TaxTMI 
TaxTMI 
2026 (6) TMI 1260
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....32 was carried out on 19.12.2019 in the case of MTC Group including the assessee company. In response to notice issued under section 153A, the assessee filed its return of income declaring the same income as originally returned. During the course of assessment proceedings, the Assessing Officer noted from certain seized diaries and loose papers found from bundle nos. 1, 3, 8 and 11 that there were entries pertaining to accommodation loans allegedly arranged through Surat based entities. On the basis of such seized material and statement of Shri Maganlal Mehta recorded during the course of search proceedings, the Assessing Officer issued notice to the assessee seeking explanation with regard to unsecured loan of Rs. 30,00,000/- received from M/s. Manmeet Exports Private Limited. 3. In response thereto, the assessee had categorically explained before the Assessing Officer that the impugned amount of Rs. 30,00,000/- was not a fresh accommodation loan involving any separate cash component during the year under consideration. The assessee explained that originally the loan of Rs. 30,00,000/- had been taken by its associate concern namely M/s. M S Motors Private Limited from M/s. Manm....
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....t records. Thus, according to the assessee, the entire accommodation mechanism together with cash component already stood disclosed and offered before the Settlement Commission in the hands of Shri Maganlal Mehta and therefore separate addition in the hands of the assessee would result in double taxation of the same transaction. 6. The Assessing Officer, however, rejected the explanation of the assessee mainly on the ground that there were two distinct loans, one pertaining to M/s. M S Motors Private Limited in assessment year 2015-16 and another in the hands of the assessee company during assessment year 2016-17, and since the loan in the hands of the assessee was not separately offered by Shri Maganlal Mehta in the settlement petition, the same represented unexplained cash credit liable for addition under section 68. The learned CIT(A) also confirmed the addition primarily observing that the assessee had failed to establish identity and creditworthiness of the creditor and genuineness of the transaction and further failed to substantiate its explanation with cogent documentary evidences to the satisfaction of the Assessing Officer. 7. Before us, the learned counsel for the ....
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....reciation of the seized documents and the actual flow of the alleged accommodation transaction. The Revenue authorities have proceeded on the premise that there were two separate accommodation loans involving independent cash components, one in the hands of M/s. M S Motors Private Limited in assessment year 2015-16 and another in the hands of the present assessee in assessment year 2016-17. However, from a holistic reading of the seized documents, statement of Shri Maganlal Mehta, the cash flow statement furnished before the Settlement Commission and the movement chart of the transactions, it emerges that what was actually involved was one single accommodation arrangement whose cheque component subsequently travelled from one group concern to another. The seized material itself demonstrates that the initial accommodation entry of Rs. 30,00,000/- had been arranged in favour of M/s. M S Motors Private Limited through M/s. Manmeet Exports Private Limited and at that stage Shri Maganlal Mehta had admittedly paid the corresponding cash component which was later owned up by him during the course of search and settlement proceedings. Thereafter, once M/s. M S Motors Private Limited repaid....
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....ly appeared in the books of another group concern. The contention of the learned CIT-DR that the assessee had independently failed to establish the creditworthiness of M/s. Manmeet Exports Private Limited also loses much of its force in the peculiar facts of the present case, because here the department itself proceeds on the footing that the transaction was an accommodation entry arranged through Shri Maganlal Mehta and the corresponding cash component had already been identified, admitted and subjected to settlement proceedings. Once the Revenue itself accepts that the transaction was part of the accommodation mechanism disclosed before the Settlement Commission, then the issue no longer remains confined to conventional examination of creditworthiness in isolation under section 68, but has to be examined in the backdrop of the entire seized material and admitted cash flow mechanism. The Assessing Officer has nowhere brought any cogent material on record to establish that at the stage when the cheque was issued to Madhuban Motors Private Limited, any fresh unexplained money had changed hands. The entire addition is thus founded only upon suspicion arising from the appearance of th....