was argued that in respect of such unabated assessments, no addition can be made in proceedings under section 153A in absence of incriminating material found during the course of search which pertains to those assessment years.

The Ld. AR further submitted that the seized papers are loose sheets without independent corroboration and therefore fall within the category of ―dumb documents‖. It was argued that no addition can be sustained merely on the basis of such loose papers in absence of supporting evidence demonstrating actual transaction. The Assessing Officer, according to the Ld. AR, has proceeded on presumption, surmise and conjecture without bringing any independent evidence on record to establish that the assessee had taken cash loans on hundi. It was also emphasized (16) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia that the seized documents do not contain the name of the assessee and were not found from the exclusive possession of the assessee. Mere allegation of handwriting or association without forensic examination or conclusive proof, it was argued, cannot establish ownership or authorship so as to fasten liability upon the assessee.

The Ld. AR further submitted that the additions have been made on the basis of statements of Shri Sushil Goyal, Shri Bhavik Jakharia, Shri Minesh Dodhia and Shri Bhadresh Dodhia, which are third-party statements. It was contended that such statements, particularly when retracted, cannot form the sole basis of addition in absence of independent corroborative material. It was argued that retracted statements, without contemporaneous corroboration, do not possess conclusive evidentiary value.

The Ld. AR also submitted that the issues arising in the present batch of appeals are squarely covered in favour of the assessee by decisions of the Co-ordinate Benches in group concerns of the same Dodhia Group arising out of the search dated 27.11.2019. Reference was made to the decision of the Mumbai Bench in the case of Vasupujya Filaments vs DCIT, CC-3, Thane, to 883/Mum/2025, order dated 25.08.2025, wherein additions under section 68 were made on account of unsecured loans alleged to be accommodation entries received from Kolkata-based entities including M/s Vinam (17) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia Finance Pvt. Ltd. In that case also, the Assessing Officer had relied upon statements of alleged entry operators, dummy directors and the statement of Shri Bhadresh Dodhia recorded under section 132(4), and the addition was supported by the Investigation Wing report. Apart from section 68 addition, issues relating to disallowance under section 69C and addition under section 69D on account of alleged hundi loans were also involved. It was submitted that the Co-ordinate Bench, after examining the seized material, statements recorded during search, documentary evidences furnished by the assessee and the absence of any direct incriminating material linking the assessee with accommodation entries, held that once the assessee had furnished PAN, confirmations, bank statements, financial statements and details of repayment, the initial onus under section 68 stood duly discharged. The Bench also examined the allegation of accommodation entries routed through M/s Vinam Finance Pvt. Ltd., the reliance placed on statements of Shri Minesh Dodhia, Shri Bhavik Jhakharia and Shri Bhadresh Dodhia, and the legal issue relating to absence of incriminating material in unabated assessments and granted relief to the assessee.

Further reliance was placed on the decision of the Co- ordinate Bench in the case of Chandrika MansukhlalDodhia vs DCIT-CC-3, Thane, IT(SS)A No. 199/Mum/2025, order dated 15.04.2025, wherein the Bench examined the legal position relating to section 153A and incriminating material and also (18) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia considered the evidentiary value of statements recorded during search. It was submitted that the factual matrix in the present appeals is identical inasmuch as the same lender company is involved, the same search action dated 27.11.2019 forms the basis of the proceedings, the same statements are relied upon by the Assessing Officer and the same Investigation Wing report constitutes the foundation of the additions. It was therefore contended that the issues being squarely covered by the decisions of the Co-ordinate Benches in group cases arising from the same search, the present appeals deserve to be allowed by following the said binding precedents.

The Ld. Departmental Representative vehemently opposed the legal ground raised

The Ld. DR further submitted that the assessment order specifically notes that during the course of search proceedings the assessee accepted that the hundi papers belonged to him. The Assessing Officer had issued various notices calling upon the assessee to explain the nature and source of the cash borrowings reflected in such hundi papers; however, the assessee failed to furnish satisfactory details. A final show cause notice was thereafter issued referring to the seized hundi documents and the amounts involved. It was therefore contended that the assessment is squarely founded on material seized during the search and not on any extraneous or borrowed information. The (20) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia plea of absence of incriminating material is, according to the Ld. DR, factually incorrect and contrary to the record.

It was further submitted that in the present case the search was conducted in the assessee’s own case as part of the coordinated Dodhia Group action and therefore the jurisdiction under section 153A stands properly assumed. The concept of ―borrowed satisfaction‖, according to the Ld. DR, is wholly inapplicable where the incriminating documents have been seized from premises directly connected with the assessee and his group concerns and are supported by statements recorded under section 132(4). The evidentiary presumption under section 292C of the Act was also pressed into service to submit that the contents of the seized documents are presumed to be true unless rebutted by cogent evidence.

In relation to the addition under section 68 concerning unsecured loan received from M/s Vinam Finance Pvt. Ltd., the Ld. DR drew attention to page 14 of the assessment order and the elaborate findings recorded therein. It was submitted that during the course of search and subsequent investigation, it was found that the assessee had obtained unsecured loans from M/s Vinam Finance Pvt. Ltd., which upon enquiry was discovered to be a paper/shell company. Although the company was registered in Kolkata, its directors Shri Bhavik Jakharia and Shri Minesh Dodhia were based in Bhiwandi and were directly connected with the Dodhia Group.

The Ld. DR further relied upon the statements recorded under section 132(4) from group members, including Shri Bhadresh Dodhia, who admitted that funds were routed through M/s Vinam Finance Pvt. Ltd. for the benefit of the Dodhia Group. It was submitted that the evidentiary value of statements recorded under section 132(4) is substantial and cannot be brushed aside merely on the basis of a subsequent retraction unless supported by credible and contemporaneous evidence. In the present case, according to the Ld. DR, the retraction was (22) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia belated and unsupported by any material demonstrating coercion or duress.

The Ld. DR submitted that the cumulative material comprising seized hundi papers, statements recorded under sections 132(4) and 131, and the investigation findings clearly establish that M/s Vinam Finance Pvt. Ltd. was a shell entity used for providing accommodation entries and that the unsecured loan shown by the assessee was not a genuine transaction. Mere production of confirmation, PAN details or MCA master data showing ―Active‖ status, according to the Ld. DR, cannot override the substantive evidence collected during search demonstrating the modus operandi of routing unaccounted money. It was contended that the Assessing Officer was therefore fully justified in treating the unsecured loan received from M/s Vinam Finance Pvt. Ltd. as unexplained cash credit under section 68 and in making the corresponding additions, which have been correctly upheld by the Ld. CIT(A).

In reply to the objection of the Ld. DR that the ground regarding absence of incriminating material was not raised before the Ld. CIT(A), the Ld. AR invited attention to paragraph 67 of the appellate order wherein the Ld. CIT(A) has specifically recorded that the assessee had taken a technical ground contending that no addition could be made in absence of incriminating material found during search. It was pointed out that the Ld. CIT(A) has noted the assessee’s contention that, in case of unabated (23) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia assessments, additions under section 153A cannot be sustained without search-based incriminating material and has also recorded reliance on the decision of the Hon’ble Supreme Court in PCIT vs. Abhisar Buildwell (P) Ltd. The Ld. AR further submitted that the said ground was not only recorded but was also adjudicated by the Ld. CIT(A) in paragraphs 68 to 70.2 of the order. It was therefore contended that the jurisdictional issue was specifically raised and decided before the first appellate authority and the objection of the Ld. DR is factually incorrect.

We have carefully considered the rival submissions, perused the assessment orders, the impugned orders of the Ld. CIT(A), the written submissions filed by the Ld. DR, the paper book placed on record and the judicial precedents relied upon by both sides.

The Ld. DR objected that the assessee did not raise the ground relating to absence of incriminating material before the Ld. CIT(A). We find from paragraph 67 of the appellate order that the Ld. CIT(A) has expressly recorded that the appellant had raised a technical ground that no addition could have been made in absence of incriminating material found during search. The Ld. CIT(A) has further recorded reliance on the decision of the Hon’ble Supreme Court in PCIT vs Abhisar Buildwell (P) Ltd. and thereafter adjudicated the issue in paragraphs 68 to 70.2.Thus, the factual position clearly demonstrates that the ground was not only raised but adjudicated upon. The objection of the Ld. DR

The central issue concerns the jurisdiction under section 153A in respect of unabated assessments. The Hon’ble Supreme Court in PCIT vs Abhisar Buildwell (P) Ltd. [149 taxmann.com 399 (SC)] has held in paragraph 14:

In the present case, the Revenue relies upon seized hundi papers, statements of Shri Bhadresh Dodhia, statements of directors of Vinam Finance, statement of entry operator Shri Sushil Goyal.The crucial question is whether the material seized demonstrates year-specific undisclosed income of the assessee.

In the decision of Vasupujya Filaments (para 20 to 25), the Co-ordinate Bench, while examining identical search action dated 27.11.2019, held that once the assessee has furnished primary documentary evidences under section 68 and there is no direct incriminating material linking the assessee to accommodation entries for the relevant assessment year, addition cannot be sustained merely on general statements. The Bench in para 23 (25) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia observed in substance that statements of alleged entry operators, without specific nexus to the assessee’s transaction for the year under consideration, cannot ipso facto justify addition. Similarly, in Chandrika MansukhlalDodhia (paras 5.1 to 7), the Co- ordinate Bench examined the scope of section 153A and held that for completed assessments, addition must be founded on incriminating material discovered during search and not on general investigation reports. Applying the above ratio, we now examine the additions on merits.

The addition under section 68 i.e. Loan from M/s Vinam Finance Pvt. Ltd. is primarily based on statement of Shri Sushil Goyal admitting to providing accommodation entries through various companies including Vinam Finance, statements of Shri Bhavik Jakharia and Shri Minesh Dodhia, statement of Shri Bhadresh Dodhia recorded under section 132(4) and Investigation Wing report. The assessee has placed on record Confirmation from lender, PAN, MCA master data showing active status, bank statements, ledger accounts, repayment through banking channel. Under section 68, the assessee must establish Identity, Creditworthiness and Genuineness of transaction. In Vasupujya Filaments (para 22), the Co-ordinate Bench held that where PAN, confirmations, bank statements and repayment details are furnished, the initial onus stands discharged, and the burden shifts to the Revenue to establish that the transaction is sham. The Co-ordinate Bench further held that merely because the lender was found to be controlled by entry operators, it does not (26) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia automatically lead to addition unless there is direct evidence showing that the assessee introduced its own unaccounted money. In the present case, we find that no evidence of cash trail has been brought on record. There is no material demonstrating that cash was paid at the time of receipt or that repayment was preceded by cash deposits. The addition rests primarily on general modus operandi and third-party statements.

The Revenue relies heavily upon statements recorded under section 132(4). It is settled that such statements have evidentiary value. However, the law equally requires corroboration when the statement is retracted.In CIT vs Sunil Aggarwal [64 taxmann.com 107 (Delhi)], the Hon’ble Delhi High Court held that retracted statement requires corroboration for sustaining addition. In the present case, Shri Bhadresh Dodhia retracted his statement by affidavit dated 08.03.2020. The Revenue contends that the retraction was delayed. We find that apart from the statement, no independent material has been brought on record establishing that the assessee received accommodation entry in the impugned assessment year. As held in Vasupujya Filaments (para 24), addition cannot be sustained solely on general statements of alleged entry operators without linking evidence. Thus, while statement under section 132(4) carries weight, in absence of corroborative material connecting the assessee’s specific transaction to alleged cash routing, addition under section 68 cannot be sustained merely on such statements.

The assessee argues that the seized papers are ―dumb documents‖. In PravinbhaiKeshavbhai Patel [2014] 45 taxmann.com 533 (Ahmedabad) as relied by Revenue, the Co- ordinate Bench held that a duly stamped, signed document reflecting amount and details cannot be termed dumb document. However, the principle that emerges is that loose sheets without corroboration cannot be sole basis of addition unless supported (28) IT(SS)A No. 2226, 2223, 2222 & 2225/Mum/2025 & Mansukhlal Meghji Dodhia by independent material. In the present case, no evidence of actual cash receipt has been brought on record. No lender has been examined to prove actual cash disbursement. Thus, the seized documents, even if treated as hundis, require corroboration.

We now examine the applicability of the decisions rendered by the Co-ordinate Benches in the cases of Vasupujya Filaments and Chandrika MansukhlalDodhia to the facts of the present batch of appeals. It is an undisputed position that the search action dated 27.11.2019 forms the foundation of all these proceedings and that the lender, M/s Vinam Finance Pvt. Ltd., as well as the statements recorded during the course of search and investigation, are common to the present appeals and to the aforesaid group cases. In Chandrika Mansukhlal Dodhia (paras 5.1 to 7), the Co-ordinate Bench specifically examined the legal position governing assessments under section 153A and reiterated that, in the case of completed or unabated assessments, no addition can be sustained unless it is founded on incriminating material discovered during the course of search. The factual matrix in the present appeals being materially identical, particularly with respect to the search action, the nature of alleged transactions, and the reliance placed on statements and investigation material, the principle of judicial discipline and consistency mandates that a similar view be adopted unless distinguishing features are demonstrated, which are not forthcoming in the present case.

For Assessment Year 2016-17, even on merits, the assessee having discharged the primary onus under section 68 and in absence of cogent evidence demonstrating introduction of unaccounted money, the addition of Rs. 1,00,00,000/- under section 68 and corresponding additions under section 69D, if any, are deleted.

In the result, the appeals filed by the assessee for Assessment Years 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 are allowed.

Consequently, the Stay Applications filed for the aforesaid assessment years, being rendered infructuous in view of the decision on merits, are dismissed as such.