TaxTMI 
TaxTMI 
2026 (5) TMI 841
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....6, but later on 19/06/2025 filed concise 7 grounds, which are reproduced as under: 1. On the facts and in law, the Ld. Commissioner of Income Tax (Appeals) [in short Ld. CIT(A)] erred in confirming the addition made by the Ld. Assessing Officer [in short Ld. AO] of Rs. 4,55,00,000/- under Section 68 of the Act. GROUNDS ON MERITS 2. On the facts and law, the impugned addition of Rs. 4,55,00,000/- is bad in law as the impugned transaction is fully explained by the Appellant and therefore, provisions of Section 68 are not applicable. 3. On the facts and in law, Ld. AO and Ld. CIT(A) erred by failing to appreciate that the Appellant had obtained unsecured loan from various parties during the relevant assessment year amounting to Rs. 4,55,00,000/- which was repaid during the relevant assessment year and subsequent year, thus in peculiar facts of the case, the genuineness of the transaction ought not to have been doubted. It is well settled principle in law that when unsecured loans are repaid in the current or subsequent year, provision of Section 68 shall not be applicable. 4. Without Prejudice to the above, on the facts and in law the Ld. C....
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....ect Tax Vivad Se Vishwas (VSV) Scheme. 2.3 Subsequently, a search and seizure operation under Section 132 of the Act was carried out on 15.09.2021 at the premises of the assessee and its related entities. Following the search action, and by virtue of Explanation 2(ii) to Section 148, the proceedings were reopened under Section 147. Upon obtaining the requisite approval from the Principal Chief Commissioner of Income-tax (Central-2), Mumbai, a notice under Section 148 was issued on 13.02.2023. In response, the assessee filed a return of income on 13.03.2023, declaring a total income of Rs. 3,01,05,613/- 2.4 In the course of the reassessment proceedings, the learned Assessing Officer (Ld. AO) confronted the assessee with the findings unearthed during the search. The Ld. AO specifically relied upon the sworn statement of Shri Kishanlal Udaylal Jain, Director of M/s Om Shilpi Jewels and Gems Pvt. Ltd., recorded under Section 131 of the Act. In the said statement, Shri Jain admitted to facilitating bogus unsecured loans from agents in lieu of the cash during FY 2013-14 and subsequent years for the assessee and his spouse, Mrs. Sonali Sood, through multiple conduit entities such as....
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....submitted that all the unsecured loans in dispute were obtained by way of banking transaction and already reflected in his books of account. The assessee filed copy of the ledger account of those unsecured parties appearing in books of account and also filed copy of the bank statements and submitted that all those loans had already been returned back either in the year under consideration or in the subsequent assessment years. The assessee refuted all the observation of the AO made on the basis of statement of 'sh Kishan U jain' and inquiry by the inspectors of investigation wing. 2.6 In view of the above observations, the ld AO made addition of unexplained cash credit of Rs. 4,55,00,000/- in respect of the 11 unsecured loan parties. 3. On appeal, the Ld. CIT(A) sustained the addition, placing heavy reliance on the statement recorded by Investigation Wing and the results of the filed inquiries carried during search. The Ld. CIT(A) rejected the assessee's contention that the mere repayment of loans through banking channels in the year under consideration or subsequent year, sufficed to discharge the onus cast under Section 68 of the Act. The Ld. CIT(A) relied on the decision o....
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..... 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the correct position of law that the Ld. AO can assume jurisdiction to proceed with the re-assessment only if undisclosed income is found based on incriminating material against the Appellant. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in issuing the Impugned Notice under Section 148 in a non faceless manner thereby contravening Section 151A of the Act as well as the E-Assessment of Income Escaping Assessment Scheme, 2022 formulated by the Board. 7. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in upholding the additions which were merely based on third-party statements, that too without any opportunity of cross-examination afforded to the Appellant. 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Ld. AO has carried out the re-assessment without adhering to the principles of natural justice. 5.1 We have heard rival submissions of the parties on this preliminary issue of admissibility of additi....
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....earned Departmental Representative (DR) argued that the present reassessment was triggered by a search under Section 132, invoking the deeming provisions of Explanation 2(ii) to Section 148. 6.3 We have heard rival submission of the parties and perused the relevant material on record. It is the contention of the assessee that re-opening is merely the 'change of the opinion' based on same set of facts which were available during earlier assessment proceedings. 6.4 But we find that in the instant case re-opening has been done under the deeming provision of Explanation 2(ii) of sec. 148 which provides for re-opening in the cases where search has been conducted. Further, while it is true that a previous assessment concluded the issue, the subsequent search action brought to light the statement of Shri Kishanlal Udaylal Jain, recorded under Section 131. In the said statement, a specific modus operandi was confessed, implicating the assessee in the procurement of bogus loans in exchange for cash. This constitutes "new tangible material" that was not available to the AO during the original assessment. The discovery of fresh evidence that fundamentally alters the complexion of the fa....
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....R 645, decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla 61 taxmann.com 412 (Delhi), and PCIT Vs. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399(SC). The Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (Supra) concluded that no addition can be made by the AO in search assessment u/s. 153A, in absence of incriminating material found during the course of search u/s. 132 of the Act. 7.2 The ld. counsel for the assessee submitted that all the above referred decisions were rendered in the context of section 153A, but pursuant to the change in law w.e.f. 1.04.2021, section 153A has been done way with and the provision governing assessment pursuant to search and seizure operation now contained in sec 148 r.w. Explanation 2(ii) of the Act. The ld. counsel was of the opinion that the language of Explanation-2(ii) read with section 148 of the Act, is pari-materia with that of the section 153A and the scheme of assessment is substantially the same. Therefore the principle settled by judicial decisions referred above should apply mutatis mutandis to the provisions of sec.148 read with Explanation 2(ii) of the Act. Relying on the above proposit....
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....reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribes and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and....
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....ax escaped assessment. The scheme of section 147/ 148 read with Explanation 2 (ii) is distinct from the scheme of section 153A. Under the erstwhile Section 153A, the AO was mandated to assess or reassess the total income for six years solely by virtue of a search. However, the current Section 147/148 framework operates on the existence of "information which suggests" escapement. Explanation 2(ii) creates a legal fiction where a search is deemed to be such information. Under the provisions of section 148/147 there is no concept of abatement of assessment. Further, if the assessing officer make an addition on the ground for which the assessment was re-opened, then the assessing officer is at liberty to make addition in respect of the other item or enquiry during the course of re-assessment proceeding, but in the case of 153A proceeding if no incriminating material is found in the case of unabated assessment year, as per the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd.(supra), the Assessing Officer is restricted to make addition on the basis of incriminating material found. 7.6 The Hon'ble Supreme Court in Abhisar Buildwell (P.) Ltd.(supra), affi....
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....a link between the search information and the escapement for each specific year. The relevant finding of the Tribunal (supra) is reproduced as under: 2.6. After hearing the rival contentions and perusing the material on record, we find that the assessee has challenged the issue of notice u/s. 148 of the Act and also the proceedings u/s. 147/143(3) of the Act on the ground that the AO has failed to provide copy of the reasons recorded in the proceedings u/s. 148 of the Act and also the addition made by the AO are not arising out of the search conducted u/s. 132 of the Act on the assessee, Rather the additions made were on the basis of material gathered during the course of searches on Kesara Group on 30.11.2018 and Anup Majee Group on 05.11.2020 and consequently the notice u/s. 148 of the Act was itself invalid and may be quashed. We have perused the provisions under old scheme vis a vis under new scheme and find that under the new scheme of search, the AO has to issue notice u/s. 148 of the Act for the number of assessment years as provided in the Act. In other words there need not be any incriminating materials and whether there is any materials warranting additions that ....
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....iminating for a particular year, the rationale of Abhisar Buildwell (supra) suggests that no addition can be sustained. Further, even no addition is made by the ld AO on the information gathered during the search leading reopening u/s. 148 of the Act, the ratio of Hon'ble jurisdictional High Court in the case of Commissioner of Income-Tax-5 v. Jet Airways (I) Ltd. [2010] 331 ITR 236 (Bom) that if an Assessing Officer (AO) reopens an assessment under Section 147/148 but fails to add the specific income for which the notice was issued, they cannot independently add other, new income, making the reassessment invalid, will also come into play and no other addition could be made in search assessments u/s. 147 otherwise then based on information if no addition is made based on such information. 7.12 Regarding the assessee's reliance on Abhisar Buildwell (supra), we observe a fundamental distinction. In the present case, the "information" is not merely the factum of the search, but the specific, sworn testimony of Shri Kishanlal Udaylal Jain and the subsequent field inquiries by the Investigation Wing which revealed the non-existence of the lenders. 7.13 In the case of decision in R....
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.... which is a no more than a process of investigation; the Assessing Officer becomes vested with additional substantive and jurisdictional powers to assume jurisdiction u/s. 147 of the I.T. Act even when no incriminating materials have been found at the time of search us 132 of the I. T. Act from the assessee's premises based on which the Assessing Officer can reasonably arrive at sound belief that income has escaped assessment. This interpretation, being absurd is unacceptable. A reasonable interpretation of law, as provided in Section 147 and 148 of the I.T. Act, is that the Assessing Officer can assume jurisdiction u/s. 147 of the I.T. Act if he can reasonably come to a sound belief that income has escaped assessment, with the help of incriminating materials found in the course of search under section 132 of the Act. However, if there are no incriminating materials found during search under section 132 of the Act, the deeming 'suggestion' under Explanation-2 to Section 148 of the Act, in itself does not lead to fulfillment of mandatory requirement w/s 147 of the I. T. Act that Assessing Officer must have sound reasons to believe that income has escaped assessment. From....
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....ncriminating material" rule established in Abhisar Buildwell (supra) was specific to the unique architecture of Section 153A. Under the amended Section 147, the AO's jurisdiction is wider; if "information" (including deemed information from a search) suggests escapement of income, the AO is empowered to reassess any income that has escaped assessment which comes to his notice during the proceedings. In this case, the third-party confessions and the failed field verifications constitute sufficient "tangible material" to justify the addition, irrespective of whether a specific document was "seized" from the assessee. 7.17 In view of the above, we hold that the jurisdictional requirements of Section 147/148 have been met. The ratio of Rakesh Kumar Pandey (supra) is distinguishable as the present case involves specific adverse evidence beyond the mere occurrence of a search. 7.18 In view of aforesaid discussion, the additional grounds Nos. 35 of the appeal raised by assessee are dismissed. 8. Additional Ground No. 6 of the appeal relates to challenging the jurisdiction of the Assessing Officer in completing the assessment on the ground that under provision of section 151A ....
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....pearing in the assessee's books lack genuine character and creditworthiness. Therefore, it is imperative to extract said questions and answers of his statement for ready reference as under: "Q.16 Please furnish details of sales made to Shri Sonu Sood and Smt Sonali Sood by you. Please also furnish the mode of payment. Ans. Sir we have not sold much of new jewellery to them. We may have done small amount of repairing work for them. The amount would not be more than 1.1 to 1.5L total. This amount would have been received by us in cash. In the last 1-2 years we have not received any repairing orders from them. Q.17 Please give details of any other transaction done with Shri Sonu Sood. Ans. Sir we have in the past given loan to Shri Sonu Sood in FY 13-14 from Omshilpi Jewels and Gems Pvt Ltd. Other than this we have no other transaction in the books of Omshilpi Jewels and Gems Pvt Ltd. I am submitting ledger of Sonu Sood in our books from FY 2013-14 till date as Page 1 to 8 of Annexure 1 to this statement. I am also submitting copy of our bank book which reflects the payments to/from Sonu Sood, at page 1 to 29 of Annexure 2 to this statement. ....
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.... Nayan Shree Jain. If so, please state the nature of your relationship with these people. Ans. Sir I do not know these people. I have never heard their names. Q. 22 I am showing you list of unsecured loans availed by Shri Sonu Sood, as declared by him in his Tax Audit Report for AY 2014-15. The Tax Audit Report is annexed as Annexure 4 to this statement. In this list, Shri Sonu Sood has stated to have received unsecured loans of Rs 9 lakhs each from Smt Monika Jain and Shri Nayan Shree Jain. The address of both these persons has been given as Shop No. 6/7, Dhavalgiri Apartment, Swami Samarth Nagar, Andheri (W), Mumbal-400053, which is same as the registered office of Om Shilpi Jewels and Gems Private Limited. Further, no PAN has been mentioned against these persons. Please comment. Ans. Sir I had arranged for loans for Sonu Sood from Renuka Exim Pvt Ltd, Chattar Impex Pvt Ltd, Yuvika Impex Pvt Ltd, Krishna Raj Diamond Pvt Ltd, Kamal Gem Jewellers and maybe that is why he has put this address against Monika Jain and Nayan Shree Jain. I do not know any persons of these names. They have no connection with me or this address. I do not even know whether they r....
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....For the purpose of verification, an Inspector was deputed on 16.09.2021 to the stated address of M/s. Benchmark Trading Pvt. Ltd., being 13/A, Mezzanine Floor, Gordhandas Building, Opera House, Mumbai-400007, for service of summons under section 131 of the Act. The Inspector reported that upon reaching the premises, an unidentified individual opened the door and categorically denied the existence of any such entity or company at the said address. The said person further refused to disclose his identity and immediately closed the door. Consequently, the summons issued under section 131 could not be served upon the said entity. C. M/s. Manibhadra Diamond Traders Pvt. Ltd. In the course of enquiries conducted under section 131 of the Act, the entity M/s. Manibhadra Diamond Traders Pvt. Ltd. was found to be non-existent at its recorded address, viz. 302-A, Shubh Building, 60 Feet Road, Bhayander (West), Mumbai-40110I.The Inspector reported that the said premises were, in fact, occupied by a residential tenant, Smt. Ratanmala Kishore Jain, who has been residing therein since the year 1992-93. This factual position was further corroborated by the Society Secretary, Shri....
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....on. In those circumstances, the Assessing Officer rejected the claim of creditworthiness and the genuineness of the transaction in relation to M/s Shree Balaji Enterprises. 10.7 In response, the assessee furnished copies of the ledger accounts of all the concerned parties along with corresponding bank statements, contending that the loans so received had been duly repaid either during the relevant previous year or in the immediately succeeding assessment year. The assessee further candidly acknowledged that the impugned loans were facilitated through Shri Kishanlal Udaylal Jain, a person known to him, who had arranged such funds from his acquaintances on the understanding that the assessee would, subject to availability, attend certain private functions of those persons. However, the assessee categorically denied having paid any cash consideration or premium in lieu of procuring the said loans. 10.7.1 It was further submitted that the assessee had no direct knowledge of the individual entities from whom Shri Kishanlal Udaylal Jain had arranged the loans, but maintained a bona fide belief that such persons possessed adequate financial capacity and were regular assessee under t....
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....tes to an exception taken by AO to the manner in which a loan amount shown to be repaid is received back allegedly by Assessee himself through a series of structured transactions. Assessee filed a list of sundry creditors along with his return of income which showed an amount of Rs. 1,26,12,036/- as payable to one M/s. Champaklal Devidas as on 31st December 1987. One Shri. J. P. Gandhi, a close associate of Assessee was the proprietor of M/s. Champaklal Devidas. In AY 1990-91 and 1991-92 Assessee has shown share and security transactions with said Champaklal Devidas, which were shown to result in a loss to Assessee and corresponding profit to Champaklal Devidas. All transactions were recorded by book entries only. Assessee contended that he had no separate document except the general entries in his book and J.P.Gandhi claimed to have lost his books in a fire. Assessee's books indicated a huge amount as closing balance in the account of Champaklal Devidas. Assessee repaid an amount of Rs. 15.4 Crores to Champaklal Devidas. The AO has held that Champaklal Devidas in turn lent the entire sum to some Dhanraj Mills Pvt Ltd. which also transferred the amount to another company called....
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....s which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. 3.5 While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine. 4. Learned advocate for the appellant attempted to emphasize that for the purpose of application of section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied. 5.....
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....tatement was neither provided nor opportunity of cross examination was provided to the assessee. The ld. counsel urged that making addition relied solely on the statement of Shri Kishanlal Udaylal Jain but failure of the Assessing Officer to afford an opportunity of cross-examination of the said witness constitutes a clear violation of the principles of natural justice, thereby vitiating the impugned addition. The ld. counsel relied on the decision of the Hon'ble Supreme Court in the case of M/s. Andaman Timber Industries v. Commissioner of Central Excise, Kolkata-II [2015] 62 taxmann.com 3 (SC), wherein the Hon'ble Supreme Court ruled that denying an assessee the right to cross-examine witnesses whose statements are used to demand tax is a serious violation of natural justice, making the resulting order null and void. The ld Counsel accordingly submitted that impugned reassessment cannot be sustained in view of the violation of the principle of natural justice. 10.14 Thirdly, adverting to the observation of the Assessing Officer that certain loan creditors were not traceable at their recorded addresses during the course of search, the learned counsel for the assessee submitted ....
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.... of any cogent material brought on record by the Assessing Officer to dislodge these evidences, the impugned addition, it was contended, is unsustainable in law. 10.15 On the other hand, the learned Departmental Representative (DR) relied on the order of the lower authorities and submitted that in view of the evidence of the statement of Shri Kishanlal Udaylal Jain, the loans are in the nature of the unexplained cash credit. 11. We have carefully considered the rival submissions and perused the material available on record. The issue for adjudication pertains to the addition made under section 68 of the Act on account of unsecured loans treated as unexplained cash credits. 11.1 At the outset, it is noteworthy that, pursuant to the search conducted by the Investigation Wing at the premises of the assessee and its related concerns, no incriminating material whatsoever was found to indicate that the assessee had introduced unaccounted cash for the purpose of obtaining the impugned loans. No reference of any material adverse to claim of unsecured loan of assessee during survey carried u/s. 133A in 07/12/2012 has been made by the AO in impugned order. 11.2 The Assessing Offi....
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....listed by the ld AO as unsecured loan or unexplained cash credit. Further, though reference was made therein to alleged email correspondence between Shri Jain and the assessee's Chartered Accountant, no such material has been brought on record by the Assessing Officer to substantiate the allegation or to establish any involvement of the assessee in the alleged accommodation entry mechanism. In answer to question no 20 of statement of sh Jain, there is reference of some ledger account as part of said email correspondence, but merely copy of ledger accounts cannot be a material establishing transfer of cash against loan by way of RTGS. Further, in answer to question 18 and 19, sh Jain stated of arranging loans through some brokers or agents but the investigation did not obtain a list of such agents or brokers from him. Further the Shri Kishanlal Udaylal Jain has stated that he received commission income of Rs. 50,000/- in cash but there is nothing on record to show that such commission income was appearing in his return of income filed in the regular course. 11.6 The ld. counsel for the assessee before the Ld. CIT(A) submitted that probably the statement of Shri Kishanlal Udaylal ....
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....rial has not been brought on record by the Assessing Officer, thereby leaving an evidentiary vacuum as to whether the impugned addition rests solely upon the statement of Shri Jain or is supported by independent corroboration. In our considered view, if such e-mail correspondence indeed exists and is sought to be relied upon as corroborative evidence, the same must be duly brought on record and confronted to the assessee. Further, in that eventuality, Shri Jain, whose statement is proposed to be relied upon, must be made available for cross-examination by the assessee. Absence of such opportunity would render reliance on his statement legally untenable in light of the settled position of law. 11.10 It is also an admitted position that the loans were arranged through Shri Kishanlal Udaylal Jain. In such circumstances, it was incumbent upon the Investigation Wing as well as the Assessing Officer to carry the enquiry to its logical conclusion by ascertaining the identities of the alleged intermediaries or brokers through whom the loans were purportedly arranged. No such enquiry has been conducted. The approach of making selective enquiries, aimed only at supporting the case of the ....
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....ved from M/s Vincent Commercial Company Ltd. 14. The Assessing Officer observed that, during the course of search proceedings, the said entity was examined under section 131 of the Act and the statement of Shri Shantilal D. Jain, Director of the company, was recorded on oath. In the said statement, he allegedly admitted that the loan of Rs. 50,00,000/- advanced to the assessee was not a genuine transaction but merely an accommodation entry. This statement was confronted to the assessee during the course of search proceedings; however, the assessee denied any knowledge of the alleged accommodation entry and stated that one Shri Pankaj Jalisatg would be in a position to furnish the relevant details. When examined, Shri Pankaj Jalisatg also expressed ignorance regarding the alleged nature of the transaction and stated that the loan had been arranged through professional intermediaries within the Chartered Accountant fraternity, without any formal written agreement. 14.1 During the course of assessment proceedings, notice under section 133(6) of the Act was issued to M/s Vincent Commercial Company Ltd.; however, no response was received. The Assessing Officer further noted that t....