TaxTMI 
TaxTMI 
2026 (3) TMI 1115
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....n to believe, formed by the Assessing Officer concerned as recorded in the reasons for reopening of the case u/s 148, about non filing of return of income. 3. That the Ld. CIT(A) has failed to appreciate that the assessee had filed the return of the above said year and which was duly evident from the record whereas, in the reasons as recorded by the AO, it has wrongly been stated that the assessee is nonfiler. 4. That the Ld. CIT(A) has failed to appreciate that the PCIT had accorded his approval for reopening of the case in a mechanical manner and that approval has also been granted by the PCIT on the basis of incorrect facts that the assessee is a non-filer. 5. That the Ld. CIT(A) has failed to follow number of judgments of High Courts and of Jurisdictional ITAT as cited before him that if there is wrong reason to believe then, the reopening u/s 148 deserves to be quashed. 6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 1.3 The revenue's grounds of appeal read as under: 1. Whether, on the facts and in the circumstances of the case, the CIT(A) was correct in....
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....rted the legal grounds as urged by Ld. AR. The written submissions have been filed by Ld. CITDR on 12-03-2026 which has duly been considered while adjudicating the appeals. Having heard rival submissions and upon perusal of case records, the appeals are disposed-off as under. Assessment Proceedings 2.1 The assessee filed regular return of income on 05-10-2013 vide acknowledgement No.814729751051013 which was processed u/s 143(1). Subsequently, the case was reopened pursuant to receipt of AIR information that the assessee purchased certain property for consideration of Rs. 9 Crores during the period under consideration and in the absence of any Income-tax return as filed by the assessee, the income to that extent had escaped assessment. Accordingly, a notice u/s 148 was issued to the assessee by Ld. AO on 30-03-2019 after obtaining necessary administrative approval of Ld. Pr. CIT-2. In response to notice u/s 148, the assessee offered original return of income. The Ld. AO noted that though the assessee had filed return of income on 05-10-2013, but no scrutiny assessment was done for the year. The property in question was stated to be purchased out of unsecured loans. The Ld. AO....
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.... Co. 15000000 a. M/s Binus Trading Co. is a partnership firm having partners Smt. Binus Verma D/o Sh. Surinder Verma who is one of the directors of the assessee which point towards the closeness and accessibility of the assessee to Binus Trading Company and further giving an opportunity to the assessee to introduce its unaccounted money into its books of account. b. Both the bank accounts of Binus Trading Company which were operating from the same bank account as that of the assessee company have been found to be a classic case of routing money from one entity to another giving a proper resemblance of a colourable device and a mere conduit to introduce unaccounted money in the books of account of the assessee. c. Loan remaining outstanding even after a gap of 8 years. d. Non-payment of interest and non-deduction of TDS by the assessee after A.Y. 2014-15 till date. e. Finding a cash trail of Rs. 70 lakhs preceding to the advancement of loan to the assessee company. f. Turning into a defaulter of a nationalized Bank (PNB). 3 H.R. Rice Industries 2160690000 a. Sh. Sudarshan Verma, one of the directors of M/s H.R. Rice Industries (P) Ltd. is also one of....
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....hed by the party in response to the summons u/s 131 e. Turning into a defaulter of a nationalized Bank (PNB) 5 Sandeep Trading Co. 10000000 a. Both the bank accounts of Sandeep Trading Co. which were operating from the same bank account as that of the assessee company have been found to be a classic case of routing money from one entity to another giving a proper resemblance of a colourable device and a mere conduit to introduce unaccounted money in the books of account of the assessee. b. Loan remaining outstanding even after a gap of 8 years. c. Non-payment of interest and non-deduction of TDS by the assessee after A.Y. 2014-15 d. Finding of cash trail of Rs.17 lakh preceding to the advancement of loan to the assessee company. e. Turning into a defaulter of a nationalized Bank (PNB) 6 Shiv Shakti Exporters Pvt. Ltd. 35000000 a. Sh. Surinder Verma & Sh. Hitesh Verma, both are the directors of M/s Shiv Shakti Exporters (P) Ltd. and have been the directors of the assessee company which point towards the closeness and accessibility of the assessee to M/s Shiv Shakti Exporters (P) Ltd. and further giving an opportunity to the assessee to introduc....
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....nished by the assessee. b. Both the bank accounts of Sandeep Trading Co. which were operating from the same bank account as that of the assessee company have been found to be a classic case of routing money from one entity to another giving a proper resemblance of a colourable device and a mere conduit to introduce unaccounted money in the books of account of the assessee. c. Loan remaining outstanding even after a gap of 8 years d. Non-payment of interest and non-deduction of TDS by the assessee after A.Y. 2014-15 till date. e. Turning into a defaulter of a nationalized Bank (PNB) 2.4 The Ld. AO thus summarized his conclusion for each of the lender party and alleged that the primary ingredients of Sec.68 remained to be fulfilled for these lender entities and accordingly, the unsecured loans thus received by the assessee were held to be lacking creditworthiness as well as genuineness. All these entities advanced loans which remained outstanding even after a gap of almost eight years especially when no interest was charged by these parties and no financial benefit accrued to these parties in spite of advancing such huge loans and keeping it outstanding for a period of....
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.... of Ld. AO were in the nature of 'reasons to suspect' and not 'reasons to believe'. The case was reopened on borrowed satisfaction. There was no link between the tangible material and formation of reason to believe that the income had escaped assessment. However, Ld. CIT(A) rejected the same on the ground that there exists reasonable ground to form the belief of escapement of income. Accordingly, the legal grounds as urged by the assessee were rejected. 3.2 On merits, the findings of Ld. AO with respect to each of the lender entities were noted. In the case of M/s Westron Homes Pvt Ltd, the assessee had furnished copy of account in the books of the assessee and also submitted copy of bank account of that party for FY 2011-12 contending that all the amount were received by cheque through banking channels. Out of the amount of Rs. 15.93 crores as received during the year under consideration, the amount of Rs. 14.13 crores had been returned back immediately in the next year through banking channels as per copy of the account as submitted by the assessee. However, Ld. AO noted that though the return of income was filed by this party for AY 2011-12, no return of income was filed for ....
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.... Developers Pvt Ltd and M/s. Westron Buildcon Pvt Ltd, all the other parties had duly responded to the enquiries made by Ld. AO during the course of assessment proceedings wherein they had furnished the confirmed copy of account in their books of account quoting their PAN Numbers, copy of their bank account statements for FY 2011-12 from where the amounts were advanced to the assessee and also explained by way of separate letter giving details of the other particulars as desired by Ld. AO. 3.4 The Ld. CIT(A) concurred that with respect to M/s Bhola Trading Co., the assessee submitted confirmation from the lender party with PAN details, copy of ITR, copy of bank account statement, evidence of filing of return of income for the AY 2012-13. The interest was charged by that lender in subsequent year. This entity was engaged in trading of rice and the source of loan as advanced to the assessee was out of CC limit of PNB. The assessment for this entity was completed by Ld. AO u/s 143(3) for AYs 2012-13 & 2013-14 wherein Ld. AO did not doubt the source of funds of the lender entity. On the date of advancement of loan, there was sufficient balance in the bank account of lender. The asse....
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....f the bank account of that party. Since the deal did not materialize, the amount was returned back immediately in succeeding year which was evident from bank statement. Therefore, the addition for this party was deleted. Similarly, the amount was received from M/s Westron Homes Pvt Ltd, for sale of land. Since the deal did not materialize, the said amount was returned back in the immediately succeeding year which was evident from supporting documents. Therefore, Ld. AO was directed to delete the addition for these entities. 3.9 While adjudicating the appeal, Ld. CIT(A) referred to the decision of Agra Tribunal in the case of Sh. Agarsen Logistic (ITA No. 108/Agra/2025 dated 24-06-2025) which was having similar facts and the appeal of the department was dismissed by the Tribunal. In the case of M/s Sunrise City Promoters and Developers Pvt Ltd and M/s Westron Homes Pvt Ltd, substantial amount was repaid back in immediately next year. Therefore, these credits could not be doubted as per the decision of Hon'ble Gujarat High Court in the case of PCIT Vs Ojas Tarmake Pvt. Ltd. (158 Taxmann.com 176) and the decision of Jurisdictional Punjab & Haryana High Court in the case of CIT Vs K....
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....-H of the Balance Sheet. Since the expenditure stood well explained, Ld. AO was directed to delete the impugned addition. Aggrieved, the revenue is in further appeal before us. The assessee, in its cross-appeal, challenges reassessment jurisdiction of Ld. AO. Our finding and Adjudication 4. From the fact, it emerges that the assessee filed regular return of income on 05-10-2013 which was initially processed u/s 143(1). However, the case of reopened on the allegation that the assessee had purchased certain property for consideration of Rs. 9 Crores during the period under consideration and it was also alleged in the reasons for reopening that no return of income was ever filed by the assessee. Accordingly, opinion of escapement of income has been formed by Ld. AO. Pertinently, before reopening the case of the assessee, certain information was called for by DIT (I&CI) qua transaction of purchase of property vide letters dated 26-11-2013 & 26-12-2013. The same were duly been responded to by the assessee along with financial statements. The attention was drawn to the fact that Income Tax Return was already filed by the assessee on 05-10- 2013. Thereafter, the case of the assessee....
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....proceeds on the assumption that no return of income was ever filed by the assessee for this year. The approval has also been given on erroneous facts. The Ld. AO has invoked the provisions of clause (a) of Explanation-2 to Sec.147 which are specifically applicable only in case where no return of income is furnished by the assessee. These provisions are clearly not applicable to the case of the assessee and accordingly, assumption of reassessment jurisdiction by Ld. AO stood vitiated in law. Similar legal ground has been decided in assessee's favor by this Tribunal in the case of ITO vs. Taj Land Developers & Promoters (P) Ltd. (ITA No.606/Chd/2024 dated 22-09-2025). The co-ordinate bench, on similar facts, at para-7, held that when Ld. AO proceeded on fundamentally wrong facts to come to the reasonable belief / conclusion that income chargeable to tax had escaped assessment, the reopening could not be sustained on legal grounds. It was further held by the bench that the opinion of AO should be based on reasonable application of mind exhibiting the escapement of income. The AO formed his belief on wrong foundation of facts. The approval granted by approving authority was also mechan....
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....ay be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by Finance Act, 2012 w.e.f. 01-04-2013 to provide that where the assessee is a company and the sum so credited consists of share application money, share capital, share premium etc., the explanation furnished by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory. However, this proviso is not applicable to the facts of the present case since we are dealing with case of unsecured loans and advances. Such additional onus / requirement for unsecured loans / advances has been introduced by Finance Act, 2022 which is applicable only from AY 2022-23 and therefore, for the impugned AY 2012-13, there is no obligation on the assessee to establish the source of source of unsecured loans and advances. Proceeding further, it would be the primary onus of the assessee to establish the identity of the lender, creditworthiness of the lenders as well as genuineness of the loan transactions. Once all ....
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....hem in succeeding years and taxed in their hands. 234A-234B (vi) M/s. Shiv Shakti Exporters Pvt. Ltd. (a) Copy of documents as per Sr. No.1. 235-412 (b) Copy of account of the company for the AY 2013-14 & 2014-15 where the interest has been charged by them in succeeding years and taxed in their hands. 413-414 (vii) Sri Surinder Verma (a) Copy of documents as per Sr. No.1. 415-430 2. Copy of the bank statement of M/s. Sunrise City Promoters and Developers Pvt Ltd from where the party had advanced the amount to the assessee along with the copy of account in the books of assessee. 431-444 3. Copy of account of M/s. Sunrise City Promoters and Developers Pvt Ltd in the books of the assessee for the subsequent year i.e. AY 2013-14, showing that the substantial amount has been paid back through the banking channel. 445 4. Copy of the bank account of M/s. Western Build Con Pvt. Ltd., who had advanced the loan to us along with the copy of account of the FY 2011-12 in the books of assessee. 446-485 5. Copy of the account of M/s. Western Build Con Pvt Ltd in the books of the assessee for the AY 2....
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....e has filed all the details, the burden of proving the genuineness and creditworthiness of the creditor stood discharged by the assessee. The other decisions as placed on record by Ld. AR also support the same view. On the basis of factual findings of Ld. CIT(A), it could very well be concluded that the assessee had discharged the initial onus of proving these transactions in terms of the requirements of Sec.68. Therefore, the onus had shifted on Ld. AO to dislodge the assessee's documentary evidences and bring on record cogent material to establish that the assessee generated unaccounted money and routed the same through banking channels in the garb of loans and advances. Unless such an investigation is shown to have been carried out, the additions would not be sustainable in law since it is trite law that no addition could be made on the basis of mere suspicion, conjectures and surmises. No such independent enquiry has been carried out by Ld. AO to dislodge the documentary evidences of the assessee. Nothing adverse could be borne out of the fact that most of the lenders and the assessee had bank accounts in common bank / branch and the lender entries turned bank defaulters. T....
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.... and ledger extract for AYs 2013-14 & 2014-15 establishing that interest has been charged by them in succeeding year and taxed in their hand. There is no prohibition in taking loans from related entities. The Ld. AO has alleged that two different ledger extracts have been furnished. However, what are the exact differences have not been specified. The lender entity has been assessed u/s 143(3) in the same range without any adverse view. This being so, the objection raised by Ld. CIT-DR is devoid of any merits. Similar objections have been raised for M/s N.B. Traders whereas the assessee has furnished similar documents viz. confirmation of account, copies of Bank Account, ITR and ledger extract for AYs 2013-14 & 2014-15 establishing that interest has been charged by them in succeeding year and taxed in their hand. The substantial loan stood repaid during this year itself. The Ld. AO has alleged that three different ledger extracts have been furnished. However, what are the exact differences have not been specified. This being so, the objection raised by Ld. CIT-DR is devoid of any merits. For M/s Sandeep Trading Co, Ld. CIT-DR has highlighted the fact that it has common directo....