ITO Vs Agility Consultancy Private Limited (ITAT Mumbai)
The Mumbai ITAT dismissed the Revenue’s appeal against deletion of a ₹3.05 crore addition under Section 68 for AY 2013-14. The assessee, a private limited consultancy company, had received ₹2.80 crore as an unsecured loan from M/s PNR Exim Pvt. Ltd. and ₹25 lakh as share application money from M/s Blow Agency Pvt. Ltd. The AO treated both transactions as bogus based on an Investigation Wing report.
Before the CIT(A), the assessee furnished corporate registration details, PAN, addresses, directors’ details, incorporation certificates, audited financial statements, ITRs, cash-flow statements and business profiles. It was also established that the amounts had been repaid through banking channels before completion of assessment, with substantial repayments occurring before issuance of notice under Section 143(2). The CIT(A) deleted the addition.
The Tribunal noted that the Revenue produced no material to discredit the documentary evidence or establish that it was false or fabricated. It further observed that the AO primarily relied on the Investigation Wing report without conducting an independent enquiry to rebut the assessee’s evidence. The Tribunal held that the assessee had discharged its primary onus under Section 68 and found no infirmity in the CIT(A)’s order. The deletion of the ₹3.05 crore addition was upheld and the Revenue’s appeal was dismissed.
Cases Discussed
- Real Innerspring Technologies (P.) Ltd. v. ACIT (ITAT Delhi), IT Appeal No.647 (DEL) of 2023
- Pr. CIT vs Marigold Gems Pvt Ltd (Gujarat High Court), R/Tax/ 811 of 2023
- ITO vs Leena Haresh Hardey (ITAT Mumbai), DT 3167 (Mum)
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. The instant appeal of the revenue filed against the order of the NFAC, Delhi [for brevity “Ld. CIT(A)”], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2013-14, date of order 27.01.2025. The impugned order emanated from the order of the Ld. Income Tax Officer – Ward 6(1)(1), Mumbai (for brevity ‘Ld. AO’), order passed under Section 143(3) of the Act, date of order 28.03.2016.
2. The brief facts of the case are that the assessee is a private limited company engaged in consultancy services. The assessee filed the return by declaring total income nil. The case was subsequently selected for scrutiny assessment and a statutory notice under section 143(2) of the Act was duly served on the assessee. During the assessment, the Ld. AO found that the assessee had received the fund, from M/s. PNR Exim Pvt. Ltd, amount to Rs. 2.8 crore as unsecured loan and M/s. Blow Agency Pvt. Ltd. amount to Rs. 25 lakhs as share application money which comes, total amount to Rs. 3.05 crore. The Ld. AO had considered that the entire transactions as a bogus transaction. So, the Ld. AO added back amount to Rs.3.05crore u/s 68 of the Act. The aggrieved assessee filed an appeal before the Ld. CIT(A). The assessee filed the relevant documents related to identity of the creditor, creditworthiness and genuineness of the transactions. Further, it is also submitted that both the loan and share application money are duly refunded to the creditors before completion of the assessment proceeding. Accordingly, the Ld. CIT(A) allowed the appeal of the assessee and deleted the additions. Being aggrieved, revenue filed an appeal before us.
3. The Ld. DR argued and contended that the Ld. CIT(A) had deleted the addition without properly appreciating the facts of the case. It was submitted that the assessee had entered into transactions with bogus entities and that the impugned transactions were nothing but sham transactions. However, with regard to the repayment of the loan and the share application money to the creditors, the Ld. DR did not advance any substantial arguments. The Ld. DR, therefore, contended that the additions made by the Ld. AO deserved to be sustained.
4. The Ld. AR filed a paper book comprising pages 1 to 84, which has been taken on record. The Ld. AR submitted that the assessee had duly furnished all the relevant documentary evidence to establish the identity and creditworthiness of the creditors as well as the genuineness of the impugned transactions. It was further submitted that the following documents had been furnished before the Ld. AO as well as the Ld. CIT(A):
i. Corporate name and registration details.
ii. PAN.
iii. Registered office address.
iv. Directors’ details.
v. Certificate of incorporation.
vi. Audited balance sheet, ITR.
vii. Cash flow statement supporting the lending capacity.
viii. Business operations profile.
5. The Ld. AR respectfully relied on the order of the Ld. CIT(A) and invited our attention in para 5.2.4, which is reproduced as below:
“5.2.4 The appellant has also challenged the conclusion drawn by AO on the basis of the fact the both the above credit entries were paid back to the respective companies and the ledger account as on the date of passing of impugned order of assessment has NIL balance. A confirmation of which was also provided to the AO at the time of assessment proceedings. More specifically the credit entry of Rs. 25,00,000/- received from Blow Agency Pvt Ltd on 03.12.2012 was returned to the company on 15th May, 2013. It is also worth keeping in mind that scrutiny notice u/s143(2) was issued in this case on 11.09.2014. In other words the credit entry inform of share application money was returned by the appellant to the creditor before regular assessment were initiated against it. Similarly, the appellant had taken Rs. 2,80,00,000/- from PNR Exim Ltd during the AY. The confirmation filed by the appellant shows that the account with the said company is a running ledger. Rs. 2,15,00,000/- out of the credit received by the company in the impugned AY was returned on 29.04.2014 itself. After that date there are number of receipt of credit and re-payment of the same as on 30.03.2015 the account has NIL balance. It is worth taking note of the fact that Rs. 2,15,00,000/- was retumed by the appellant long before he was noticed u/s 143(2) for regular assessment. By adducing these evidences it is argued by the appellant that the transactions of credit taken by the appellant cannot be treated as non- genuine as return of money to the creditor by itself is strong evidence of their genuineness and creditworthiness.”
6. The Ld. AR further contended that the Ld. CIT(A) has adjudicated the appeal in favour of the assessee after taking cognizance of the orders of the Coordinate Bench of ITAT, Delhi and in order of the Coordinate Bench of ITAT, Mumbai. The relevant observations of the Ld. CIT(A) contended in following paragraph nos. 5.2.6 and 5.2.7 which are reproduced as below:
“5.2.6 In terms of the above discussion, it is apparent that the appellant had discharged its primary onus cast upon him under the provisions of section 68. However, the AO was lead to the decision of treating the credit entries to be unexplained for the reason of the report received from investigation wing Kolkata that the credit received by the appellant to the extent of Rs. 2,80,00,000/- from PNR Exim PvtItd. and Rs. 25,00,000/- from Blow Agency Pvt Ltd are accommodation entries as both the credit giving companies were controlled and managed by Shri Narendra Kr. Jain who by own admission is an entry provider. The nature of transaction in case of accommodation entry has been discussed in detail by ITAT Delhi in the case of Real Innerspring Technologies (P.) Ltd. v. ACIT IT Appeal No.647 (DEL) of 2023. In its decision dated MARCH 27, 2025 the following were decided-
10. Considered the rival submissions and material placed on record. We observed that the AO has initiated reassessment proceedings on the basis of information received from the Investigation Wing and search proceedings in the case of Shri Verma. It is brought on record that these two companies were found to be controlled by the accommodation entry providers, Shri Verma and Shri Anil Agarwal. Merely because the assessee has taken the unsecured loan from the companies controlled by them, the addition was made rejecting the various supporting documents provided by the assessee relating to transactions.
11. In our considered view, the additions were made only on the basis of alleging that the loan taken by the assessee from the above said two companies are only accommodation entries and assessee’s own money was routed through these companies with the help of accommodation entry providers. On careful note, the accommodation entries are taken which will remain in the books of account and they will ultimately have written off over the period of time. These loans were normally not repaid. In the given case, it is brought to our notice that the assessee has received the unsecured loan through the banking channel and repaid…..
12. From the above, it is clear that 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. By returning the loan, the assessee has only utilized the loan for the purpose of business and repaid the same. 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. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee.
13. In the result, appeal filed by the assessee is allowed.
(emphasis supplied by the undersigned)
5.2.7. In this decision of ITAT Delhi, the obvious has been reduced into words. The prime characteristic of any accommodation entry is receipt of a credit entry through banking channel on payment of corresponding amount in cash. If any credit entry has been re-paid it ceases to be an accommodation entry. Therefore, the return of the credit made by the appellant to both the companies namely PNR Exim Pvt Ltd and Blow Agency Pvt Ltd are by themselves formidable evidence that these credit entries were not in nature of accommodation entry. The refund of credit entry has also been taken as proof of genuineness of credit by Gujarat High Court in the case of Pr. CIT vs Marigold Gems Pvt Ltd R/Tax/ 811 of 2023 and also in the case of ITO vs Leena Haresh Hardey DT 3167 (Mum) by jurisdictional ITAT Mumbai. Following the above Judicial authority, I am of the opinion that the AO has wrongly based his decision only on the investigation report received by him without going into the details of the particular transactions of credit under taken by the appellant and without making any specific enquiry. I also find the decision of the AO to be erroneous when he finds the creditor to be non-creditworthy only on the basis of P & L account and completely ignoring the reserve and surplus available with the creditor at the time of giving credits. In terms of the above discussion the addition made the AO u/s. 68 is hereby deleted. Ground No. 1 and 2 are allowed.
7. We have heard the rival submissions and perused the material available on record. It is an undisputed fact that the assessee had furnished comprehensive documentary evidence before the Ld. AO as well as the Ld. CIT(A) to establish the identity of the creditors, their creditworthiness, and the genuineness of the impugned transactions, including their PAN, certificate of incorporation, registered office details, directors’ particulars, audited financial statements, income-tax returns, cash flow statements, and other relevant records. The revenue has not brought any material on record to discredit these documents or to demonstrate that they were false or fabricated. We further note that both the unsecured loan received from M/s. PNR Exim Pvt. Ltd. and the share application money received from M/s. Blow Agency Pvt. Ltd. were repaid through banking channels before the completion of the assessment proceedings, and in substantial measure even before the issuance of notice under section 143(2) of the Act. The Ld. DR also did not advance any substantive argument disputing the factum of such repayments. The Ld. AO has primarily proceeded on the basis of the Investigation Wing report without conducting any independent enquiry to rebut the documentary evidence furnished by the assessee.
The Ld. CIT(A), after a detailed appreciation of the facts and the documentary evidence, has rightly relied upon the decisions of the Coordinate Benches, including Real Innerspring Technologies (P.) Ltd. (supra), Marigold Gems Pvt. Ltd. (supra), and Leena Haresh Hardey (supra), and has recorded a well-reasoned finding that the assessee had discharged the primary onus cast upon it under section 68 of the Act. The revenue has not placed any contrary material or binding judicial precedent to warrant interference with the findings of the Ld. CIT(A). Accordingly, in the facts and circumstances of the case, we find no infirmity in the impugned order of the Ld. CIT(A) deleting the addition of Rs.3.05crore made under section 68 of the Act. The same is upheld, and the grounds raised by the revenue are dismissed.
8 In the result, the appeal of the revenue bearing ITA No.8683/Mum/2025 is dismissed.
Order pronounced in the open court on 29th day of July 2026.
