TaxTMI 
TaxTMI 
2026 (8) TMI 1650
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....ent order and without adequately examining the creditworthiness of the lenders and the real source of funds" 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made under section 68 by accepting documentary evidences such as confirmations, PAN, income-tax returns and bank statements, without appreciating that the assessee had failed to discharge the primary onus during the assessment proceedings and without conducting proper verification of the financial capacity of the creditors. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition under section 68' by placing reliance on subsequent repayment of loans through banking channels, without appreciating the settled legal position that the genuineness and source of the credit must be established in the year of receipt itself and subsequent repayment does not validate an unexplained credit entry. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 9,50,00,000/- made by the Assessi....
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....ed loans after holding that the assessee failed to establish the identity, creditworthiness of the lenders and the genuineness of the transactions. The learned CIT (A), however, granted relief by deleting the additions made by the Assessing Officer. Being aggrieved by the findings of the learned CIT (A), the Revenue has preferred the present appeal before this Hon'ble Tribunal. 6. Ld. DR further submitted that the learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 16,66,99,990/- made under section 68 of the Income-tax Act, 1961. The Assessing Officer, after conducting detailed enquiries under sections 131 and 133(6), recorded specific creditor-wise findings demonstrating that the assessee had failed to establish the three essential ingredients mandated under section 68, namely, the identity of the creditors, their creditworthiness and the genuineness of the loan transactions. In several cases, notices remained uncomplied with, incorrect PAN details were furnished, financial statements and income-tax returns were not produced during the assessment proceedings, and independent enquiries revealed deficiencies in the financial capacity of the lenders. T....
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....g Officer, recorded a categorical finding that although the assessee claimed to have repaid 9.50 crore out of the loan of 15 crore received from Shri Pankaj D. Goshar, the search conducted under section 132 unearthed seized WhatsApp conversations and other incriminating electronic material establishing that cash was received by the assessee against issuance of cheques and vice versa for facilitating accommodation entries. The Assessing Officer further observed that the assessee and Shri Pankaj D. Goshar had business association in real estate projects, including M/s Goshar Ventures Pvt. Ltd., and that the repayment transaction represented an accommodation entry rather than a genuine discharge of liability. These findings were based not merely on suspicion but on the cumulative appreciation of seized electronic evidence, the conduct of the parties and the surrounding circumstances. 9. Ld. DR submitted that the learned CIT(A) deleted the addition by holding that the unsecured loan and its repayment were routed through banking channels and that the Assessing Officer had based the addition primarily on the alleged bogus long-term capital gains earned by Shri Pankaj D. Goshar from th....
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....tary evidence and repayment through banking channels. The order passed by the learned CIT(A) be set aside to the extent challenged by the Revenue and the additions made by the Assessing Officer be restored. 11. On the other hand, the learned counsel appearing on behalf of the assessee strongly supported the orders of the learned CIT(A). The learned counsel further submitted that, in the course of assessment proceedings, the assessee filed most of the information available with it and in the course of the appellate proceedings also, the assessee filed various information to prove the genuineness, creditworthiness and identity of the creditors. Learned counsel for the assessee submitted that the additions made by the Assessing Officer were not based on any inquiry, information or investigation by the Department but was made in the course of regular assessment proceedings and not related to any accommodation entry provider. The learned counsel for the assessee submitted that on the additional evidences which the assessee filed before the learned CIT(A), the learned CIT(A) called for a remand report in respect of all 39 parties, in which the Assessing Officer had stated that the ass....
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....T(A), upon which a remand report was called for by the learned CIT(A) and considering the remand report, the submissions of the assessee and the evidences furnished on record by the assessee, the learned CIT(A) deleted the addition, observing that the assessee had established the identity, creditworthiness, and genuineness of the loan transactions. 14. We observed that the Assessing Officer observed in the remand report that the assessee had submitted various documents such as ledger accounts, bank statements, ITR acknowledgments, computation of income, confirmation of accounts, and in certain cases, balance sheets and profit and loss accounts of the lenders. The Assessing Officer observed that some of the parties had not submitted certain complete documents such as financials and some of them had declared meagre income compared to the loans advanced and no interest deduction details were furnished, and therefore, the creditworthiness and genuineness of the loan transactions remained unsubstantiated. The Assessing Officer further observed that no independent third-party information, inquiry, or cross-checking had been carried out by the Assessing Officer at that stage, and the c....
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..... It is observed by the learned CIT(A) that since the assessee rectified the same by furnishing all the relevant details and no adverse material had been brought on record to discredit the evidences now submitted, it was held that the loan transactions were genuine and the assessee had proved the identity and creditworthiness of the lenders. It was also the observation of the learned CIT(A) that except the loan from M/s Hina Chedda, who is the daughter-in-law of the assessee, all the loans were repaid either during the year itself or in subsequent years through regular banking channels, which fact has not been disputed by the Assessing Officer. The learned CIT(A), therefore, held that the repayment of the loan reinforces the genuineness of the transaction and negates the explanation of any unexplained cash credit. The learned CIT(A) held that once the existence of the loan, identity of the lender and the mode of transaction are established and the amount stands repaid, the provisions of section 68 of the Act cannot be invoked. While coming to such a conclusion, the learned CIT(A) observed as under:- "8.1.4 Decision: From the above, in my opinion, the appellant has....
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....uent years and therefore the question of getting accommodation entries does not survive anymore in view of the judgment passed by the Hon'ble Gujarat High Court in the case of PCIT vs. Ojas Tarmake Pvt. Ltd. (2023) taxmann.com 75 (Guj.) wherein it was held 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". 6.2 We have again given thoughtful considerations to the peculiar facts and circumstances of the case and the determinations made by the authorities below and the relevant documents filed by the Assessee and raising the factual and legal issues and the plausible explanation and are of the considered view that the decision of the Ld. Commissioner as observed above, is not only based on the relevant documents which have been produced by the Assessee to establish identity and creditworthiness of the parties from whom the A....
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....hat the said loan amount s been repaid by the assessee to Shri Ishwar Adwani in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the ITAT has held that the matter is not required to be remanded as no other view would be possible, we seè no reason to interfere with the impugned order passed by the ITAT. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed. c. Pr. CIT vs M/s. Skylark Build - ITA No. 616 of 2016 (Bom-HC): "6. It is in these circumstances, he concludes that the creditworthiness of the cash creditor is fully vouched and hence the action of the Assessing Officer in rejecting the explanation of the assessee was not tenable in the eyes of law. We do not think that in endorsing this finding of fact, the Tribunal has not performed its obligation and duty as a last fact-finding authority. When such detailed findings of the Commissioner were on record supported by case laws, then, every single line in this 31 p....
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....ay be taken into consideration, according to Mr. Mohanty, but that was not enough. Even the money being paid by cheques is of no consequence according to Mr. Mohanty. It may be so, but when these principles are invoked, their application would depend upon the facts and circumstances in each case. There, the Hon'ble Supreme Court endorsed the findings and dismissed the Revenue's Appeal. While relying upon paragraph 26 of this judgment in P. Mohanakala (supra) what Mr. Mohanty submits is that in that paragraph the Hon'ble Supreme Court was referring to its prior decisions. The reliance thereon was to the extent of the Revenue's submissions and to give support to it. The argument was that the issue relating to the propriety of the legal conclusion that could be drawn on the basis of the proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the manner since the authorities below failed to draw a proper and logical inference from the proven facts. The Hon'ble Supreme Court expressly rejects this submission and says that findings of fact are arrived at on a proper appreciation of the material available on record and....
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....ounting to Rs. 11,16,99,999/- (Rs.16,66,99,999 - Rs. 5,50,00,000) in its books of account for the year under consideration; so I direct the Assessing officer to delete the addition of unsecured loans of Rs. 11,16,99,999/- made u/s 68 of the Act. Accordingly, Ground No.1 raised by the appellant is hereby allowed to that extent." 18. As could be seen from the above, the learned CIT(A) deleted the addition to the extent of Rs. 11,16,99,999/- out of Rs. 16,66,99,999/- in respect of unsecured loan and considered the balance addition of Rs. 5,50,00,000/- along with addition made of Rs. 9,50,00,000/- u/s 69 of the Act while disposing the grounds. We see no infirmity in the order passed by the Ld. CIT(A) in holding that the assessee has proved the genuineness, creditworthiness and identity of the creditors. 19. Coming to the balance addition of Rs. 5.50 crore out of Rs. 16,66,99,999/- in respect of unsecured loan and the addition made of Rs. 9.50 lakh in respect of repayment of loan to on Shri Pankaj D Goshar. The case law relied upon by the Ld. DR have no application to the facts of the assessee's case. 20. Considering the submission of the assessee, the evidence on record an....
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....between the assessee and the lender. Accordingly, the Assessing Officer concluded that the transaction represented an accommodation entry and held that the assessee had failed to discharge the onus under sections 68 and 69 of the Act and made an addition of closing balance Rs 5,50,00,000. The relevant extract of the assessment order is reproduced below "During the assessment year under consideration, the Assessee has claimed to have received an amount of Rs 15,00,00,000 from the Shri. Pankaj Goshar which is reflecting in the copy of ledger. The Assessee has claimed to have been repaid and squared off the amount of during the year under consideration. Thus the amount of is reflecting as outstanding. The Assessee was asked to file the confirmation for the same. Further a notice under section 133(6) of the Income Tax Act 1961 was also issued for the examination of the unsecured loan received. Further In this case, a summons under section 131 of the Income Tax Act 1961 was also issued to Shri. Pankaj Goshar. However though the party has filed the reply but did not appear before this office to give statement under section 131 of the act citing the medical reasons and loss of me....
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....a. Thus the entire process of giving and accepting the loans from Shri. Parikaj Goshar is a mechanism of accepting and giving the accommodation entries in the mutual books of accounts against the receipt of cash. Thus the Assessee has not shed of the onus of bestowed upon him within the meaning of section 68, 69 of the Income Tax Act 1961." 8.2.3. The AO in the assessment order further held that the appellant claimed repayment of Rs. 9,50,00,000 to Shri Pankaj Goshar, the transactions were in the nature of accommodation entries involving exchange of cash against cheque entries. Relying on WhatsApp communications seized during the search under section 132, it was concluded that cash was received and repaid between the parties to mutually accommodate cash and cheque balances. Accordingly, the Assessing Officer treated Rs 9,50,00,000 as unexplained and brought the same to tax under section 69 read with sections 68, 69A and 69B of the Act. The relevant portion of the assessment order is reproduced below - "16. Further from the submissions of the Assessee it was seen that the Assessee has claimed to have repaid back the Rs. 9,50,00,000/- (RS. 15,00,00,000 less Rs. 5,50....
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....ined that both parties have, as and when required, extended interest-free financial support to each other strictly through banking channels. During AY 2014-15, Shri Pankaj Goshar advanced Rs 11 crores to the appellant, out of which Rs 5.5 crores was repaid during the year and the balance Rs 5.5 crorse was duly reflected as unsecured loan outstanding as on 31.03.2014. It was further submitted that a search under section 132 was conducted in the case of Shri Pankaj Goshar on 10.09.2015, during which certain WhatsApp messages were seized from his mobile phone. Based solely on these messages, the Assessing Officer presumed that the appellant was involved in cash accommodation entries and issued a show cause notice. The appellant categorically denied any cash transactions in his statement recorded under section 131 and explained the loan and repayment entries appearing in the books. However, the Assessing Officer ignored the explanation and proceeded to treat the transactions as accommodation entries, primarily relying on the alleged penny stock gains of Shri Pankaj Goshar and the impugned WhatsApp messages. The appellant has further contended that the additions of Rs 5.5 crores under s....
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....urable Tribunal in the case of Mr Pankaj Goshar has observed that LTCG earned by Mr Pankaj Goshar on sale of shares of Pine Animation Limited cannot be considered to be an accommodation entry. The operative paragraphs of the order are reproduced below - "25. We noticed earlier that the AO has fully placed reliance on the investigation report given by the investigation wing and also relied upon the statements recorded from certain persons and exit providers. The assessee sought opportunity to cross examine all those persons, but such opportunity was not given. However, in the second remand proceeding, the AO issued notice only to an alleged exit provider named Shri Jagdish Purohit only. Even though Shri Jagdish Purohit did not present himself for cross examination, yet he sent a letter to the AO, wherein he has stated that he was not aware of the assessee and further, he did not have any business relationship with the assessee. This reply of Mr. Jagdish Purohit was not proved to be wrong by the AO. However, in respect of other persons, no step was taken by the AO to afford the opportunity of cross examination either during the course of assessment proceedings or in remand p....
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....nsecured loans taken from Shri Pankaj D Goshar amounting to Rs. 15,00,00,000/-. (ii) Whatsapp chat between the appellant and Shri Pankaj Goshar OME TAX DEPART It is pertinent to mention that a statement under section 131 of the appellant was recorded on 08.12.2016 by the AO. The said statement on oath is reproduced below - XXX On perusal of the above, I find that the appellant categorically denied having indulged in any cash transactions or accommodation entries. No adverse inference emerged from the said statement, nor was any contradiction or incriminating material brought on record during the examination. The statement, therefore, does not support the allegations made by the Assessing Officer and, in fact, reinforces the appellant's stand that the transactions were genuine and routed through regular banking channels. In such circumstances, the said messages do not constitute reliable or conclusive evidence, as they do not bear any date or time to establish their relevance to the year under consideration. Further, it is also observed that the Assessing Officer has relied entirely on material found in the possession of a third party, without....
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....d officers who were in charge of the Search/Survey that the entire data of my mobile phone has been found to be erased/deleted. In the circumstances, the question of taking print out from my mobile data does not arise.... In view of the peculiar facts and circumstances of the case, I request you to provide me the confirmation from the Whatsapp Service Provider/iCloud Service Provider that the conversations as referred with various persons in several paras of your Notice have been extracted from my mobile phone" We notice that the has contended before the AO that the said Whatsapp chat was not available in his phone. Hence, if the Whatsapp chat was really available in the Iphone, then the same should be available in the Hard disk, wherein all the datas were copied by the revenue. We notice that the AO has not brought anything on record, despite the fact that the assessee was disputing the same. We notice that the Ld CIT(A) has also confirmed this addition only for the reason that the data from iphone has been copied in the External Hard disk by the revenue. He also did not bother to call for the same from the AO. (e) Finally, as submitted by Ld. AR, the AO....
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....leged infirmities in the lender's long-term capital gains and the unverified WhatsApp messages recovered from a third party, can, by themselves, sustain the impugned addition. No corroborative evidence has been brought on record to establish receipt of cash or to disprove the genuineness of the transactions recorded in the books. I thus, direct to AO to delete both the additions, that is, Rs 5,50,00,000/- challenged by the appellant in Ground No. 1 and Rs 9,50,00,000/- challenged by the appellant in Ground No.2. Accordingly, Ground No. 2 is hereby allowed. Remaining quantum of Ground No.1 to the extent of issue of addition of unsecured loans amounting to Rs. 5,50,00,000/- is also allowed hereby.". 21. On careful perusal of the order of the learned CIT(A) and the findings therein, we observe that since the learned CIT(A) on appreciation of the evidences on record and the statements recorded, deleted the addition, we therefore see no valid reason to interfere with the findings of the learned CIT(A). The grounds raised by the Revenue are rejected. 22. Coming to the appeal for the assessment year 2016-17, the first issue is in respect of addition of Rs. 2 crore made ....
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....ssing Officer and the submissions made earlier. 26. Heard the rival contentions and on perusal of the orders of the authorities below, it is noticed that during the assessment year under consideration, the assessee received unsecured loans from 27 parties amounting to Rs. 22,22,00,000/-. The assessee furnished all the required confirmation letters, bank statements, ITRs and audited financials of the lenders. The Assessing Officer, in the course of the assessment proceedings, issued notices u/s 133(6) to 27 lenders/parties. Out of 27 parties, only two parties neither responded nor could the assessee produce them before the Assessing Officer, namely V.K. Trading Company and Smt. Manjula Vinod Shah. Thus, the Assessing Officer treated the loans obtained from these parties amounting to Rs. 2 crores as unexplained cash credit u/s 68 of the Act. 27. Before the learned CIT(A), the assessee led some additional evidences which were sent to the Assessing Officer by the learned CIT(A) and a remand report was called for. Based on the remand report, the learned CIT(A) deleted the addition made u/s 68 of the Act observing as under:- "6.2.4. In respect of the additional evidences s....
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....owing receipt as well as repayment of loan - the loan has been repaid on 04.07.2016. (iii) Confirmation of accounts (iv) ITR acknowledgement for AY 2016-17. (v) Bank statement of the lender. 6.2.7. From the above, in my opinion, the appellant has duly established the identity and creditworthiness of the lenders and the genuineness of the loan transactions through the documentary evidence now placed on record. The addition was made by the Assessing Officer primarily on the ground that the lender parties did not comply with notices issued u/s 133(6) of the Act and also that the appellant could not prove the identity and creditworthiness of the lenders and the genuineness of the loan. The said deficiency was on account of time constraints and practical difficulties and not due to any infirmity in the transactions themselves. The appellant has since rectified the same by furnishing all the relevant details, and no adverse material has been brought on record to discredit the evidences now submitted. Further, the fact of repayment of loans to the lender parties during the subsequent year, lend credence regarding the nature and source of transa....
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....the relevant documents which have been produced by the Assessee to establish identity and creditworthiness of the parties from whom the Assessee had taken the loans and genuineness of the transactions but also based on the legal precedents and the fact that the Assessee has taken the unsecured loan through banking channel and repaid the loan amount along with interest after deducting TDS thereon, through banking channel itself and then only deleted the addition under consideration. We observe, as demonstrated by the Ld. Counsel of the Assessee that the Hon'ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax, Central Vs. Bhupendra Chmpaklal Dalal (2024) 160 taxmann.com 645 (Bom.) (6th March 2024) has also dealt with the fact that where major portion of the credit has been repaid during the year and the AO has accepted the debit entries of trading transactions as genuine and the creditor was having an opening balance and has paid the interest regularly and credit is continuing from the earlier years. The Hon'ble court on the said facts ultimately affirmed the decision of the Tribunal in deleting the addition. 6.3 On the aforesaid analyzations,....
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....rity. When such detailed findings of the Commissioner were on record supported by case laws, then, every single line in this 31 page order of the Commissioner was not required to be reproduced by the Tribunal. The Tribunal found that the Commissioner's order cannot be faulted for he applied the correct legal principles that were applicable to the facts and circumstances of the assessee's case. In addition, there is a subsequent development and namely that each of these creditors from whom the assessee borrowed moneys or who advanced it the moneys, were repaid the sums borrowed. This would establish that there were indeed real creditors; that they had indeed the funds available with them and that the transactions were genuine. In the circumstances, the finding of fact by the Commissioner was endorsed by the Tribunal. Instead of endorsing it fully and dismissing the Revenue's appeal in its entirety, the Tribunal, in paragraph 7, deems it fit and proper to send the matter back to the Assessing Officer so as to verify and examine whether indeed there is any repayment. COME TAX DEPARTME 7. We do not think that the Tribunal committed any error of law nor its finding,....
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....ly rejects this submission and says that findings of fact are arrived at on a proper appreciation of the material available on record and the surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities even in the case before us. The transactions were found to be genuine. It is not only that the moneys came by way of cheques and through proper banking channels, but even the repayment has been verified and the Assessing Officer, while giving effect to the Tribunal's order records that this is not a transaction which can be said to be hit by the principles relied upon." d. CIT vs. Mahaveer Crimpers 95 taxmann.com 323 (Guj HC) There is further no quarrel that the Assessing Officer does not dispute the fact that the assessee has not availed any cash loan from the said entity. His only case is that the assessee has not been able to prove source alongwith genuineness and creditworthiness of the above stated entity. It emanates from above extracted portion that the assessee has filed all relevant details along....