TaxTMI 
TaxTMI 
2026 (5) TMI 1205
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....0,000/- made under section 69A by treating the unsecured loan received from M/s Aneri Fincap Ltd. as non-genuine and in the nature of accommodation entry. Consequentially, the assessee has also challenged the disallowance of interest expenditure and denial of set off of interest income amounting to Rs. 17,50,000/-, which, according to the Assessing Officer, was intrinsically linked to the alleged bogus loan transaction. 2. Briefly stated, the facts borne out from the assessment records are that during the relevant previous year the assessee had received unsecured loan of Rs. 50,00,000/- from M/s Aneri Fincap Ltd. through banking channels and the same was duly recorded in the regular books of account maintained in the normal course of business. The reassessment proceedings came to be initiated pursuant to certain information allegedly received from the Investigation Wing and material emanating from search and seizure proceedings conducted under section 132 in the case of "One World Group" and related entities. During the course of such search proceedings, statements of Shri Rajesh G. Mehta and Shri Urvil Jani were recorded under section 131, wherein it was allegedly admitted that....
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....s merely engaged in routing accommodation entries to various beneficiaries. 5. Apart from the aforesaid search-related material, the Assessing Officer also drew adverse inference on the ground that the assessee had initially stated during the course of assessment proceedings that there was no formal loan agreement executed between her and M/s Aneri Fincap Ltd., but subsequently a loan agreement was furnished before the Department. According to the Assessing Officer, this change in stand adversely affected the credibility of the assessee's explanation. The Assessing Officer further observed that the loan amount received from M/s Aneri Fincap Ltd. had thereafter been advanced by the assessee to three concerns, namely M/s Rishabh World Pvt. Ltd. (formerly M/s Rishabh Apparel Pvt. Ltd.), M/s Vardha Mercantile Pvt. Ltd. and M/s Dhandeep Mercantile Pvt. Ltd., in which the assessee was stated to be a director. It was further observed that two out of these three companies were allegedly loss-making concerns and that the assessee had earned interest income only from one company which, according to the Assessing Officer, ultimately stood neutralized by interest paid to M/s Aneri Fincap Lt....
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....ted material pertaining to third parties, strict compliance of section 153C was mandatory and resort to section 147 was wholly impermissible in law. In support of the aforesaid contention, reliance was also placed upon the decision of the Coordinate Bench in the case of Parshwa Investment vs. DCIT, wherein, according to the assessee, on identical factual matrix the reopening proceedings had been quashed for failure to follow the statutory mandate of section 153C. 9. The assessee had also challenged the reopening on the ground that the reasons recorded were vague, factually incorrect and mechanically reproduced without there being any independent application of mind by the Assessing Officer. It was submitted that the reasons recorded referred to allegations of bogus purchase and sale transactions carried out by concerns allegedly controlled by Shri Rajesh Mehta, whereas in the assessee's case the transaction under consideration pertained only to unsecured loan transaction and not to any bogus purchase or sale activity. Thus, according to the assessee, the very factual foundation on the basis of which belief of escapement was formed was itself erroneous and misconceived and, there....
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....tion entry or unaccounted money. According to the assessee, her name nowhere appeared in the statement of Shri Rajesh Mehta and there was no specific allegation therein that the transaction entered into by the assessee was bogus in nature. It was also submitted that no independent inquiry had been carried out by the Assessing Officer to establish any cash trail or to demonstrate that the money received by the assessee had emanated from her own undisclosed sources. The assessee further submitted that although adverse inference had initially been drawn due to non-availability of loan agreement, however, considering the time gap since the transaction pertained to financial year 2016-17, the agreement was subsequently traced and voluntarily furnished before the Department. It was also pointed out that M/s Aneri Fincap Ltd. had responded to notices issued under section 133(6) and had duly confirmed the transaction. 13. Another important plank of the assessee's submissions before the lower authorities was that the provisions of section 69A themselves had no application to the facts of the present case. It was argued that section 69A could be invoked only where the assessee is found to....
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.... upheld the consequential disallowance of interest expenditure and denial of set off by holding that the entire arrangement was part of a bogus accommodation entry transaction unearthed during the course of search proceedings. 15. We have heard the rival submissions, carefully perused the assessment order, the impugned order of the learned CIT(A), the material placed in the paper book and the various documentary evidences furnished before the authorities below. Though the assessee has raised multiple legal and jurisdictional grounds challenging the validity of reassessment proceedings under section 147, including the plea that proceedings ought to have been initiated under section 153C inasmuch as the entire foundation of reopening emanates from search material pertaining to third parties, however, after considering the entire factual matrix and the evidences placed before us, we find that the controversy can conveniently be adjudicated on merits itself because, in our considered opinion, the additions made by the Assessing Officer and sustained by the learned CIT(A.) are wholly unsustainable on facts as well as in law. The central issue requiring adjudication before us is wheth....
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....and huge fund availability during the relevant period. The financial statements placed before us show that the company had borrowed funds aggregating to several hundreds of crores and had current assets and loan portfolios exceeding several hundred crores. It has also been demonstrated from the audited financial statements that the lender had advanced loans to various parties as part of its financing business and had disclosed substantial interest income in its books of account. Thus, the financial capacity and creditworthiness of the lender cannot be brushed aside merely on generalized allegations made during third-party investigations. Once the audited financial statements, bank statements and statutory records demonstrate that the lender had sufficient financial wherewithal to advance the loan, the primary burden cast upon the assessee stood duly discharged. Merely because subsequently certain allegations may have surfaced against the lender during search proceedings, the same, by itself, cannot automatically render every transaction undertaken by such entity as sham or fictitious unless specific material is brought on record establishing direct nexus between the assessee and th....
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....on 69A itself becomes wholly misconceived. Section 69A contemplates a situation where the assessee is found to be owner of money, bullion, jewellery or other valuable article not recorded in the books of account and the assessee either offers no explanation regarding the nature and source thereof or the explanation furnished is found unsatisfactory. In the present case, neither any unaccounted asset has been found in possession of the assessee nor any unexplained money outside the books has been detected. On the contrary, the transaction is duly recorded in the books and fully traceable through banking channels. The Assessing Officer has not demonstrated that the explanation offered by the assessee is inherently false or impossible. Rather, the addition has been made merely on presumptions flowing from third-party statements and surrounding circumstances without establishing the basic jurisdictional facts necessary for invoking section 69A. 20. The Assessing Officer has also drawn adverse inference from the fact that initially the assessee had stated that no formal loan agreement existed and subsequently furnished the same. However, in our considered opinion, such discrepancy by....