M/S. SUPER SHIV SHAKTI MINCHEM PVT. LTD.,JODHPUR vs. ITO, WARD-3, , BHILWARA

The core grievance of the assessee pertains to the legality of the reopening of the assessment and the additions made under section 68 and section 69C. The assessee’s principal argument is that the reasons recorded by the AO for initiating proceedings under section 147 were vague, mechanical, and based entirely on information received from the Investigation Wing, without any application of mind or independent verification. It was submitted that the AO merely reproduced the content of the letter from the DDIT (Inv.), Udaipur, without establishing a live link between the alleged information and the assessee’s case. The reopening, according to the assessee, was based on “borrowed satisfaction,” which is not permissible under law.

The assessee further submitted that it had duly disclosed all relevant facts at the time of filing the original return. It was emphasized that both M/s Mihir Agencies Pvt. Ltd. and M/s Alpha Chemie Trade Agencies Pvt. Ltd., the companies which invested in the 3 assessee, were duly incorporated entities having valid PAN, were registered with the ROC, and regularly filed income tax returns. The assessee claimed to have furnished full documentary evidence in support of the share application money, including share application forms, board resolutions, confirmation letters, copies of audited financials and bank statements of the investor companies. The amounts were received through banking channels, and no defect had been pointed out in the documentation submitted. Therefore, it was argued that the burden of proof under section 68 stood discharged.

We have heard the rival contention of the parties and perused the material available on the record .Upon careful consideration of the rival contentions and the material available on record, we are of the considered view that the reassessment proceedings were validly initiated. The reasons recorded by the AO were based on specific, credible, and tangible material, including the statement of an identified entry operator, corroborated by details of transactions, amounts, and investor names. The AO is not expected to conclusively establish escapement of income at the stage of recording reasons. What is required is the existence of information that can reasonably lead a prudent officer to form a belief that income has escaped assessment. This threshold is clearly satisfied in the present case.

We are unable to accept the assessee’s argument that the reopening was based on borrowed satisfaction. The AO recorded detailed reasons which referred to the search and seizure action in the case of the Mahasagar Group, the specific role of Shri Mukesh Choksi, and the names of the very entities that invested in the assessee. This is not a case of vague suspicion or generalized information. Rather, it is a case where the assessee is explicitly named in the investigation as a beneficiary of the entry scheme. The AO was justified in acting upon such material. Upon perusal of the material available on record, it is evident that the companies M/s Mihir Agencies Pvt. Ltd. and M/s Alpha Chemie Trade Agencies Pvt. Ltd. had made substantial investments in the share capital of the assessee company during the relevant assessment year. The amounts so received were duly credited in the books of the assessee. Importantly, the Board Resolutions authorizing such investments on behalf of these companies were signed by Shri Mukesh Choksi, who has categorically admitted, in his statement recorded by the Investigation Wing, that these companies were instrumental in providing bogus share capital entries in lieu of cash. The linkage between the assessee and the Choksi group is not incidental but direct and traceable. The entities from which the assessee purportedly received share application money were not independent investors acting on commercial prudence but were controlled by an admitted entry operator, who has provided detailed explanation of the modus operandi and specifically identified the assessee as a recipient of such 5 accommodation entries. The chain of evidence — right from the entities under Shri Choksi’s control, the banking trail, the documents executed, and the admission by Choksi himself — clearly establishes a closed circuit of fraudulent capital infusion into the assessee company.

In view of this, we are of the considered opinion that the Revenue had cogent and credible material to form a reason to believe that income had escaped assessment. The satisfaction recorded by the Assessing Officer was neither mechanical nor perfunctory, but based on detailed and specific information. Therefore, the initiation of proceedings under section 147 was legally valid and does not suffer from any jurisdictional defect. The ground raised

This inference is further bolstered by direct evidentiary material obtained during the course of investigation. Notably, the statement of Shri Mukesh Choksi, recorded under due process, reveals that he operated a network of companies engaged in the provision of accommodation entries against cash payments. Among the companies identified by Shri Choksi were M/s Mihir Agencies Pvt. Ltd. and M/s Alpha Chemie Trade Agencies Pvt. Ltd., both of which are directly involved in the present case as purported investors in the assessee company. Shri Choksi’s admission not only detailed the modus operandi adopted by his group to route unaccounted money as share capital but also named these very companies as entities used for such circular transactions. This is not an isolated assertion; the additions made in the hands of Shri Mukesh Choksi and his group entities in respect of similar accommodation entry transactions have already been upheld by the Hon’ble Bombay High Court, thus lending credibility and legal weight to the findings against the assessee in the current matter. Judicial pronouncements across various High Courts and the Hon’ble Supreme Court have consistently held that in cases where the surrounding circumstances point to a colorable device or sham transaction, the mere submission of documents such as PAN cards, confirmation letters, and bank statements is not sufficient to establish the genuineness of the transaction. In Suman Poddar v. ITO [ITAT No. 302 of 2019, GA No. 3355 of 2019], the Hon’ble Calcutta High Court held unequivocally that documentary evidence alone does not prove genuineness when the transaction defies economic logic. Similarly, in Raj Bhandari v. CIT, the Hon’ble Calcutta High Court emphasized that transactions lacking commercial substance or business purpose raise a higher 7 evidentiary burden on the assessee. This position was later affirmed by the Hon’ble Supreme Court, thereby underscoring the principle that judicial scrutiny must look beyond the form and examine the substance of the transaction.

The Hon’ble Supreme Court in PCIT v. NRA Iron & Steel Pvt. Ltd. [(2019) 103 taxmann.com 48 (SC)] provided authoritative guidance on this very issue. The Court ruled that in order to discharge the onus under Section 68 of the Income-tax Act, the assessee must not only prove the identity of the investor but also establish their creditworthiness and the genuineness of the transaction. The Apex Court further clarified that mere production of PAN and bank statements is not sufficient when the transaction appears commercially irrational or lacks substance. This precedent is particularly significant in the present case, where all three elements identity, creditworthiness, and genuineness are in question.

The assessee’s contention regarding the denial of the opportunity to cross- examine Shri Mukesh Choksi is also devoid of merit. It is well-settled law that income-tax proceedings are quasi-judicial in nature and are not governed by the strict procedural rules of the Indian Evidence Act, which apply to civil or criminal trials. While the right to cross-examination is a part of natural justice, it is not absolute in income-tax matters and must be contextualized. In the present case, Shri Choksi’s statement was given voluntarily before a statutory authority and was detailed, implicating not only himself but also the specific companies and modus operandi involved in providing accommodation entries. The assessee was duly made aware of the reliance placed on these statements and had multiple opportunities, including during assessment and appellate proceedings before the CIT(A), to present a credible rebuttal. No substantive or plausible rebuttal was furnished. Moreover, given the considerable lapse of time and the cogent evidence already on record, any further delay for the purpose of cross- examination would serve no useful purpose and would unnecessarily protract the proceedings without altering the core factual findings. As held by the Hon’ble High Courts it is for the assessee to produce the officials / Managing Director of the company which had invested in the assessee at his own expenses and it is not for the Revenue to call for him. Once the assessee claims that these companies have invested money in the form of share application in the assessee company then the onus is on the assessee 8 to prove and produce the relevant evidences that the investment was not bogus and onus cannot be shifted on the Revenue in the manner suggested by the assessee.

In light of the detailed factual matrix, corroborative confessional evidence, and the clear and consistent line of judicial authority, we find no infirmity in the additions made by the Assessing Officer under Sections 68 and 69C of the Income-tax Act. The CIT(A) has rightly upheld these additions, and we see no reason to interfere with the same. The documentary formalities presented by the assessee fail to address the fundamental lack of commercial rationale behind the transaction. When seen in conjunction with the judicially recognized conduct of the Mahasagar group of companies, operated by Shri Choksi, and the precedent findings of the Bombay High Court validating such additions in similar cases, the Revenue’s case acquires a strong evidentiary foundation.

Lastly, the reaffirmation of these principles by the Hon’ble Bombay High Court in its rulings involving Mukesh Choksi group entities, as well as the authoritative ruling of the Hon’ble Supreme Court in PCIT v. NRA Iron & Steel Pvt. Ltd., collectively settle the legal position. They establish beyond doubt that in cases where transactions lack economic rationale, involve known entry operators, and are routed through dubious entities, mere submission of standard documents cannot legitimize them. The assessee must demonstrate the complete chain of commercial substance and provide a credible rationale for the transaction — which is glaringly absent in the present case.

In conclusion, considering the totality of facts, corroborative evidence, and binding judicial precedents, we hold that the Assessing Officer and the CIT(A) were entirely justified in treating the share capital receipts as unexplained income and unexplained expenditure under Sections 68 and 69C respectively. The grounds raised