TaxTMI 
TaxTMI 
2026 (1) TMI 684
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....ong with sources of repayment and reasons thereof. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(4) erred in allowing the appeal of the assessee despite the fact that assessee could not prove the creditworthiness of the lenders and the genuineness of the transactions. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(4) erred in allowing the appeal of the assessee despite the fact that assessee could not provide any satisfactory explanation about the nature and source of the amount credited in its books of accounts, and therefore, the 10 was justified in holding that the amounts totaling to Rs. 7,25,00,000/- found credited in the books of accounts of the assessee during the year under consideration as unsecured loans are nothing but accommodation entries. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the appeal of the assessee despite the fact that assessee could not prove the entire chain of flow of funds which involved complex layering such that accommodation entries were passed through a structured mechanism using paper companies to channel fun....
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.... of Rs. 6,19,520/-. It is undisputed that the original return of income filed by the assessee was not selected for scrutiny assessment proceeding under section 143(3) of the Act. Subsequently, a search and seizure operation under section 132(1) of the Act was conducted in the case of Jatia Group and other related Groups at their business premises and residential premises of Directors on 17.04.2018. During the search, the premises of the assessee were also covered under section 132 of the Act and the search was concluded on 21.04.2018. Consequent to the search action, the case of the assessee was centralised with DCIT, Central Circle-7(1), Mumbai, for coordinated investigation, assessment, and for having a uniform view on the common issues pertaining to various Jatia Group cases. Accordingly, a notice under section 153A of the Act was issued on 23.10.2019 to the assessee. In response to the above notice, the assessee filed its return of income on 09.11.2019, declaring a total income of Rs. 6,19,520/-. Thus, the time period for issuance of notice under section 143(2) of the Act had already expired on the date of search, and no assessment proceedings were pending for the year under co....
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....the Department. Incriminating material also comprises of document or evidence found in search which demonstrates or proves that what is apparent is not real or what is real is not apparent. In other words, if an assessee has recorded transactions in his books or other documents maintained in the ordinary course then in order to hold the material or evidence found in the course of search to be incriminating in nature, document should lead to conclusion that the entries made in the books of the assessee do not represent true and correct state of affairs. Rather the evidence unearthed or found in the course of search should establish that the real transaction of the assessee was something different than what was recorded in the regular books and therefore the entries in the books did not represent true and correct state of affairs i.e. the assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the books of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regular maintained or the returns filed with the authorities from time to time etc. The nature of the evidence o....
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....terial, the assessee was found not to be conducting any business activity, and there was no iota of evidence to indicate any transactions involving the actual movement of material. The AO further held that all the documents merely pointed to invoices backed by no material movement, and there were no documents vis-à-vis material movement, sales, marketing, inventory management, and CRM/SCM. The AO further held that from the perusal of the seized tally documents, it was found that the searched entities were indulged in large scale of booking of bogus entries running into crores of rupees by way of bogus sales and purchases through various paper entities. Further, it was held that on physical verification of business premises of these companies, it was found that these companies have not been doing any genuine business and were engaged in providing accommodation bills and sales and purchases entries from the paper companies, as document such as purchase order, sales order, weighment slips, lorry receipts, etc., were neither submitted during the assessment proceedings nor during the search proceedings. Thus, the AO held that the physical movement of goods was not actually being ....
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....hase order, etc. * It is clearly seen from the money mapping that the payment received from one party immediately transferred to other parties on same day. Almost same trend was followed with respect to all parties. * No actual/physical delivery of goods was done as established in the light of detailed analysis/investigation. * No credit guarantee / security obtained from Topworth group of Companies and UttamGalwa Group of Companies. Entire purchases are backed by LC payment to vendors. * Details like Purchase order, Sales order, Weighment Slip, Lorry receipts or any other form of communication on the basis of which the orders were placed/delivered were found to be unavailable. * The address of the party to whom the material had to be delivered to and in the absence of lorry receipts the actual movement of the goods could not be ascertained. * There is no evidence to substantiate whether any communication ever took place between the searched entities firm and its vendor and customer during the trade. In general business practice, parties do interact to exchange quotations, agreements, follow ups etc. vide emails, facsimile or le....
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....n that, wherein the Trade Discounts were offered were at a higher percent as compared to the proportionate rate of interest on delayed payment." 9. Accordingly, the AO arrived at the conclusion that the search entities have not done any genuine activities and have misused the banking facility by way of using the letter of credit and were engaged in the practice of providing back-to-back sales and purchases of accommodation entries from various shell companies and providing the letter of credit from the various banks. 10. After recording the aforesaid findings in relation to the material seized during the course of search, the AO vide order dated 31.03.2021 passed under section 153A read with section 143(3) of the Act, inter alia, proceeded to make the addition under section 68 of the Act in respect of loan amounting to Rs. 7,25,00,000/- received by the assessee from Uttam Value Steels Ltd. by treating the loan as bogus. 11. In its appeal before the learned CIT(A), the assessee specifically raised the ground challenging the impugned addition in the absence of an incriminating document being found during the course of the search. However, the learned CIT(A) rejected the said....
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....he entities of the Jatia group. It was held by the AO that the said loan transaction is the part of the bogus transactions between the lender and the appellant. Therefore, it can be said that the additions to the income are made on the basis of such incriminating evidence found during the search." 12. From the perusal of the assessment order, as well as the impugned order passed by the learned CIT(A), it is pertinent to note that entire emphasis of the Revenue, by placing reliance on the documents seized during the course of search action under section 132 of the Act, are on the findings that the entities of Jatia Group were involved in accommodation entry transaction of back-to-back purchase and sales transaction with entities of three groups namely Topworth, Uttam Galva and Lloyds Group of companies and there is no evidence of actual movement of goods from the point of purchase to the point of sale. Further, documents proving the physical movement of goods were not furnished despite multiple opportunities. 13. As noted in the foregoing paragraphs, the assessee is only engaged in investment and trading of shares and securities, which is sufficiently proved from the financial....