Loading judgment…
Facts
The assessee's assessment for A.Y. 2014-15 and 2015-16 was reopened based on information alleging fictitious loans of Rs. 47,41,600/- and Rs. 55,18,875/- respectively, from an entry operator, Shri Jignesh Shah. The Assessing Officer made additions to the assessee's income, treating these as accommodation entries, and the CIT(A) upheld these additions.
Held
The Tribunal found that the reopening was based on incorrect information because the assessee consistently denied receiving any loans from Shri Jignesh Shah or his entities and provided bank statements and loan details to support this. Since the AO failed to provide any counter-evidence, the Tribunal concluded that the reopening notices under Section 148 and the subsequent assessments were invalid and quashed them.
Key Issues
Whether the reopening of assessment under Section 147 and the subsequent additions based on alleged fictitious loans are valid when the assessee denies the transactions and provides evidence, and the Assessing Officer fails to bring counter-evidence on record.
Sections Cited
Section 147, Section 144B, Section 143(3), Section 143(1), Section 148, Section 151
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
& 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 2 – identical, both the matters were heard together and are being disposed of vide this common order for the sake of convenience.
2. We shall first take up the appeal in for A.Y. 2014-15.
ITA No.1688/Ahd/2025 : A.Y. 2014-15.
Brief facts of the case are that the assessee had filed its return of income for A.Y. 2014-15 on 29.09.2014 declaring income of Rs.13,95,430/-. The case was reopened u/s.147 of the Act on the basis of information received from the Investigation Wing reflected on Insight Portal of the Department that the assessee had taken accommodation entry of Rs.47,41,600/- during the year in the form of fictitious loan from one Shri Jignesh Shah. In the course of assessment, the assessee had denied having taken any loan from Shri Jignesh Shah or the entities controlled by him. The AO, however, did not accept the explanation of the assessee and the alleged loan of Rs.47,41,600/- taken from Shri Jignesh Shah was held accommodation entry and added to the income. The assessment was completed u/s.147 r.w.s. 144B of the Act on 30.03.2022 at total income of Rs.61,37,030/-.
4. Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
& 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 3 –
Now, the assessee is in second appeal before us. The following grounds have been taken in this appeal:
“1. The Learned CIT (Appeals) has erred in law and on facts in confirming the action of A.O. reopening of appellant's case invoking the-provisions Section 147 of the Ac. It is submitted that there is no escapement of income or default on part of appellant at any stage of proceeding. On facts and circumstances of the case, the whole reopening of assessment is bad in law and void-ab-initio and thus the order passed by lower authorities deserves to be set a aside and order passed by Ld AO. u/s 143(3) rws 147 deserves to be quashed.
2. The Learned CIT (Appeals) has erred in upholding the action of AO reopening the case of Appellant without any basis or justification. It is submitted that the reasons recorded itself is Incorrect, formed relying upon Incorrect information with incorrect assumption of fictitious loan transactions and it has no nexus or relevance with Appellant's case. On facts and circumstances of the case, the entire reopening of assessment is completely illegal and unjustifiable and therefore the Assessment order passed u/s 147 rws 143(3) of the Act be quashed and set aside accordingly. The same be held now.
3. The learned CIT(A) has erred in confirming the addition made of Rs. 47,41,600/-on account of fictitious loan transactions from the companies managed by Jignesh Shah and Sanjay Shah. It is submitted that the Appellant has filed complete details with relevant books of accounts and documentary evidences justifying that no such alleged loan transaction has ever been entered into by Appellant with Jignesh Shah or Sanjay Shah or with any other related concern. It is therefore submitted the entire addition made blindly, without bringing any evidences on record and thus is absolutely illegal and unjustifiable. In view of this the addition made of Rs 47,41,600/-be deleted in the interest of justice.
4. The Order passed by the learned CIT(A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.
5. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing of appeal.”
Shri Sulabh Padshah, Ld. AR of the assessee submitted that the case was reopened on the basis of information that the & 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 4 – assessee had obtained loan of Rs.47,41,600/- from Shri Jignesh Shah, an accommodation entry provider. He submitted that the assessee had out-rightly denied having taken any loan from Shri Jignesh Shah or entities controlled by him. Under the circumstances, the AO was not correct in making the addition without bringing any evidence regarding the alleged loan taken from Shri Jignesh Shah. He submitted that the case was reopened on incorrect facts and, therefore, the reopening of the assessment was bad in law and void ab initio. He further submitted that the assessee had filed complete details in respect of the loans obtained by the assessee and the name of Shri Jignesh Shah or Shri Sanjay Shah or any other related concern was not appearing therein. The Ld. AR emphasized that the AO had made the addition blindly without bringing any evidence on record and, therefore, the addition as made by the AO should be deleted. Ld. AR relied upon the following decisions in this regard:
“1. Vertool Consultancy LLP Vs. DCIT, Circle-2(1)(1), Nadiad, (ITAT Ahmedabad), (Order date: 16-05-2025) 2. Varshaben Sanatbhai Patel Vs. ITO, Special Civil Application Nos. 12873 & 12875 OF 2014 (Gujarat High court) (Order date: 13-10-2015) 3. Bhavi Leasing & Finance Ltd. Vs. ITO, Ward-1(1) Baroda, (ITAT Ahmedabad), (Order date: 19- 10-2022) 4. Amrit Brakewell Products Pvt Ltd Vs. ITO, Ward-2(3), New Delhi, (ITAT Delhi) (Order date: 02- 05-2023) 5. Neel Builders Pvt. Ltd. Vs. ITO Ward 18(1), New Delhi, ITA.No.6336/Del./2019, (ITAT Delhi) (Order date: 02-12- 2020)
& 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 5 –
6. Luxe Trading and Holding (India) Pvt. Ltd. Vs. Ito, Ward 15(4), New Delhi, (ITAT Delhi) (Order date: 14-08-2019)”
Per contra, Shri Yogesh Mishra, Ld. Sr. DR relied upon the order of the lower authorities.
We have considered the rival submissions. It will be relevant to consider the reason for which the case was reopened by the AO. A copy of the reason has been brought on record in the paper book filed by the assessee and the reason as recorded by the AO is found to be as under:
“1. Brief details of the assessee: As per the details available on record/ITBA system, the assessee has filed return of income for the A.Y- 2014-15 on 29.09.2014.
Brief details of Information collected/received by the AO: In this case, information was reflected on Insight Portal. On verification of the information, it is noticed that assesse entered into transaction as fictitious loan (Entry operator beneficiaries) of Jignesh Shah Dissemination amounting to Rs. 4741600/- during the year under consideration.
3. Basis of forming reasons to believe and details of escapement of income: On perusal of the details and information, it is very clear that the assesse assessee had made transaction as fictitious loan (Entry operator beneficiaries) of Jignesh Shah Dissemination amounting to Rs. 4741600/- during the year under consideration. In view of the above facts, I have reason to believe that income of Rs. 4741600/- has escaped assessment within the meaning of section 147 of the Act. Therefore it is a fit case for reopening of the assessment by invoking the provision of section 147 of the I.T. Act 1961. Accordingly, it is fit case for issuing notice u/s. 148 of the I.T. Act.
Applicability of the provisions of section 147/151 to the facts of the case: In view of above findings, I have reasons to believe that this is a case where income chargeable to tax has escaped assessment & 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 6 –
by an amount of Rs.2503550/- and it is a fit case for reopening the assessment as the income chargeable to tax has escaped within the meaning of section 147 of the Act. In this case, a return of income was filed for the year under consideration, but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded in above paras. It is pertinent to mention here that in this case, the assessee has filed return of income for the year under consideration, but no assessment as stipulated u/s 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the Act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to the facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have been lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s. 148 has been obtained separately from Pr. Commissioner of Income Tax as per the provisions of Sec. 151 of the Act.”
It is noted from the above reason that the only information available with the AO was fictitious loan of Rs.47,41,600/- taken from an entry operator provider Shri Jignesh Shah. In the course of assessment, the assessee had denied having taken any loan from Shri Jignesh Shah or Shri Sanjay Shah. The submission made by the assessee vide letter dated 09th March, 2022 in response to notice u/s.142(1) of the Act is found to be as under:
“3. Fictitious Loan of Jignesh / Sanjay Shah Rs. 4741600/- In respect with the details sought for the loan taken from Jignesh Shah/Sanjay Shah we are replying as under:- a. I have not received any amount from any person named Sanjay or Jignesh Shah. If the Assessing Officer has made any further investigation in the matter or has any other information with him, then the same may please be shared with me so that I can reply to that. In absence of that, the fact of the matter is that there is no & 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 7 – transaction between my HUF and Jignesh Shah or Sanjay Shah of any manner. b. I would also like a copy of statement or document, if any, where by my name is appearing in the records or statements or books of Jignesh Shah or Sanjay Shah. c. The nature of the transaction entered into is also mentioned as "fictitious loan" taken. But as a matter of fact I have not taken a loan of a single rupee from anyone by the name of Jignesh Shah or Sanjay Shah or anyone related to that person in the relevant financial year. d. Copy of my bank book for that year is attached herewith to prove it that I have not received any loan from any person named Sanjay or Jignesh Shah. e. Also attached is the list of parties from whom loans have been taken. There is no mention of any person or any amount resembling or equivalent to the details provided in your notice.”
It is evident from the above reply that the transaction in the form of fictitious loan from Shri Jignesh Shah or Shri Sanjay Shah or any other entity was not only denied but the assessee had requested the AO to provide the documents and copy of statement in this regard. The assessee had also furnished a copy of bank book as well as the detail of unsecured loans as appearing in its books of accounts. From the copy of bank statement brought on record, it is found that no amount was received from Shri Jignesh Shah or Shri Sanjay Shah. Neither their name was appearing in the list of persons from whom unsecured loan was taken by the assessee. The only entity appearing in the bank statement is Saumya Fincap, to whom certain funds were advanced and on which the assessee had received interest. Considering the materials as brought on record by the assessee in the course of assessment proceeding, it is crystal clear that no loan of Rs.47,41,600/- was received by the assessee from Shri Jignesh Shah or Shri Sanjay Shah or any entity controlled by them. In & 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 8 – view of these facts, the reopening as done by the AO is found to be on the basis of incorrect information. No addition could have been made in the course of assessment without controverting the evidences brought on record by the assessee. There was no material available on record to establish that the assessee had taken loan of Rs.47,41,600/- from Shri Jignesh Shah or Shri Sanjay Shah or any entity controlled by them, which was the basis for issuance of notice for reopening. Considering the fact that the assessee did not obtain any loan Shri Jignesh Shah and no evidence in this regard was brought on record by the AO; not only the reopening was invalid but no addition was called for on account of bogus loan. Accordingly, we quash the notice issued u/s.148 of the Act and consequently the assessment completed in pursuance thereto, is also quashed. The grounds taken by the assessee are allowed.
In the result, the appeal of the assessee for A.Y.2014-15 is allowed.
ITA No.1689/Ahd/2025 – A.Y. 2015-16
The facts involved in A.Y. 2015-16 are identical to for A.Y. 2014-15. The case of this year was reopened to examine the fictitious loan of Rs.55,18,875/- taken from Shri Jignesh Shah. The assessee had not only denied the loan transaction but also brought on record evidences to establish that no loan was taken from Shri Jignesh Shah or Shri Sanjay Shah or any entity controlled by them. Considering these facts, & 1689/Ahd/2025[Shah Mahendrakumar Mafatlal (HUF) vs. ITO] A.Ys. 2014-15 & 2015-16 - 9 – the decision taken by us in is applicable mutatis mutandis to this year as well. Accordingly, the reopening done for the A.Y. 2015-16 is quashed and the appeal of the assessee is allowed.
In the combined result, both the appeals filed by the assessee are allowed.
This Order pronounced on 06/01/2026
Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 06/01/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,