TaxTMI 
TaxTMI 
2026 (8) TMI 33
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....see, a resident corporate entity is stated to be engaged in the business of construction of residential and commercial complexes. For the assessment year under dispute, assessee filed its return of income 25-9-2013, declaring NIL income. The return of income filed by the assessee was selected for scrutiny. Ultimately, assessment was completed under section 143(3) of the Act vide order dated 21-3-2016, determining the total income at Rs. NIL after setting off brought forward losses. Subsequently, as stated by the Assessing Officer, an oral representation made by one R. Sangani on 26.08.2017 in the Prime Minister's Office (PMO) was received, wherein, the concerned person had made allegations regarding evasion of income tax by Mr. Madan Jain and family and his Associate firms, including the present assessee, who allegedly received unsecured loans from various entities. Based on such information, the Assessing Officer reopened the assessment under Section 147 of the Act. In response to the notice issued under section 148 of the Act, assessee raised objections challenging the validity of reopening. However, through a separate order, the Assessing Officer disposed of the objections a....
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....e submitted, in response to the said notice, the assessee furnished all supporting evidences to establish the genuineness of the loan transactions. He submitted, after making enquiries and thoroughly verifying the documentary evidences, the Assessing Officer completed the assessment accepting the loan transactions. He submitted, in the reassessment proceeding, no fresh and tangible material was available before the Assessing Officer with regard to loan transactions. He submitted. merely based on a letter/representation made by a third party, though the reopening of assessment was after expiry of four years from the end of the relevant assessment year, however, the Assessing Officer failed to establish that escapement of income was on account of failure and non-disclosure of material/information by the assessee in terms with proviso to Section 147 of the Act. He submitted, before reopening the assessment, the Assessing Officer has not conducted any independent enquiry to verify whether the allegations made by the third party makes out a case of escapement of income. Thus, he submitted, reopening of assessment under section 147 of the Act has to be declared as invalid. In support of ....
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....ansaction, the Assessing Officer did not conduct any independent enquiry by issuing notice under Section 133(6) or summons under Section 131 of the Act to the lenders to verify the genuineness of the loan transactions. He submitted, merely relying upon the allegations made by a third party, the Assessing Officer has added back a part of the loans, that too, without providing an opportunity to cross-examine such third party, though specifically requested for by the assessee. Proceeding further, he submitted, the loan transactions are genuine and can be proved from the fact that the repayment of the loans were made either in the same year in which loan was availed or in subsequent years. He submitted, on the date of reopening of assessment, most of the loan accounts stood squared off. He submitted, the assessee has not only paid interest on the loans but has deducted tax. Thus, he submitted, in these circumstances the loans availed cannot be treated as non-genuine for invoking the provisions of Section 68 of the Act. In support of such contention, he relied upon the following decisions: (i) Gaurav Triyogi Singh vs. ITO, 121 taxmann.com 86 (Bombay). (ii) PCIT vs. KRB....
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....Whitemoon Exports Pvt. Ltd. Rs. 5,43,00,000/-. vii. Sharpskill Trading Pvt. Ltd. Rs. 8,65,01,000/-. viii. Newlook Mercantile Company Pvt. Ltd. Rs. 4,96,35,000/-. 9. It is a fact on record that these entities are group companies of the assessee. Further, in course of assessment proceedings, the assessee had furnished all supporting evidences, including loan confirmations and income-tax returns, copies of bank statements, ledger copies, etc. both of the lenders and the assessee. The financial statements of lender companies were also furnished to prove the creditworthiness. After verifying the details furnished by the assessee, the Assessing Officer noted that all the lender companies have a common address. Further, he has stated that the lender companies themselves have availed unsecured loans from other shell companies and provided loan to the assessee. He has stated that the lender entities though have huge turnover but profit is negligible. Thus, based on the aforesaid factual analysis, the Assessing Officer had expressed doubts regarding the genuineness of part of the loan transactions and ultimately treated them as non-genuine. The lender-wise details of ....
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....he lender entities. Pertinently, in compliance to the direction of the bench, the Department has furnished report dated 21.01.2026. A perusal of the said report clearly demonstrates that the nature of enquiry conducted by the Assessing Officer in course of the assessment proceedings of the assessee is not available as details of issuance of notices under Section 133(6) and summon u/s. 131(1) to the loan creditors as also the outcome thereof are not available on record. As regards the status of the assessment made in case of the lender entities, the report clearly states that no such record is available. However, the report acknowledges that in course of assessment proceedings, copies of loan confirmation, financial statements etc. were furnished by the assessee. Thus, the aforesaid facts clearly demonstrate that no purposeful enquiry was conducted by the Assessing Officer to prove that the supporting evidences furnished by the assessee to prove the loan transactions are false or fabricated. The department is not even in a position to controvert assessee's contention that in the case of lender entities, loan transactions have been accepted as genuine. 12. Be that as it may, in co....
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....3 27,02,500 29,21,402 31,57,209 Priyanka Gems 53,52,849 54,05,000 1,06,65,029 1,15,37,987 1,24,53,120 1,34,72,457 1,45,61,070 1,45,61,070 1,45,61,070 13. As can be seen from the aforesaid chart, as on the date of reopening of assessment on 31.03.2021, most of the loan accounts were squared off except two loan accounts which remained outstanding. Thus, as on 31.03.2021, the following loan accounts were outstanding: (i). M/s. Burlington Mercantile Pvt. Ltd. Rs. 38,64,281/-. (ii). M/s. Priyanka Gems, Rs. 1,45,61,070/-. 14. The lender entities have extended the unsecured loan by charging interest at the rate of 12%. It is a fact on record, assessee has been regularly paying interest to the entities on the outstanding loan amounts and also deducting tax at source. It is well known that in case of loan transactions found credited in the books of account of the assessee, initial burden is on the assessee to satisfy three ingredients in terms with section 68 of the Act. The three ingredients are, identity of the creator, cred....
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....sessing Officer regarding the loan transactions, the assessee had furnished all supporting evidences to prove the loan transactions. While completing the assessment, the Assessing Officer has accepted the loan transactions. Though, it may not be the only determinative factor for the genuineness of the loan transactions, however, it demonstrates that the loan transactions were not examined for the first time in course of the reassessment proceeding. Thus, on overall consideration of the factual matrix and other related factors, we conclude that the addition made under section 68 of the Act for an amount of Rs. 17,08,00,000/- is unsustainable. As a natural corollary, the proportionate disallowance of interest corresponding to such loans is also unsustainable. Thus, the Assessing Officer is directed to delete the additions. 16. In so far as loan of Rs. 50,00,000/- from M/s Priyanka Gems, the addition has been made on the allegation that the concerned lender had received the amount from another entity, namely M/s MD Enterprises, allegedly in violation of FEMA provisions for making remittances without actual import of goods. It is the further allegation that the bank account through ....