AEON COMMERCIAL INDIA PRIVATE LIMITED, MUMBAI,MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 15(1)(1), MUMBAI, MUMABI

The Assessing Officer, however, held that the assessee failed to establish the identity, creditworthiness and genuineness of the creditors. Relying upon the investigation findings and statement of CA Sanjay Shah recorded under section 132(4), the Assessing Officer concluded that the transactions were accommodation entries in the garb of unsecured loans. Accordingly, he treated the sum of Rs. 1,18,69,619/- as unexplained cash credit under section 68 of the Act and added the same to the total income. The assessed income was determined at Rs. 1,79,06,769/-. Penalty proceedings under section 270A were also initiated.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). Before the first appellate authority, the assessee challenged both the validity of reopening as well as the addition on merits. It was contended that the reopening was based on borrowed satisfaction, approval under section 151 was mechanical, and the assessee was not afforded opportunity of cross-examination of CA Sanjay Shah. On merits, it was submitted that no amount had been received from the alleged parties during the year under consideration and that section 68 could not be invoked in the absence of any fresh credit.

The CIT(A), however, upheld the reopening and the addition. He observed that the information received from the Investigation Wing constituted tangible material for reopening and that the Assessing Officer had followed due process. On merits, the CIT(A) held that the lenders were part of the accommodation entry network controlled by CA Sanjay Shah and that the assessee failed to discharge the onus under section 68 of the Act. He further observed that routing of transactions through banking channels and deduction of tax at source did not establish genuineness. Accordingly, the CIT(A) confirmed the addition of Rs. 1,18,69,619/- under section 68 of the Act and dismissed the appeal.

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

That the notice issued u/sec 148 of the Act and the approval as given u/sec 151 of the Act is bad in law, since the notice as well as approval do not carry either manual signatures or digital signatures as held by the Hon'ble Jurisdictional Bench in the case of J Kumar Infraprojects Ltd vs DCIT as reported in 176 taxmann.com 193 vide order dated 03.07.2025. Additional grounds on merits 3. That the CIT(A) has erred in confirming the action of the Assessing Officer in making the addition of Rs. 1,18,69,619/- by ignoring the fact that no credit has been received from the alleged parties during the year under consideration.

That the case of the Assessee is squarely covered by the Judgment of the Hon'ble Bombay HC in the case of Ivan Singh vs ACIT as reported in 116 taxmann.com 499 and also by the Judgment of the Hon'ble Mumbai Bench in the case of Anandmangal Investment & Finance Pvt Ltd vs ITO in order dated 18.09.2025.

It was further submitted that the Assessing Officer reopened the assessment merely on the basis of borrowed information without any independent application of mind and after obtaining approval under section 151 in a mechanical manner. It was also submitted that the notice under section 148 was issued by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer, rendering the reopening proceedings invalid in law.

It was also submitted that it is a matter of record that the amount treated as unsecured loan by the Assessing Officer has already been repaid majorly, which is evident from the charts placed on record. Therefore, under such circumstances, no addition can be sustained in the hands of the assessee in respect of the same amount.

It was also pointed out that for Assessment Year 2019–20, similar addition has already been made by the Assessing Officer and the appeal for that year is pending before the CIT(A), and therefore, making the same addition again in the present year amounts to taxing the same amount twice. Accordingly, it was contended that both the reopening as well as the addition under section 68 are bad in law and on facts, and the same deserve to be quashed.

The learned Departmental Representative, on the other hand, relied upon the orders of the Assessing Officer and the Aeon Commercial India Private Limited CIT(A). He submitted that the reopening of the assessment was made on the basis of information received pursuant to search action and the statement recorded during the course of search, which constituted tangible material for forming belief that income had escaped assessment.

We have heard the rival submissions and perused the material available on record. The core issue for our consideration is whether the addition of Rs. 1,18,69,619/- made under section 68 of the Act can be sustained in the facts and circumstances of the present case.

It is an admitted position emerging from the record that the Assessing Officer proceeded on the premise that the assessee had received accommodation entries aggregating to Rs. 1,18,69,619/- from three concerns, namely, M/s Indian Infotech & Software Ltd., M/s Shivom Investment & Consultancy Ltd. and M/s Consultshah Financial Services Pvt. Ltd. during the previous year relevant to Assessment Year 2020–21. However, the assessee has consistently contended, right from the stage of assessment proceedings, that no fresh credit was received from any of the said parties during the year under consideration and that the entries reflected either repayment of earlier amounts or credit of interest.

The assessee placed on record the ledger accounts of the said three parties, which form part of the paper book. A perusal of the said ledger accounts clearly shows that the amounts were Aeon Commercial India Private Limited originally received in earlier assessment years, namely, Assessment Years 2018–19 and 2019–20, and that during the relevant previous year there is no credit entry representing receipt of loan or advance from the said parties. What is reflected in the books of account for the year under consideration is either repayment of principal or accounting of interest. Thus, the factual foundation on which the Assessing Officer proceeded, namely, that the assessee had received fresh accommodation entries during the year, is not borne out from the record.

It is well-settled that the provisions of section 68 of the Act can be invoked only in respect of a sum credited in the books of the assessee during the relevant previous year. In the absence of any such credit entry in the year under appeal, the very jurisdictional fact for invoking section 68 fails. The Assessing Officer has not brought on record any material to controvert the ledger accounts produced by the assessee or to demonstrate that any amount was, in fact, received by the assessee from the said parties during the year under consideration. The addition has been made merely on the basis of information received from the Investigation Wing and the statement recorded during the course of search, without correlating the same with the actual entries appearing in the books of the assessee for the relevant year.

We also find merit in the contention of the assessee that similar addition has already been made in Assessment Year 2019–20 in respect of transactions with the very same parties Aeon Commercial India Private Limited and the appeal for that year is pending before the first appellate authority. In such a situation, making the same addition again in the present year, when no fresh credit has arisen, would result in taxing the same amount twice, which is impermissible in law.

Further, the reliance placed by the Assessing Officer and the CIT(A) on the general findings of the Investigation Wing and the statement of CA Sanjay Shah does not, by itself, justify the addition in the year under consideration, unless it is shown that the assessee has received any sum during the relevant previous year. In the present case, the primary evidence in the form of ledger accounts demonstrates that no such receipt has taken place in the impugned year. In the absence of any contrary material brought by the Revenue, the addition cannot be sustained merely on surmises and general allegations of accommodation entry business.

In view of the above factual position, we hold that the addition of Rs. 1,18,69,619/- made under section 68 of the Act is not sustainable on merits, as there is no credit in the books of the assessee during the relevant previous year corresponding to the said amount. Accordingly, the addition so made by the Assessing Officer and confirmed by the CIT(A) is directed to be deleted.

Since we have decided the issue on merits in favour of the assessee, the legal grounds challenging the validity of reopening, sanction under section 151, issuance of notice under section 148 and other jurisdictional issues are not adjudicated and are left open.

In the result, the appeal of the assessee is allowed on merits.