TaxTMI 
TaxTMI 
2026 (9) TMI 1973
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....s. The return of income was filed on 30.07.2014, declaring total income of INR 7,66,960/- after claiming deduction under Chapter VI-A. The case of the assessee was reopened, based on the information received from the Investigation Wing, Kolkata that the assessee has taken loans from Two companies which were managed and controlled by Shri Mukesh Banka and therefore, the said loans were alleged as accommodation entries. Thereafter, notice u/s 148 was issued on 24.03.2021, in response to which return of income was filed on 12.04.2021, declaring same income as was declared in the return of income filed u/s 139 of the Act. During the course of assessment proceedings, the AO asked the assessee to prove the genuineness of the transactions and identity and creditworthiness of the lender companies. In response, the assessee filed confirmed copies of the accounts, their bank statements, ITRs of both the companies however, the AO observed that the genuineness of the transaction was not proved nor the creditworthiness of the lenders was established and therefore, loans taken of INR 1,45,00,256/- from M/s. Pawanshiv Construction Ltd. (INR 70,00,084/-) and from M/s. Sankat Sathi Infrastructure P....
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....f M/s. Sankat Sathi Infrastructure Pvt. Ltd., name of the assessee is appearing. Likewise at page 231, loans given to assessee is appearing under the head "loans and advances" in the Balance Sheet of M/s. Pawanshiv Construction Pvt. Ltd. The Ld. AR submits that these loans were repaid subsequently through banking channels and submits that by filing their ITRs and Balance Sheets, the assessee has proved the identity. In order to establish the creditworthiness, as per the Balance Sheet of M/s. Pawanshiv Construction Pvt. Ltd., balance of Share capital and Reserves was of INR 9.85 crores and in the case of M/s. Sankat Sathi Infrastructure Pvt. Ltd. the corresponding figure was of INR 10.28 crores. Further, the payments were made through banking channels, thus the genuineness of transactions cannot be doubted. Ld. AR placed reliance on the judgement of Hon'ble Kolkata High Court in the case of CIT vs M/s Dataware Pvt.Ltd reported in [2011] (9) TMI 175 (Cal). Ld.AR submits that merely for the reason that Shri Mukesh Banka in his statement recorded during the course of search, admitted that he had provided accommodation entries of unsecured loans to various persons, addition cannot be ma....
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....ength and perused the material available on record. At the outset, it is observed that both the lower authorities have placed heavy reliance on the statement of Shri Mukesh Banka given during the course of search wherein he had admitted that the Banka Group was involved in providing accommodation entries to various beneficiaries through the companies managed and controlled by him and loan taken by the assessee were out of such companies, therefore, these companies were held as Shell entities by the lower authorities. It is further observed that ld. CIT(A) at page 30 of the order, has made a chart with respect to the source in the hands of the lender companies. However, ld. CIT(A) has not considered the Reserves and Surpluses and only paid up share capital of these companies were taken into consideration. It is further observed that out of the Seven companies from whom assessee has taken loans in all the three assessment years, ld. CIT(A) has observed that only two lender companies were continued to be in existence and the remaining Five lender companies were struck off after 2018. Thus, ld. CIT(A) has concluded that these companies are Shell companies and have no creditworthiness t....
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....rved from the assessment order, the AO has made no efforts of making independent verification of the details so filed by the assessee by issuing summons u/s 131 or 133(6) of the Act to the lender companies and simply proceeded to make the addition on assumptions and presumptions and merely by placing heavy reliance on the information supplied by the Investigation Wing gathered during the course of search in the case of Shri Mukesh Banka. Failure to make proper investigation before reaching to the conclusions of loans taken as unexplained is a fatal error and cannot be cured later. The Hon'ble Supreme Court in the case of Orissa Corporation Ltd. (supra) has held that "when the assessee has provided complete details of the creditors, AO should have issued summons u/s 133(6) of the Act if he has in doubts about the creditors". As observed in the instant case, no such action has been taken and therefore, without bringing on record any contrary material to controvert the details filed by the assessee. The loans taken from the parties cannot be doubted. Coming to the creditworthiness of the lender companies, it is observed from the financial statements of all the companies that they are ....
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....er unexplained credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors." 17. It was further observed by the Hon'ble Court as under: "14. With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the ASSESSING OFFICER that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into....
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....wellery and gave loan to assessee out of sale consideration, since assessee had disclosed name of jewellers to whom jewellery was sold and also established mode of payment through banking channel, and moreover existence of deposits made to assessee by creditors was not in dispute, impugned addition under section 68 with respect to loan could not be sustained." 20. The Hon'ble Jurisdictional High Court in the case of CIT v. Kamdhenu Steel and Alloys Ltd. reported in [2012] 361 ITR 220 (Delhi) has held as under: 28. "The contention of the assessee has been found to be convincing by the Tribunal and the learned Tribunal has allowed the appeal thereby deleting the addition. The Revenue is in appeal before us. The entire case of the Revenue based on the plea that as per the report, the investing companies were not found at the given addresses and on this basis, argument is raised that the companies are non-existing and the transactions were bogus and not genuine. Here, the case of the Revenue is even weaker than the cases discussed above. It is not even the case that the Directorate of Income Tax (Investigation) has found Mr. Mahesh Garg in such racket of floating bogus comp....
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....t is established that the entire loan, which is subject matter of addition, as unexplained cash credit has been repaid either in the year under consideration or subsequent assessment years. The entire transaction relating to availing of and repayment of loan has been done through banking channel. All details relating to loan availed and repayments made have been furnished before the departmental authorities, the details of which have been produced at pages 24 to 29 of the order of learned First Appellate Authority. It is also a fact on record that assessee has furnished all supporting evidences not only to prove the identity of the lenders but even creditworthiness as well as genuineness of the transaction by furnishing their bank statements, income-tax return copy, confirmations etc. Thus, it is evident, assessee has discharged its onus of proving the identity and creditworthiness of the creditors as well as genuineness of the loan transactions. Therefore, in our considered opinion, learned First Appellate Authority was justified in deleting the addition of Rs. 2,67,05,959 made under Section 68 of the Act. Since, the addition made under Section 68 of the Act has been deleted, as a....