NIRMAN,AHMEDABAD vs. DCIT, CIRCLE-2(1)(1),, AHMEDABAD

4. For the sake of ready reference, the reasons recorded for reopening the case are reproduced here asunder:-

“BASIS OF FORMING REASON TO BELIEVE AND DETAILS OF ESCAPEMENT OF INCOME: As per the information received from Dy. Director of Income-Tax(Inv.), Unit- 1(3), Ahmedabad, a search u/s 132 of the Act was carried out on 11.09.2018 in the case of Sanjay Shah and Jignesh Shah of Ahmedabad (JSSS hereinafter) The search resulted into seizure of unaccounted cash of Rs. 19.37 Crores (related to accommodation entries and commission earned thereon) along with incriminating digital as well as documentary evidences. Clandestine record of unaccounted cash, synchronized trading, proving bogus LTCG in various BSE listed scripts and transport of such cash through angadiyas was found to be maintained in secret Tally Data file - 3– Nirman Vs. DCIT Asst. Year : 2014-15 with company name "123". In this secret file, against transactions of shares on BSE platform, movement (angadiya) and delivery (recd) of cash is recorded. Furthermore, the receipt of commission in cash is also recorded under the head "LTCG COMMISSION The evidences manifest that this is the record of accommodation entries of LTCG against receipt of cash. The evidences demonstrate that accommodation entry provider duo has resorted to synchronized trading in shares of various listed companies, because it is only through synchronized trading that the sellers are ensured accommodation entry of bogus LTCG against cash and the buyers are ensured delivery of cash against such pre-determined purchase of shares. The buy and sell parties are well planned in this transaction, as only in such scenario, the cash is assured to the buyer and sale proceeds of shares are assured in the bank account linked with the demat account of seller. This is conclusive evidence of bogus LTCG and synchronized trading. Furthermore, other kind of Digital Data including incriminating MS Excel files, incriminating Word Files, Whatsapp Chats/Images and documents including Khata-Bahis were also found and duly analyzed. Stamps and bank accounts of various persons were also found in possession of accommodation entry provider duo. During recording of their statements and by filing affidavits, various dummy directors admitted that they were merely signing documents on directions of operators. They admitted of being involved in providing accommodation entries of LTCG, Loss, Unsecured Loans etc. Data analysis coupled with circumstantial evidences led to discovery that 15 BSE listed scrips have been used for generating bogus LTCG and contrived losses. During investigation, sample trail of funds was also established wherein the infrastructure of shroffs and angadiyas was used by the duo for routing unaccounted funds of beneficiaries. The duo also admitted being involved in providing accommodation entries including bogus LTCG and contrived losses. On perusal of information so received, it is noticed that the assessee is one of the beneficiaries who has obtained accommodation entry of Rs. 1,00,00,000/- in the form of fictitious loan from Shri Jignesh Shah wherein a search action was carried out by the Investigation Wing of Ahmedabad which is required to be brought to tax. Failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment, the income of the assessee has escaped assessment to the tune of Rs. 1,00,00,000/- for the AY 2014-15 within the meaning of Section 147 of the Income-tax Act, 1961. I have, therefore, reason to believe that this is a fit case for reopening the assessment u/s. 147 of the Act and for issue of notice u/s, 148 of the Income-tax Act, 1961.

3. In view of the above, you may submit your response with supporting documents (if any) on the above mentioned issues to undersigned electronically in 'E-proceedings' facility through your account in e- - 4– Nirman Vs. DCIT Asst. Year : 2014-15 Filling website (www.incometaxindiaefiling.gov.in) at your convenience on or before 03/06/2021 ….”

5. Against the notice of reopening, the assessee has raised objections by way of its letter dated 31st May 2021, which reads as under:-

“…… ……. (1). We have objections against your re-opening of assessment proceedings and issuance of notice u/s 148 dated 30-03-2021 on following grounds:-

1) You have provided only reasons recorded the Assessing Officer who was in charge of the case at that time. You have not provided copy of permission/satisfaction obtained from your higher authority. Thus, it is not clear that whether due process of law as stipulated by the Income Tax Act is followed or not. We request you to provide us copy of recorded reasons duly signed by you the Assessing Officer at the relevant time and also showing the date of his signing. We also request you to provide us duly signed copy of satisfaction / permission obtained from higher authority. In other words, we request you to provide us scan xerox copies of the said documents, reasons and authorization, showing the actual signatures and dates of signing. From the reason given by you, how one can know on which dates reasons were recorded and who had given the permission and on which dates? Thus, you are not providing proper evidences showing that due process stipulated by law is followed or not for re-opening of our case for A.Y. 2014-15. 2) You are conducting proceedings based on reasons recorded by another officer. Your proceedings suffer from change of opinion and lack of application of mind and is invalid. 3) Your inquiry is based on the statements of Shuri Sanjay Shah and Shri Jignesh Shah, third party, referred into the information received from Dy. Director of Income Tax (Iny.). Unit-1(3), Ahmedabad, You have not provider copies of statements of Shri Sanjay Shah and Siri Jignesh Shah 4) On merits also, we would like to draw your kind attention to the fact that information on the basis of which you have recorded reason for reopening the assessment for A.Y. 2014-15 is completely wrong. You have mentioned in the reasons as under: "On perusal of information so received, it is noticed that the assessee is one of the beneficiaries who has obtained accommodation entry of Rs.

- 5– Nirman Vs. DCIT Asst. Year : 2014-15 1,00,00,000/- in the form of fictitious loan from Shri Jignesh Shah wherein a search action was carried out by the Investigation Wing of Ahmedabad which is required to be brought to tax. Failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment, the income of the assessee has escaped assessment to the tune of Rs. 1,00,00,000/- for the AY 2014-15 within the meaning of Section 147 of the Income-tax Act, 1961. 1 have, therefore, reason to believe that this is a fit case for reopening the assessment u/s. 147 of the Act and for issue of notice u/s. 148 of the Income-tax Act, 1961." We have to submit that during the year, we have no any transaction of any amount and / or any accommodation entries of Rs. 1,00,00,000/- from Shri Jignesh Shah in the form of unsecured loan or on any other form. This can be verified by you from the audited accounts and audit reports filed with you. Information on which you have relied is completely wrong and baseless and reopening of assessment based on reasons recorded on such wrong information is not tenable in law and invalid.

We submit that inference drawn by you can not be derived from wrong information received by you and you are simply resorting to roving and fishing inquiry. We submit that this is bad and not permissible under law.

(II). We request you to provide us following: (ii) Copies of statements of Shri Sanjay Shah and Shri Jignesh Shah. (iii) Scan/ xerox copies of the reasons recorded for reopening and authorization showing the actual signatures and dates of signing as asked at para 1 above. (III). In case you decide to proceed further, we also request you to give us an opportunity to cross examine the said Shri Sanjay Shah and Shri Jignesh Shah. In view of above, we submit that your reopening proceeding is completely illegal and bad in law and we request you to close the proceedings. In case you decide to continue the proceedings, provide us copies of documents asked by us at Para (II) above and also request you to dispose off our objections by passing a speaking order before proceeding further in the matter and provide us …..”.

6. Subsequently, the Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the Act, making disallowance u/s 69A of the Act of Rs.1,00,00,000/- by observing as under:-

- 6– Nirman Vs. DCIT Asst. Year : 2014-15 “The assessee filed its return of income for A.Y. 2014-15 on 06.09.2014 declaring total income of Rs. 20,06,810/-. On carefully examining the information received from DDIT(Inv), 1(3), Ahmedabad and also on perusal of the same, it is seen that a search action u/s. 132 of the Act was carried out in the case of Jigar Shah and Sanjay Shah/Shroff of Ahmedabad. It is further worth to mention that the above persons are managing and controlling multiple companies and concerns which are not carrying out any genuine business activity and involved in providing accommodation entries of various kinds such as unsecured loans, share premiums, penny scripts, bogus gains, contrived losses etc. It is found that as per data available on the records, such companies/concerns were found to be non- existent at their respective addresses. Moreover, above mentioned companies/concerns are not carrying out genuine business activities. On perusal of the information, it is found that the assessee is one of the beneficiaries who has availed /obtained accommodation entries of Rs. 1,00,00,000/- under various head from various concerns who are controlled and managed by above persons.

3. Information was received from the DDIT(Inv.), Unit-1(3), Ahmedabad. As per the information a search action u/s. 132 was conducted on 11.09.2018 in the case of Sanjay Shah and Jignesh Shah of Ahmedabad(JSSS). The search resulted into seizure of unaccounted cash of Rs. 19.37 crores(related to accommodation entries and commission earned thereon) alongwith incriminating digital as well as documentary evidences. Clandestine record of unaccounted cash, synchronized trading, providing bogus LTCG in various BSE listed scrips and transport of such cash through angadiyas was found to be maintained in secret Tally Data file with company name “123”.

- 7– Nirman Vs. DCIT Asst. Year : 2014-15 In this secret file, against transactions of shares on BSE Platform, movement (angadiya) and delivery(recd) of cash is recorded. Furthermore, the receipt of commission in cash is also recorded under the head “LTG COMMISSION”. The evidences demonstrate that accommodation entry provided duo has resorted to synchronized trading in shares of various listed companies, because it is only through synchronized trading that the sellers are ensured determined purchase of shares. The buy and sell parties are well planned in this transaction, as only in such scenario, the cash is assured to the buyer and sale proceeds of shares are assured in the bank account linked with the demat account of seller. This is conclusive evidence of bogus LTCG and synchronized trading. During search proceedings, Jignesh Shah and Umang Shah(Accountant of Sanjay Shah) have also admitted that the script has been used for providing accommodation entries of bogus LTCG against cash from beneficiaries.

- 8– Nirman Vs. DCIT Asst. Year : 2014-15

(i) Shri Sanjay Shah and Shri Jignesh Shah are directors in few concerns only. However, through various dummy directors/proprietors, they control, operates, and manages a large no of concerns. (ii) The entities managed by Shri Jignesh Shah and Sanjay Shah are not carrying out any genuine business without any employed persons except the few common accountants who manage accounts and banking transactions. (iii) This concern was indulged in the activity of providing accommodation entries only.

(iv) The search operation unearthed valid material that discredits and impeaches the particulars furnished by the assessee and it has also been expressly established the link between self-confessed “accommodation entry providers”, Sanjay Shah and Jignesh Shah and others whose business was to help assessees bring into their books of account their unaccounted monies through the medium of penny stock shares of non-genuine entities. The involvement of the assessee in such modus operandi is clearly indicated by valid material available as a result of investigations carried out by the Investigation Wing into the activities of such ‘entry providers’.

7. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee, observing that assessee was a beneficiary of accommodation entries. The Ld. CIT(A) held as under:-

“2. The grounds of appeal object to addition of Rs.1,00,00,000/- u/s 69A as unexplained money of the assessee. 2.1 On carefully examining the information received from DDIT(Inv), 1(3), Ahmedabad and also on perusal of the same, it is seen that a search action u/s. 132 of the Act was carried out in the case of Jigar Shah and Sanjay Shah/Shroff of Ahmedabad. It is further worth to mention that the above persons are managing and controlling multiple companies and concerns which are not carrying out any genuine business activity and involved in - 9– Nirman Vs. DCIT Asst. Year : 2014-15 providing accommodation entries of various kinds such as unsecured loans, share premiums, penny scripts, bogus gains, contrived losses etc. 2.2 On perusal of the information, it is found that the assessee is one of the beneficiaries who has availed /obtained accommodation entries of Rs. 1,00,00,000/- under various head from various concerns who are controlled and managed by above persons. 2.3 On perusal of information, it is found that the assessee, is one of the beneficiaries and made transactions during F.Y. 2013-14 relevant to A.Y. 2014-15. The information disseminated by the Investigation wing in respect of the transaction made by the assessee in penny stock is self-explanatory. It is thus clear that the assessee had entered into share transaction of Rs. 1,00,00,000/- in penny scripts managed controlled by Shri Jignesh Shah through fabricated trading with a view to ultimately reduce tax liability. Thus, it is clear that the amount of Rs. 1,00,00,000/- had escaped assessment. The reply of the assessee that he has not received any loan from Shri Jignesh Shah is baseless which is nothing but a desperate attempt to protect the interests of the various clients/beneficiaries of the accommodation entries. The addition of Rs. 1 crore u/s 69A r.w.s. 115BBE as unexplained money is confirmed.

3. The appeal filed by the assessee is dismissed.”

- 10– Nirman Vs. DCIT Asst. Year : 2014-15

With regard to the reopening of assessment u/s 148, we find that the reopening as well as the consequential assessment is passed entirely on information received from the Investigation Wing in relation to search proceedings conducted in the cases of Shri Sanjay Shah and Shri Jignesh Shah. However, beyond reproducing the modus operandi allegedly adopted by the said persons, the Assessing Officer has not brought on record any incriminating material, document or evidence which directly links the assessee with the alleged accommodation entry transactions. The reasons recorded merely state that “the assessee is one of the beneficiaries” without disclosing how, on what basis and on the strength of which evidence such a conclusion has been drawn. The expression “beneficiary” is used as a label, not as a finding supported by material evidence in the case of the assessee. The date of receiving of loan, amounts, cheque number, bank account from which the cheques have been issued, bank account in which the cheques have been encashed are flagrantly missing. Such reopening, based on vague and non-specific information, reflects borrowed satisfaction and not an independent formation of belief as required under section 147 of the Act.

11.1 We also find blatant inconsistencies in the stand of the Assessing Officer viz. in the reasons recorded for reopening, the allegation is that the assessee received a fictitious unsecured loan of Rs.1,00,00,000/- from Shri Jignesh Shah. However, in the assessment order, the nature of transaction is shifted to penny stock transactions resulting in bogus gains. This shifting of stand clearly demonstrates that the Assessing Officer himself was uncertain about the very nature of the alleged escapement of income. An assessment cannot be sustained on such changing and contradictory allegations, as they strike at the root of jurisdiction as well as merits. Even if it is treated as LTCG, on going through the ITR we find that assessee has not claimed any LTCG or long term capital loss. At - 11– Nirman Vs. DCIT Asst. Year : 2014-15 places, the Assessing Officer mentions accommodation entries, at places it is mentioned as loan and finally assessed as LTCG which the assessee has never claimed. We also find that no loan has been received by the assessee as per the balance-sheet or the bank account. Even if it is assumed that, if not Jignesh Shah, it is the entities controlled by Jignesh Shah who provided fictious loan or gains, there was no such evidence on record or not even an iota of information directing to these transactions.

11.2 In the absence of any evidence of receipt or ownership of money, we hold that the addition has been erroneously made. For invoking section 69A, it is incumbent upon the Assessing Officer to establish that the assessee is the owner of money, bullion, jewellery or other valuable article which is not recorded in the books of account. The basic condition precedent for invoking section 69A remains unfulfilled. In the present case, i. No cash or money has been found in the possession of the assessee; ii. No bank entry evidencing receipt of ₹1 crore has been identified; iii. No seized document refers to receipt of money by the assessee; iv. No transaction trail has been established.

11.3 Further, we find that the Revenue has heavily relied upon statements of Shri Sanjay Shah and Shri Jignesh Shah and other third parties recorded during search proceedings. However, it is an admitted position that copies of such statements were not supplied to the assessee despite specific request till the completion of assessment and the appellate proceedings. It is incumbent upon the Revenue to at least supply the assessee with the material collected. We find that Assessment Order is largely a reproduction of the Investigation Wing report describing the general modus operandi of accommodation entry providers. The Assessing Officer has not carried out any independent enquiry or verification with reference to the assessee’s books of account, bank statements or audited financials during the assessment proceedings, if not at the time of re- - 12– Nirman Vs. DCIT Asst. Year : 2014-15 opening. Such an approach does not meet the statutory requirement of an assessment being framed after due application of mind and bringing the relevant evidences on record.

11.4 It is deplorable that the Ld. CIT(A) has confirmed the addition in a summary and mechanical manner, without addressing the specific contentions raised by the assessee. The Ld. CIT(A), being a quasi-judicial authority, was duty- bound to independently evaluate the material and render reasoned findings. The failure to do so renders the appellate order unsustainable. The appellate order merely reiterates the findings of the Assessing Officer without examining absence of assessee-specific evidence, incorrect assumption of facts, applicability of section 69A of the Act. We strongly condemn the action of the Assessing Officer and that of the Ld. CIT(A) in dealing with the tax issues and stop short of levying any cost and leave the matter of augmenting the efficiency, educating and training of their higher administration.

11.5 Since the reopening is based on vague and non-specific information, the assessment is framed without any evidence establishing receipt or ownership of unexplained money and since the Ld. CIT(A) has mechanically confirmed an unsustainable addition, we hold that the addition of Rs.1,00,00,000/- made u/s 69A of the Act is directed to be deleted.

The order is pronounced in the open Court on 13.02.2026. (SIDDHARTHA NAUTIYAL) VICE-PRESIDENT Ahmedabad; Dated 13.02.2026 **btk - 13– Nirman Vs. DCIT Asst. Year : 2014-15