TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 655
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....ct, 1961. 2. The assessee is an individual, proprietor of Sunrise Enterprises, engaged in the business of trading, commission and investment. He filed his return of income on 30.09.2011 declaring total income of Rs.2,08,97,440. Subsequently, the assessment was reopened under section 147 and notice under section 148 was issued on 30.03.2018. The recorded reasons proceeded on an information note dated 26.03.2018 from the DDIT (Inv.) Unit 2(2), Mumbai, stating that enquiries in the case of Shri Rajendra Drolia, proprietor of M/s Sai Traders, revealed him to be a "hawala operator" without genuine business and allegedly providing accommodation entries. The note annexed an analysis of the said party's bank statements reflecting the following agg....
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...., I have come to conclusion that the assessee had routed his own money in the form of unsecured loan from the Havala operator Shri Rajendra Drolia. Hence, I conclude that an amount of Rs. 1,00,00,000/- was accounted in the books of accounts of the assessee through fictitious transaction in the name of above bogus Hawala operator. Therefore an amount of Rs. 1,00,00,000/- is hereby disallowed u/s 68 of the Income-Tax Act, 1961 and added back to the total income of the assessee. Penalty proceedings u/s 271(1)(c) are hereby initiated separately for furnishing inaccurate particular of income." 5. In first appeal, the learned CIT(A) affirmed the addition primarily on the footing that (i) the assessee did not produce the creditor for examination ....
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....Drolia is a Hawala operator having no genuine business and only providing accommodation entries in form of sale-purchase to beneficiary parties. The TIN of Messrs Sai Trader which is proprietary concern of Shri Rajendra Drolia is also cancelled because of irregularities. Therefore, the assessing officer has arrived at the conclusion of amount of Rs. 1,00,00,000/-being fictitious transaction and adding the same under section 68 of the IT Act. In light of assessing officer's findings and assessee's submission before me, I find no reason to disturb the findings in assessment order. Therefore, addition of Rs. 1,00,00,000/- is confirmed and appeal of the assessee is dismissed." 6. We have heard the rival submissions, carefully perused the mater....
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.....03.2011 and 15.03.2011. Immediately prior to each transfer, the lender's account carried adequate cleared funds. No material has been brought to show that such balances were artificially created by cash deposits or by circular layering traceable to the assessee. (c) Genuineness is borne out by an unimpeached banking trail. The loan was received through account-payee instruments. Interest was regularly paid at a commercial rate of 18% with TDS duly deducted and reflected in quarterly statements. The entire principal stood repaid on 20.04.2012 and 26.04.2012, nearly six years before the notice under section 148 was issued. These are strong, objective indicators of an arm's-length borrowing rather than a colourable self-funding device. 9. ....
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.... label of "hawala" does not, by itself, rebut the assessee's documentary case. 10. It is equally significant that the assessment order does not grapple with, let alone dislodge, the assessee's primary materials: the lender's tax returns, bank statements establishing pre-existing funds, the ledger confirmation, the contractual rate of interest (18%) with TDS deduction, and proof of full repayment. These are not peripheral or formalistic documents; they go to the heart of identity, capacity, and genuineness. Once placed on record, the evidentiary burden moved to the Revenue to undertake independent verification and bring contra material such as demonstrable cash introductions, immediate cash-cheque patterns, intra-group circulation, or adver....