AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1480
X X X X Extracts X X X X
X X X X Extracts X X X X
....d M/s. Starlite Builders Pvt. Ltd. of INR 55.45 crores and 17 crores respectively, as bogus and mere accommodation entries. Accordingly, the addition was made u/s 68 of the Act for the same. 3. In first appeal, Ld.CIT(A) confirmed the addition therefore, the assessee is in appeal before the Tribunal by taking following Grounds of appeal:- 1.0. "That, on the facts and in the circumstances of the case, the disallowance, imposition of tax, and interest with reference thereto, as well as the quantification of taxable income and tax liability, are unjustified, erroneous, and unsustainable, and it is prayed that necessary directions be issued to the Learned Assessing Officer (Ld. AO) to grant appropriate relief in accordance with the law. 2.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred int upholding the order of Ld. AO without considering the fact that the assessment completed u/s 147 r.w.s 143(3) was bad in law on various technical and jurisdictional grounds. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that recourse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... addition made was baseless and invalid. 8.1 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 on account on unexplained cash credits amounting to Rs. 72.45 crores without considering the facts and reply filed by the appellant. 8.2 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 since bank statement cannot be construed to be books maintained by the assessee for the purpose of section 68 of the Act. 8.3 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 since legitimate transactions in respect of advances received for land purchase stated to be accommodation entries or unexplained credits which were refunded by the appellant company to the impugned parties. 9.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in treating the appellant company as an accommodation entry recipient by relying on statement recorded at back of the appellant without providing a copy of impugned statements and a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith respect to other Grounds of appeal taken on merits, Ld.AR submits that assessee has received advances from M/s Focus Realcon Pvt. Ltd. & M/s. Starlite Builders Pvt. Ltd. in terms of the MOU entered into between the parties dated 27.03.2014 as per which both the companies have provided advances for the purchase of lands on their behalf. It was submitted by Ld.AR that in the case of M/s. Starlite Builders Pvt. Ltd., the said amount was returned in subsequent year which is evident from the copy of the confirmation submitted before the AO placed at page 47 of the Paper Book. Ld. AR submits that in subsequent assessment year more funds of Rs. 12.00 crores were received from M/s. Starlite Builders Pvt. Ltd. however, the same were never doubted by the AO. Ld. AR submits that the assessee has filed the confirmation of the parties and since the transaction was carried out through banking channel and the advances were received for the purchase of land in terms of MOU executed between the parties, no addition should be made u/s 68of the Act. Ld.AR submitted that nature of advances received has duly been described in the MOU and the said amounts were refunded and the assessee has also file....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. It is well established that before initiating the reassessment proceedings, AO should apply his mind and must record the satisfaction of escapement of income. In the instant case, as could be seen from the perusal of the reasons recorded, as reproduced at pages 2-3 of the reassessment order that the AO has recorded his satisfaction solely on the basis of the information received from DDIT Unit-I (Inv.) and the statements of the directors without their being any independent application of mind. The Ao has not conducted any fresh enquiry before recording the reasons to believe of escapement of any income and thus such satisfaction is purely borrowed satisfaction. Further the material so received was never confronted to the assessee. Therefore, the assumption of jurisdiction u/s 147 of the Act is bad in law. 12. The Hon'ble Delhi High court in the case of Pr. CIT vs. RMG Polyvinyl (P) Ltd. reported in 83 taxmann.com 348 has held as under: "..where information was received from investigation wing that the assessee was beneficiary of accommodation entries but no further inquiry was undertaken by Assessing Officer, said information could not be said to be tangible mate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the income of the assessee has escaped assessment. [Para 25] Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. There is not even a line of reason which may justify the formation of the belief. Consequently, reopening of assessment for the assessment year in question by the Assessing Officer does not satisfy the requirement of law in terms of sections 147 and 148." [Para 26]." 15. Similarly reliance is placed on the judgement of Hon'ble Delhi High Court in the case of Movish Realtech (P.) Ltd. vs. Deputy Commissioner of Income-tax reported in [2023] 152 taxmann.com 666 (Delhi), in the head note of the decision it was held as under :- "Section 68, read with sections 147 and 148, of the Income-tax Act, 1961 - Cash credits (Loan)- Assessment year 2019-20 - Pursuant to a search conducted at 'Oneworld group entities', it was noted that assessee was a beneficiary of an accommodation entry provided in form of bogus loans - It was alleged by revenue that bogus accommodation entry was provided by AFL Ltd. - It was also noted that AFL was one of several entities controlled by an accommodation entry provider i.e., one....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing Officer to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject-matter of examination. The Assessing Officer being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe, the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre-condition to the assumption of jurisdiction under section 147 The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment [Para 26] In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the Assessing Officer one after the other and there was no independent application of mind by the Assessing Officer to the tangible material which forms the basis of the reasons to believe that income has es....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rores and majority was repaid in subsequent assessment year. Likewise, funds received from M/s. Focus Realcon Pvt. Ltd. were refunded in AY 2017-18. It is further observed that no adverse interference was drawn by the Revenue when the funds were refunded to these parties. The assessee also filed financial statement of both the companies a perusal of which revealed that both the companies have sufficient net worth and the advances given to the assessee were duly appearing in their balance sheet. 21. With respect to the repayment of loan, the Hon'ble Gujarat High Court in the case of PCIT Vs Ojas Tarmake Pvt Ltd reported in 156 Taxmann.com 75 has observed as under: "Where appellant showed unsecured loans received during relevant assessment year and AO made addition on ground that appellant failed to discharge onus of liability as laid down under section 68, since amount of loan received by appellant was returned to loan party during year itself and all transactions were carried out through banking channels, impugned addition was to be deleted." 22. With respect to the statement of the Directors, Shri Pradip Dey, it is observed that he was Director of both the companies....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions filed or on record, the allegation of the AO that the notices issued u/s 133(6) have not been complied and hence the amount be treated u/s 68 is not an acceptable proposition. 13. Keeping in view, the facts and arguments taken, we hold that the assessee has substantiated its claim before the AO by producing all the relevant documents viz. copy of ledger account of M/s Grand Realcon Pvt. Ltd., copy of the bank statement reflecting money received from M/s Grand Realcon Pvt. Ltd., copy of confirmation of account, copy of income tax returns o f M/s Grand Realcon Pvt. Ltd. and M/s Grand Realcon Pvt. Ltd.'s bank statement and financial statements o f M/s Grand Realcon Pvt. Ltd., we affirm the decision of the ld. CIT(A) holding that appellant has duly discharged its onus but the AO has failed to conduct specific enquiries and come out with findings that the underlined transactions is sham transaction." 23. The appellant has submitted following documents to substantiate the amount received as genuine which are as under:- (i) Copy of the ledger accounts of both the lenders; (ii) Copy of bank statement reflected money received; (iii) Copy of confi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High court." 26. The Hon'ble Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd reported in [2022]134 Taxmann.com 256 (Delhi) while allowing the appeal in favour of the assessee towards the additions made u/s 68 of the Act has held as under : "Section 68 of the Income-tax Act, 1961 - Cash credits (Share capital money) - Assessment years 2012-13 to 2017-18 - Assessee-company received share capital and share premium money from several investors - Assessing Officer made addition in respect of same on account of unaccounted income under section 68 on basis of recorded statement of managing director of assessee-company - Whether since assessee placed sufficient documentary evidence to establish that money which assessee had paid to investors was routed back to it in form of share capital/share premium and identity, creditworthiness and genuineness of investors was proved, there was no justification to make addition under section 68 - Held, yes [Paras 11.4, 11.5 and 14.4] [In favour of assessee]." 27. It is also relevant to state an amendment is ....