TaxTMI 
TaxTMI 
2026 (6) TMI 824
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....earned assessing officer erred in making an addition of Rs. 10,00,000/- to the income of the assessee u/s 68 of the Income Tax Act, 1961. 3. The learned assessing officer erred in making an addition of Rs. 30,000/- to the income of the assessee u/s 69 of the Income Tax Act, 1961. 4. The learned assessing officer erred in charging the interest under section 234B & 234C of the Income Tax Act, 1961. 5. The learned assessing officer has erred in initiating the penalty proceedings u/s 271AAC of the Income Tax Act, 1961. 6. The appellant craves leave to add, alter, modify and delete any of the grounds of appeal on or before the disposal of the appeal." 2. Brief facts of the case are that the assessee filed return of income u/s 139 on 31.03.2021, declaring total income of Rs. 27,41,600/-. The High Risk CRIU/VRU information was received by the AO on the basis of search u/s 132 of the Act conducted by Revenueon 17.11.2021, on Galaxy Group, Shri Pradeep Indra Prasad Agrawalla and entry providers Shri Deepak Agarwal and Shri Himanshu Verma. Documents seized during the search contains information which show that the assessee is the beneficiary of accommod....
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.... searched earlier by Revenue, and they were found indulged in providing various types of accommodation entries through web of non-descript entities. The analysis of the financial of these non-descript entities by Revenue revealed that these entities have declared meager turnover over the past few assessment years, fixed assets recorded are negligible, salaries and wages to employees, statutory benefits such as ESI, PF etc recorded are negligible. The companies have huge reserves and surplus lying in their Balance Sheet. The book value of these companies do not justify high premium. It was also found that these entry providers were regularly opening new companies, and shift the business of accommodation entries to these new entities, to befool law enforcement agencies. It was also found that Directors of many of these companies were found to be same and their financial analysis also indicated that they are persons of no means. It also transpired while conducting physical enquiries by Revenue that no such company/entity was found existing at the address provided. It also transpired during investigations that these entities have poor creditworthiness, identity could not be proved as t....
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....olled by Sh. Rajesh Agarwal (CA. and close associate of Shri Deepak Agarwal). Similarly, statement of Sh. Himanshu Verma was also recorded by Revenue on oath u/s 131(1A) of the 1961 Act, wherein he admitted that M/s Arti Securities and Services Limited, M/s Saivi Finance Private Limited and Mysore Finlease Private Limited are Managed and controlled by Sh. Deepak Agarwal, and Sh Deepak Agarwal provides accommodation entries in lieu of cash. During the search proceedings at the office premises of Deepak Agarwal, various unsigned board resolution paper, letter head, signed and unsigned POAs (Power of Attorney) of various non-descript entities were found and seized in physical form. These POA's also included POA's of many companies which have provided accommodation entries to companies of M/s Galaxy Group. During the course of search proceedings, various incriminating documents such as tally data set of various non-descript entities entries controlled and managed by Shri Deepak Agarwal and Shri Himanshu Verma was found in the possession of both. During the course of post search investigation, statements of various CAs were recorded who were being reported as statutory Tax Auditors on F....
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....ssessment order, which is stated to be managed by Shri Himanshu Verma, and was used to provide accommodation entries in lieu of cash@3%., wherein the assessee has received Rs. 10,00,000/- as unsecured loan from LVS Financial Services Private Limited on 17.12.2019. The ledger account of the assessee in the books of accounts of LVS Financial Services Private Limited was reproduced by the AO in its assessment order at page 23, which reads as under: The AO invoked provisions of Section 68 of the Act by holding that the assessee has accepted loan of Rs. 10,00,000/- from non-descript entity M/s LVS Financial Services Ltd. which has no genuine business and has no creditworthiness and thus, the assessee is the beneficiary of the accommodation entry. Since, creditworthiness of the transaction remained unsubstantiated, an amount of Rs. 10,00,000/- was added to the income of the assessee as an unexplained income u/s 68 of the 1961 Act. The AO also invoked provision of Section 115BBE of the 1961 Act to apply rate of tax stipulated therein. Further, the AO made addition to the income of the assessee to the tune of Rs. 30,000/- (3% of Rs. 10,00,000/-) being commission income in lieu of afores....
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.... further emphasize that repayment timing and evidence are critical in distinguishing genuine loans from accommodation entries. For instance, in the recent and jurisdictional ITAT decision in Real Innerspring Technologies Pvt. Ltd. v. ACIT (IT Appeal No: 647/Del/2023 dated 27.03.2025), involving substantially similar facts with companies controlled by the Himanshu Verma/Anil Agarwal group, the tribunal deleted the addition u/s 68 because the assessee demonstrated repayment of the loans with interest via banking channels before the notice u/s 148 was issued, supported by bank statements, TDS certificates, and audited financials proving creditworthiness and business utilization. The ITAT noted: "the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan and repaid along with the interest clearly shows that the transactions are genuine... Merely because some operator has managed the affairs and all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion." Here it is important to distinguish the scenarios where repayment occurs after notice u/s 148 or even....
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.... by Sh. Deepak Agarwal & Sh. Himanshu Verma. These dummy entities were engaged in providing bogus accommodation entries, and the assessee is one of the beneficiary of the bogus accommodation entry of unsecured loan of Rs. 10,00,000/- from LVS Financial Services Ltd.. The Ld. Sr. DR relied upon the order of the Tribunal in the case of ACIT v. Bhawani Finvest Private Limited in ITA No.6303/Del/2025 vide order dated 25th March, 2026, wherein under similar circumstances with respect to the same searches conducted by Revenue on 17.11.2021 u/s 132 on entry operators namely Mr. Deepak Agarwal and Mr. Himanshu Verma, the Division Bench of the Tribunal upheld reassessment made by the AO and as confirmed by ld. CIT(A) by upholding the additions made by the authorities below, by holding as held as under: "8. We have heard rival submission in the light of material available on records. We have noted that the Id. AO has vividly demonstrated in his assessment order extracted hereinabove that the assessee was having connections with accommodation entry providers. We have also noted that the ld. AO has extensively brought out in the assessment order while analyzing statements of entry pro....
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.... investigation that Sh. Himanshu Verma and Shri Deepak Agarwal were alleged accommodation entity providers in lieu of cash and commission. It was also unraveled consequent to detailed investigations carried out by department, that they were controlling and managing more than 300 non-distinct entities (listed by the AO in his assessment order), which were allegedly web of dummy/shell companies incorporated to provide bogus accommodation entries in lieu of cash and commission and both of them were working in tandem. The Department has concluded that these entities do not have adequate capital, had meager assets and had meager business turn over. There was huge share premium reflected in their books of accounts which do not justify their assets and turnovers. They were having very few employees, and main activities of these non-distinct entities were to provide various types of accommodation entries in lieu of commission and cash. It also transpired that there are cross holding by these companies, which were undertaken to boost their net-worth with a view to provide more accommodation entries. It was unraveled consequent to investigations carried out by Revenue that these two entry pr....
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....the search conducted by Revenue such as whatsapp messages/chats and statements recorded during search and post search investigations. Thus, the onus has shifted back to the assessee to rebut the findings of the Revenue, and the onus is very heavy in the instant case. The main bone of contention of the assessee is that the assessee is not provided with the copies of the relied upon statement recorded by the Department nor cross examination of said persons whose statements were recorded was allowed by department. It is pertinent to mention here that the employees of these entry operators, employees of galaxy Group, professionals as well as son of Sh. Deepak Agarwal (detailed in preceding para's of this order) admitted while recording statements that these entities were engaged in providing different types of accommodation entries in lieu of cash and commission. Under these circumstances the main bone of contention of the assessee is that assessee was not provided with the copies of the statement recorded by the Revenue as well as cross examination was not allowed. The other defense taken by the assessee is that this loan was unsecured loan taken through banking channel in 2019, and i....
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....y the assessee by invoking Section 68 of the 1961 Act. Thus, repayment of loan was made in 2025 after additions were already made to the income of the assessee to the tune of Rs. 10,00,000/- by treating such loan as income of the assessee from undisclosed sources u/s 68. I have also observed that the assessee has not demonstrated that any interest has been paid on such loan to LVS Financial Service Ltd. I have observed that in last more than 5 years, the assessee did not pay any amount to the lender. I have also observed that assessee has not placed on record any loan agreement with LVS Financial Services Private Limited. I have also observed that the assessee has not placed on record terms and conditions on which such loan was availed. The loan is raised from LVS Financial Pvt. Ltd. and as the name indicate, the said LVS Financial Services Pvt. Ltd. is purportedly supposed to be engaged in finance activity. It is quite obvious that finance company will provide loan on commercial terms, which may include loan processing fee, interest on loan, security against the loan, guarantees to secure the loan, regular repayments of the loan by monthly, quarterly installments. No such details ....
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....essee to produce Directors of LVS Financial Services Private Limited to prove its contention that the lender is genuinely engaged in NBFC activities. Again no effort was done by the assessee even as of date. In-fact, the assessee has claimed that recently on 23.07.2025, it repaid loan of Rs. 10,00,000/- to LVS Financial Services Private Limited, then now the assessee cannot contend that these documents could not be produced or Directors could not be produced before authorities, as the assessee is in contact with the lender as late as in July, 2025, while the Revenue could not locate the entity at its given address and these entities are not responding to summons issued by Revenue. Thus, the evidence which could be produced but not produced, presumption will lie against the person who withheld the evidences Thus, the assessee is not able to prove the creditworthiness and genuineness of the said lender. It is true that the assessee has provided the identity of the lender by way of PAN details, but on physical inspection the said company is found to be non existent on the address furnished on record. Merely filing of the PAN, bank statement and loan confirmations are not sufficient. O....