TaxTMI 
TaxTMI 
2026 (1) TMI 236
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....2022, declaring total income of INR 21,25,86,720/-. Based on the material available on record and considering the facts and circumstances of the case, assessment proceedings were initiated in terms of notice u/s 143(2) of the Act issued on 27.02.2023. Thereafter, the AO computed the total income of the assessee company at INR 22,94,83,823/- vide assessment order dated 28.03.2024 passed u/s 143(3) of the Act wherein addition of Rs. 40,00,000/- was made u/s 68 r.w.s. 115BBE of the Act towards the loan taken from M/s Hallow Securities Pvt. Ltd., addition of INR 87,25,098/- was made u/s 69A r.w.s. 115BBE of the Act towards cash balance held as unexplained and disallowance of INR 41,72,005/- was made u/s 37 of the Act towards various expenses. 3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 30.04.2025, allowed the appeal of the assessee and deleted all the additions/disallowance made by the AO. 4. Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal :- 1. "Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3, Noida has erred in deleting the add....
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....tion of ld. CIT(A) in deleting the addition of Rs. 40,00,00,000/- taken from M/s Hallow Securities Pvt. Ltd. 6. We have heard the rival contentions and perused the material available on record. From the perusal of the assessment and appellate order, it is seen that on the issue of loan from M/s Hallow Securities Pvt. Ltd., all the observations and allegations made by AO are same as were made in the case of M/s Allure Developers Pvt. Ltd. for Assessment Year 2020-21 in ITA No. 3559/Del/2025 vide order dated 26.11.2025. The relevant observations by the Tribunal in deciding the appeal in ITA No.3559/Del/2025 are as under :- 19. "Heard the parties and perused the material available on records. In the present case the sole issue before us is the addition made of Rs. 17,74,00,000/- made by AO by holding the loans taken from M/s Hallow Securities Put. Ltd as unexplained u/s 68 of the Act which stood deleted by ld. CIT(A). Before going further, the facts leading to the issue are summarized as under: "A search action us/ 132 was carried out on ACE group of cases on 28.07.2021 and further on 04.01.2022. During the year assessee received loan of Rs. 26,74,00,000/- from a ....
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.... referred / relied upon by the AO for making the additions. He solely placed reliance on the statements of the director of assessee company and one of the employees of Ace group and also placed heavy reliance on the statements of one Shri Ashish Begwani, recorded during the search in his case in the year 2016-17 wherein he had admitted engaged in the business of providing accommodation entries. However, such statements were recorded three-four years back where transactions under dispute before us were carried out in the year 2019-20 thus these statements have no direct relevance with the loans taken by the assessee and therefore, cannot be made sole basis for alleging the loan taken by the assessee company in the year under appeal from M/ s Hallow Securities Put. Ltd. as unexplained/ bogus accommodation entries. The Hon'ble Supreme Court in the case of CIT-III, Pune us Singhad Education Society in Civil Appeal No.11080/2017 arising out of SLP (C) No.25257/2015 has held as under :- "The seized incriminating material have to pertain to the AY in question and have co-relation, document-wise, with the AY. This requirement u/s 153C is essential and becomes a jurisdictional ....
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....tary evidence lacks evidentiary value. In the present case, the AO has made the addition solely based on the statement of Sh. Vishal Kumar without producing any documentary evidence to substantiate the claim that cash was exchanged against the loans raised whereas, the director of the company had refuted the said allegation. On the above issue, the Hon'ble Supreme Court of India in the case of Principal Commissioner of Income-tax (Central) vs. Dwarka Prasad Aggarwal reported at [2024] 161 taxmann.com 813 (SC) has held as under: "Section 68 of the Income-tax Act, 1961 - Cash credit (Illustrations) - High Court by impugned order held that where Assessing Officer solely based on statements of Directors recorded during a search operation conducted under section 132 on assessee, made addition under section 68 without probing deeper into income-tax returns of creditor companies and without scrutinizing documents furnished by assessee to prove genuineness of such credits, impugned addition was to be set aside - Whether SLP filed by revenue against impugned order was to be dismissed - Held, yes [Para 1] [In favour of assessee]" Further, the judgment ....
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.... documents on mere ground that they did not absolve assessee from his responsibility of proving nature of transaction -It was noted that statement of AKA was not recorded in presence of assessee nor an opportunity of cross-examination was provided to it - Whether where there was no evidence brought on record by Assessing Officer to connect statement of AKA with loan transaction of assessee, said statement was of little avail and could not be basis of allegations - Held, yes - Whether, further, since assessee had discharged its initial burden by providing documentary evidences and burden had now shifted to Assessing Officer, who failed to bring on record any reason in writing as to why these documents did not establish identity of lender or proved genuineness of transaction, impugned assessment order passed by casually brushing aside these evidences was utterly perverse and liable to be quashed - Held, yes [Paras 4 and 5] [Matter remanded] Further, the Hon'ble High Court of Kolkata in the case of Principal Commissioner of Income-tax vs. Golden Goenka Fincorp Ltd. reported at [2023] 148 taxmann. com 313 (Calcutta) has held as under: Where Assessing Officer solel....
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....D VERSUS SECURITIES AND EXCHANGE BOARD OF INDIA & ORS. reported at 2022 (8) TMI 423 - SUPREME COURT has held as under: "SEBI's attempt to cherry-pick the documents it proposes to disclose - There is a dispute about the fact that certain excerpts of the opinion of Justice (Retd.) B. N Srikrishna, were disclosed to the appellant herein. It is the allegation of the appellant that while the parts which were disclosed, vaguely point to the culpability of the appellant, SEBI is refusing to divulge the information which exonerate it. Such cherry-picking by SEBI only derogates the commitment to a fair trial. In the case at hand, SEBI could not have claimed privilege over certain parts of the documents and at the same time, agreeing to disclose some part. Such selective disclosure cannot be countenanced in law as it clearly amounts to cherry-picking. Appeal allowed." Further, in the judgment of Ld. ITAT Delhi Bench E in the case of M/s Lumax Industries Limited vs. DCIT, Central Circle- 28, Delhi in ITA No. 947/Del/2021 vide its order dated 0d4.04.2024, it has been held as under: "24. In the case in hand, the Ld. AO grossly erred in not taking cognizance of all....
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.... for making addition in the case of the assessee. This is all the more true because the AO has himself proceeded to enquire into the source of source of the loans and gave relief to the extent of approximately Rs. 140 crores(Rs. 9 crore in the present case) in the whole ACE Group from the total loans received from M/ s. Hallow Securities Put. Ltd. by ascribing the same to be from genuine sources. Still, it shall be important to examine the other relevant issues in the case in consequence to which enquiry was initiated with M/ s. Hallow Securities Put. Ltd." 26. As per section 68 of the Act, there must be a credit of amounts in the books maintained by an assessee and such credit has to be of a sum received during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offer no explanation" means where the assessee offers no proper, reasonable and acceptable explana....
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....tate & Finance Out of Recovery of advances made in earlier years. Addition Made 31.07.2019 15000000 Partly out of funds received from Sundram Consultants Private Limited and Partly out of funds received from Manak Estate & Finance Out of Recovery of advances made in earlier years. Addition Made 03.08.2019 5000000 Sundram Consultants Private Limited Out of Recovery of advances made in earlier years. Addition Made 09.08.2019 10000000 Manak Estate & Finance Out of Recovery of advances made in earlier years. Addition Made 21.08.2019 18000000 Manak Estate & Finance Out of Recovery of advances made in earlier years. Addition Made 26.08.2019 20000000 Partly out of funds received from Manak Estate & Finance and Partly out of funds received from AKJ Engineers Pvt Ltd. Out of Recovery of advances made in earlier years. Addition Made 27.08.2019 20000000 Partly out of funds received from Manak Estate & Finance and Partly out of funds received from Sundram Consultants Private Limited. Out of Recovery of advances made in earlier years. Addition Made 28.08.2019 20000000 Partly out of funds rec....
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....ceived in the . ICICI Bank account of M/s Hallow from M/s Teesta as of 30.12.2019. Out of this, Rs.98 lakh was transferred to the SBI account of M/s Hallow on 16.01.2020 Accepted 22.01.2020 5000000 Sundram Consultants Private Limited Out of Recovery of advances made in earlier years. Addition Made 28.01.2020 10000000 Partly out of funds received of Rs 65 Lakh from Sundram Consultants Private Limited on 28.01.20 and Partly out of funds transferred of Rs 98 Lakh from ICICI bank to SBI on 16.01.2020 (internal transfer) Out of Recovery of advances made earlier to Sundram. An amount of Rs. 10 Crores was received in the ICICI Bank account of M/s Hallow from M/s Teesta as of 30.12.2019. Out of this, Rs.50 lakh was transferred to the SBI account of M/s Hallow on 15.01.2020. Addition Made 267400000 Total Credits 29. It is also relevant to state that an amendment is made vide Finance Act, 2022 wherein second proviso to section 68 is added so as to provide that the nature and source of any sum, whether in the form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated a....
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....tal 300.00 crores received in FY 2019- 20 to 2021-22. It is also observed by ld. CIT(A) that the RBI license issued was also submitted and in the assessment proceedings of one of the group company M/ s Bright Buildtech Put. Ltd., who is also before us in the captioned appeals, loan received from M/ s Hallow Securities Put. Ltd. out of the funds received from Teesta Retails were also accepted by the department, thus the funds to such extent cannot be held as unexplained. 34. Another issue raised by the revenue is that the lender company M/s Hallow Securities Put. Ltd. was declared as Shell company by the press release issued by the Ministry of Finance dt.08.06.2018 and further no opportunity was given to the Ao to rebut the evidences filed by the assessee which are in the nature of additional evidences u/R 46A of the Act. In this context, it is seen that in order to verify this fact, ld. CIT(A) has made direct enquires from SFIO u/s 250(4) of the Act, who is the nodal agencies in this regard. The SFIO vide reply dt. 23.01,2025, as reproduced herein above, in clear terms has stated that no investigation is initiated/pending/ disposal against the company i.e. M/s Hallow Secur....
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....50(4) of the Act. The relevant observations of ld. CIT(A) are as under: Reply of AO "During the course of appellate proceedings, various reminders were issued to the Ayide this office emails dated 15.02.2025, 08.02.2025, 01.02.2025, 25.01.2025, 24.01.2025, 18.01.2025, 15.01.2025, 14.01.2025 & 08.01.2025 on various issues including enquiries conducted with Hallow Securities Put. Ltd., SFIO Report, Additional Grounds of Appeal etc. But no objections have been received from the AO till the date of finalization of appeal. It is pertinent to point out that it was only during the course of enquiry done by this office that the assessee/third parties furnished the relevant evidences. The said evidences were called for under the powers of enquiry with the office of Commissioner Appeal). Hence, the assessee/third parties have not produced any additional evidence but have only furnished evidences as called tor during enquiry made by this office. In case, the AO is not able to collect complete material and take the issue to logical end, the evidence collected by the appellate authority from the assessee/ third parties in continuation of the same trail initiated by th....
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....al. No part of rule 46A whittles down or impairs the power to make further inquiry conferred upon the AAC by section 250. Similarly, sub-section (5) of the said section confers a power on the AAC to permit the appellant to raise a fresh point. This power has not been even touched by rule 46A." Further, the Hon'ble High Court of Bombay in the case of Smt. Prabhavati S. Shah vs. Commissioner of Income-tax reported at [1998) 100 TAXMAN 404 (BOM.) has held as under: It is, thus, clear that the powers of the AAC are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the ITO. He can do what the ITO can do. He can also direct the ITO to do what he failed to do. The power conferred on the AAC under the said subsection being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. On a conjoint reading of section 250 and rule 46A, it is clear t....
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....T vs. Kanpur Coals Syndicate [1964] 53 ITR 225 has held that "the appellate Commissioner has plenary powers in disposing of an appeal. The Hon'ble Court further held that the scope of the power of CIT(A) is coterminous with the AO." Further, the Hon'ble High Court of Karnataka in the case of CIT vs. K. S. Dattatreya [2011] 197 taxman 151 has held that "as a revisional authority commissioner appeal can revise not only the ultimate computation arrived at but every process which lead to the ultimate computation or assessment". Further, the Hon'ble Kerala High Court in the case of V. SubramoniaAiyr vS. CIT 1978] 113 ITR 685 held that "the power conferred on Appellate Authority by Section 246 which is exercised in accordance with procedure with Section 250 indicate and amplitude and width which is no less wide than that of an ITO and the Appellate Authority could substitute the order of the ITO by one of his own." 36. In view of the above clear observations of ld. CIT(A) we find that despite of repeated opportunities to the AO, no response was given thus the ld. CIT(A) had proceeded to decide the issue after making necessary enquires at his end. Ac....
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....AY Name of Entity ITA No. Business advance against agreement to sell Amount accepted as genuine by AO Addition made by AO Amount refunded Repayment ledger Page No. of PB A B A-B 19-20 ACE MEGA STRUCTURE P.LTD. ITA 4115/DEL/2025 (D) ITA 4067/DEL/2025 (A) 58,39,05,000 18,00,00,000 40,39,05,000 29.03.2023 and 23.09.2022 158-164 Note :- * That Hallow Securities had advanced a total of Rs.40.51 crores (Rs.32.31 crores in AY 2019-20 and Rs.8.20 crores in AY 2020-21) towards the purchase of a Farm House, and Rs. 34.34 crores (329.34 crores in AY 2019-20 and 85 crores in AY 2020-21) towards seven plots to M/s Ace Mega Structure Pvt. Ltd., pursuant to agreements dated 19.03.2019 and 14.03.2019, respectively. These agreements were seized during the course of search and are reproduced in the assessment order of M/s Ace Mega Structure Pvt. Ltd. for AY 2019-20 at Pages 2-6. (The copy of the agreements are reproduced at Page No. 196-215 of the Paper Book filed before the Hon'ble ITAT) * That owing to the inability of Hallow Securities to remit the balance conside....
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....ilders (P.) Ltd. reported at [2024] 164 taxmann.com 162 (Bombay) has held as under: "Where assessee had taken unsecured loan from two companies and had submitted all evidences to substantiate loan including confirmation from creditors and loan was taken and repaid through banking channels, Assessing Officer was not justified in treating said unsecured loan as fake and unexplained cash credit" Further, the Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax (Central vs. Dharmesh Padamshibhai Patel soner reported at [2023] 156 taxmann.com 491 (Gujarat) has held as under: However, Tribunal remanded matter back to Assessing Officer to verify identity of parties -It was noted that Tribunal had observed that assessee had furnished bank accounts of all lenders wherein loans claimed were duly reflected - Creditors were assessed to tax and their confirmations were filed - Further, loans were returned through banking channels before close of subsequent Financial year - Whether, on facts, an opportunity was rightly allowed by Tribunal to assessee to prove identity of lenders when their creditworthiness and genuineness of transaction....
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....he Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax vs. Ojas Tarmake (P.) Ltd. reported at [2023] 156 taxmann.com 75 (Gujarat) has held as under: Where assessee showed unsecured loans received during relevant assessment year and AO made addition on ground that assessee failed to discharge onus of liability as laid down under section 68, since amount of loan received by assessee was returned to loan party during year itself and all transactions were carried out through banking channels, impugned addition was to be deleted." 39. We find that the sole allegation of the AO was that the assessee has taken the bogus accommodation entries in the shape of unsecured loans however, as discussed above, the revenue has failed to controvert the finding of the ld. CIT(A) who not only appreciate the facts of the case and the submissions made by the assessee but also make verification at his own end in terms of the powers u/s 250(4) of the Act when the AO has filed to response on the request of ld. CIT(A) of making verification of the submissions made by the assessee. It is further seen that the assessee has discharged the burden casted upon i....
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....that the exclusion of funds advanced to ACE Group from the current year's credits in the hands of Hallow Securities Put. Ltd. is also inconsequential for the reason that the corresponding credits in earlier years have already been added to the income in the case of Hallow Securities Put. Ltd. Hence, once the original advances and credits forming the substratum of these transactions have been added to the income of Hallow Securities Put. Ltd., any subsequent reduction from the credits in accounts of Hallow Securities Put. Ltd. of the advances given to the ACE Group does not materially impact the overall transactions which need to be brought to tax. 5. The loans received from M/ s. Hallow Securities Pt. Ltd. have been returned back in future years. 6. The statement of Sh. Vishal Kumar is without corroborative documentary evidence meaning that the said statement is standalone. 7. The statement of the Directors i.e. Sh. Pratap Singh Rathi (who has denied the facts as narrated by Sh. Vishal Kumar) rebuts the statement of sh. Vishal Kumar. 8. The AO has applied the source of source theory in ACE Group while giving relief with respect to the funds r....
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....e assessment cannot be framed only on bare suspicion. The assessment should rest on principles of law and one should avoid presumption of evasion in every matter. The assessee, in the instant case, has sufficiently demonstrated the genuineness of transaction and creditworthiness of the loan creditors. On a broader reckoning, the apprehension raised by the Revenue authorities militates against the tangible material and is thus extraneous. Accordingly, we find no infirmity in the order of ld. CIT(A) in deleting the additions made u/s 68 towards the unsecured loans of Rs. 17.74 crores by holding the same as accommodation entries. Accordingly, all the grounds of appeal of the revenue are dismissed. 7. From the perusal of the assessment and appellate order, it is seen that on the issue of loan from M/s Hallow Securities Pvt. Ltd., all the observations and allegations made by AO are same as were made in the case of M/s Allure Developers in AY 2020-21 in ITA No. 3559/Del/2025. 8. Admittedly, there is no change in the facts and circumstances regarding the issue of loan taken from M/s Hallow Securities Pvt. Ltd. where in the case of M/s Allure Developers Pvt. Ltd while dismissing the ....
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....he assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 12. As per section 69A of the Act, if the assessee cash, bullion, jewellery or any valuable article etc. is found in possession of the assessee and failed to explain the source thereof. The same could be held as unexplained in the hands of the assessee. As it could be seen from the order of AO, the cash in hand of INR 87,25,098/- was duly recorded in the books of accounts as cash in hand of 18 group companies of the ACE Group and therefore, the source of the same is duly explained and cannot be held as unexplained. 13. It is further observed that Ld. CIT(A....