Matrix Arch Technologies Private Limited Vs Ward 12(3)(1) (ITAT Mumbai)
Summary: The Income Tax Appellate Tribunal Mumbai in Matrix Arch Technologies Private Limited Versus ITO, Ward 12(3)(1), Mumbai, ITA/4116/MUM/2026 dated 03/09/2026 deleted the additions made u/s 68 of the Income Tax Act 1961, holding that an assessee’s documentary evidence cannot be disregarded merely based on third party material without providing a nexus between such adverse material and the particular transactions of the taxpayer.
The reassessment stemmed from Investigation Wing information on the Pravin Kumar Jain group, alleging that share application money received by the assessee were accommodation entries. Against an original addition of Rs. 50,00,000/- under Section 68, the Ld. CIT(A) had already deleted Rs. 20,00,000/- on remand, sustaining Rs. 30,00,000/-.
Before the Tribunal, it was demonstrated that the assessee had discharged its onus through complete documentary evidence for the three genuine subscribers share application forms, board resolutions, PAN, ITRs, audited financials, bank statements, and Form 20B/ROC records with funds routed entirely through banking channels, supported by Pravin Kumar Jain’s retraction affidavit and coordinate bench precedents including M/s. Lalwani Estates & Realtors Pvt. Ltd. (ITA No. 3370/Mum/2023).
Accordingly, the entire additions were deleted.
Cases Discussed
- M/s. Lalwani Estates & Realtors Pvt. Ltd. v. Income Tax Officer — ITA No.3370/Mum/2023, order dated 08.03.2024 (ITAT Mumbai).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity “Ld. CIT(A)”], for Assessment Year 2009-10, date of order 05.03.2026. The impugned order emanated from the order of the Ld. Income Tax Officer-Ward 12(3)(3), Mumbai (for brevity ‘Ld. AO’), order passed under Section 144 r.w.s. 147 of the Act, date of order 09.12.2016.
2. The brief facts of the case are that the assessee is a private limited company engaged in the business of providing architectural models and allied services. For the Assessment Year 2009–10, the assessee filed its return of income on 27.09.2009 declaring total income of Rs.6,49,992/-. Subsequently, the case was reopened under section 147 of the Act and notice under section 148 was issued on 25.03.2015. The reassessment was ultimately completed under section 144 r.w.s. 147 of the Act.
3. During the reassessment proceedings, the Ld. AO proceeded on the basis of information received from the Investigation Wing arising out of search/survey proceedings conducted in the case of Shri Pravin Kumar Jain and his group concerns. According to the Ld. AO, the assessee had received accommodation entries in the nature of share application money/unsecured loans from entities allegedly controlled or managed by the said group. Consequently, the Ld. AO made an addition of Rs.50,00,000/- under section 68 of the Act and further disallowed depreciation of Rs.1,33,408/-.
4. Being aggrieved, the assessee carried the matter before the Ld. CIT(A). During the appellate proceedings, the assessee furnished, inter alia, Form 20B filed with the Registrar of Companies, share application forms, Board resolutions of the subscriber companies, their PAN details, income-tax returns, audited financial statements and bank statements. The assessee contended that the actual share capital received during the relevant year was only Rs.30,00,000/-, comprising Rs.10,00,000/- each from Anchal Properties Pvt. Ltd., Capetown Mercantile Co. Pvt. Ltd. and Realgold Trading Co. Pvt. Ltd. The matter was also subjected to remand proceedings. On verification of Form 20B, it was accepted that no transaction had taken place with two of the parties originally referred to by the Ld. AO and, accordingly, the addition to the extent of Rs.20,00,000/- did not survive. However, the balance addition of Rs.30,00,000/- was sustained primarily with reference to the Investigation Wing material and the statement of Shri Pravin Kumar Jain. The Ld. CIT(A), therefore, deleted Rs.20,00,000/- but confirmed the addition of Rs.30,00,000/- under section 68. The issue of depreciation of Rs.1,33,408/- was restored to the Ld. AO for verification. Aggrieved by the sustenance of the addition, the assessee is in appeal before us.
5. The Ld. AR argued and filed a paper book comprising pages 1 to 520 which has been placed on record. The Ld. AR submitted that the assessee had discharged the initial onus cast upon it under section 68 of the Act by furnishing complete documentary evidence relating to the three subscriber companies. The share application money of Rs.30,00,000/- was received through regular banking channels and the assessee had furnished the share application forms, Board resolutions, PAN details, income-tax returns, audited financial statements and bank statements of the subscribers. It was further submitted that the transactions were duly reflected in the statutory records filed before the ROC.
6. The Ld. AR further contended that the addition was substantially founded upon the statement of Shri Pravin Kumar Jain recorded during the search proceedings, whereas the said statement was subsequently retracted by him by an affidavit dated 15.05.2014. According to the Ld. AR, no independent incriminating material was brought on record establishing that the funds received by the assessee represented its own unaccounted money routed through the subscriber companies. The assessee had specifically contended that no independent enquiry under section 133(6) was carried out and no adverse material directly connecting the assessee with any alleged cash accommodation-entry mechanism was brought on record.
7. The Ld. AR further placed reliance upon the order of the Coordinate Bench in M/s. Lalwani Estates & Realtors Pvt. Ltd. v. ITO, ITA No.3370/Mum/2023, order dated 08.03.2024, and submitted that the said case also arose from information relating to Shri Pravin Kumar Jain group and involved addition under section 68 in respect of share application money. In that case also, the Coordinate Bench considered documentary evidence including PAN, bank statements, confirmations and ROC records.
8. The Ld. AR has filed list of events during the hearing before us. The said list of event is reproduced as below:-
| Sr. No. | Particulars | Details | Pg. No. (Paper book) |
|---|---|---|---|
| 1. | Written Submission | The Ld. CIT(A) made an addition of Rs.30,00,000/- u/s 68 of the Act, solely relying on the investigation wing report without appreciating all the documentary evidence furnished by the Appellant. | Pg. No. 10 to 20 |
| 2. | Issuance of Reasons for reopening u/s 148 of the Income Tax Act, 1961 dated 29/08/2016 | The Ld. AO proposed an addition of Rs.40,00,000/-, without verifying that the said company has not provided any share application money. | Pg. No. 21 to 23 |
| 3. | Reply dated 15/09/2022 to Hearing information Notice issued u/s 250 of the Act dated 08/09/2022 | Explaining and furnishing all documents and information to establish that only Rs. ₹ 30,00,000/- has been received by the Appellant as Share Application money. | Pg. No. 49 to 51 |
| 4 | Remand Report dated 17/05/2024. | Confirming that the Appellant has only received Rs. 30,00,000/- Share Application money from the said companies. | Pg. No. 83 |
| 5 | Reply dated 18/06/2024 to the letter issued by the CIT(A) dated 29/05/2024. | Explaining and furnishing all the documents and information establishing identity, creditworthiness, and genuineness of the transaction. Moreover, furnishing Praveen Jain’s retraction statement vide Affidavit dated 15/05/2014. | Pg. No. 86 to 100 |
| 6 | Form 20B submitted to ROC. | Form 20B filed with the registrar disclosing Capetown Mercantile Company Pvt. Ltd., Realgold Trading Company (P) Ltd., and Anchal Properties (P) Ltd. as shareholders of the Appellant. | Pg. No. 127 |
| 7 | Share application form for issuing equity shares to said companies dated 27/12/2008. | Share application forms for issuing equity shares of the Appellant to Realgold Trading Company (P) Ltd., Capetown Mercantile Company Pvt. Ltd., and Anchal Properties (P) Ltd. | Pg. 129 to 134 |
| 8 | Capetown Mercantile Company Pvt. Ltd. investing share | Capetown Mercantile Company Pvt. Ltd. certifying the investment of Rs.10,00,000/- share application money in 1,00,000/- equity | Pg. 179 |
| 9 | Realgold Trading Company (P) Ltd. investing share application money | Realgold Trading Company (P) Ltd. certifying the investment of Rs.10,00,000/- share application money in 1,00,000/- equity shares of the Appellant. | Pg. No. 202 |
| 10 | Anchal Properties (P) Ltd. investing share application money | Anchal Properties (P) Ltd. certifying the investment of Rs. 10,00,000/- share application money in 1,00,000/- equity shares of the Appellant. | Pg. No. 221 |
| 11 | Praveen Jain retraction statement | Praveen Jain retraction statement vide Affidavit dated 15/05/2014. | Pg. No. 224 to 229 |
| 12 | ITO-6(2)(2) v. M/s. Design Deal Fashions Pvt. Ltd. (ITA No.7025/Mum/2019) dated 22/03/2024 [ITAT Mumbai] | [The said companies providing share application money were the same as those involved in the present matter, namely M/s. Anchal Properties Pvt. Ltd., Capetown Mercantile Company Pvt. Ltd., and Realgold Trading Company (P) Ltd., no addition under Section 68 could be sustained merely on the basis of the statement of Praveen Jain] Para No. 6,8, and 11 of the judgment. | Pg. No. 290 to 295 |
| 13 | Shri Mahendra H. Shah v. Income Tax Officer-4(1)(3) (ITA No.6892/Mum/2018) dated 27/09/2021 (ITAT Mumbai) | [Addition u/s 68 of the Income Tax Act,1961, cannot be sustained merely on the basis of the statement of Praveen Jain, in the absence of an independent enquiry] Para No. 5, 12, and 13 of the judgment. | Pg. No. 357,392 to 394 |
| 14 | M/s Lalwani Estates & Realtors Pvt Ltd. v Income Tax Officer 10(2)(2) (ITA No.3370/Mum/2023) dated 08.03.2024 (ITAT Mumbai) | Para No.16, 19 to 26. | Pg, No.404 to 414 |
| 15 | Asst. CIT 3(2) v. Greenscape Developers Pvt Ltd. (ITA No.3698,4593, 4594, 4675, 4687,4285, 4346 & 4568/Mum/2025)dated 26/11/2025 (ITAT Mumbai) | Para 5 | Pg. No.428 |
9. The Ld. DR strongly relied upon the orders of the revenue authorities. The Ld. DR submitted that the Investigation Wing had identified the concerned entities as being connected with Shri Pravin Kumar Jain group, which was engaged in providing accommodation entries. Therefore, mere production of PAN, income-tax returns, confirmations and bank statements would not, by itself, establish the genuineness of the transactions. The Ld. DR further submitted that the surrounding circumstances and financial profile of the investor companies were required to be considered and that the Ld. CIT(A) had rightly held that the assessee failed to satisfactorily explain the nature and source of the credit of Rs.30,00,000/-. Accordingly, the Ld. DR prayed for sustaining the impugned appellate order.
10. We have heard the rival submissions and perused the material available on record. The limited dispute surviving before us relates to the addition of Rs.30,00,000/- under section 68 of the Act. It is an admitted position emerging from the appellate as well as remand proceedings that, as against the original addition of Rs.50,00,000/-, actual share capital credited in the books of the assessee was only Rs.30,00,000/-. Consequently, the Ld. CIT(A) himself deleted the balance amount of Rs.20,00,000/-.
11. We find that the assessee had furnished substantial documentary evidence in support of the three subscriber companies, including their share application forms, Board resolutions, PAN particulars, income-tax returns, audited financial statements and bank statements. The transactions were routed through banking channels. The assessee had also furnished Form 20B and other ROC records evidencing the subscription/allotment of shares. The Ld. CIT(A) nevertheless sustained the addition essentially on the premise that the subscriber entities had been identified by the Investigation Wing as entities providing accommodation entries and that the documentary evidence furnished by the assessee was insufficient to rebut such adverse material.
12. At this juncture, we find it relevant to consider the order of the Coordinate Bench in M/s. Lalwani Estates & Realtors Pvt. Ltd. (supra). In that case also, the reassessment had originated from information concerning accommodation entries allegedly provided by Shri Pravin Kumar Jain group. The Coordinate Bench observed that the assessee therein had furnished PAN, bank statements, confirmations and other financial statements of the investors and that the existence of the investor companies was not disputed. It further observed that availability of sufficient funds with the investors was relevant for examining their capacity to make the investment.
The Coordinate Bench further noticed that subsequent allotment of shares and filing of statutory records with the ROC supported the genuineness of the share-capital transaction. Ultimately, the Coordinate Bench held that where the relevant documents supporting the share application money and subsequent allotment of shares were available and the revenue had not brought material on record demonstrating manipulation, cash movement or direct/indirect benefit to the assessee, the addition could not be sustained merely on the basis of the alleged connection of investors with Shri Pravin Kumar Jain. The appeal of the assessee therein was accordingly allowed.
13. On comparison of the factual matrix, we find the ratio of the aforesaid Coordinate Bench decision applicable to the issue before us. In the present case also, the assessee has placed documentary evidence relating to the identity of the subscribers, their financial particulars and the banking transactions. The share subscription is supported by the statutory corporate records. Significantly, the addition sustained by the Ld. CIT(A) continues to rest substantially upon the Investigation Wing findings relating to Shri Pravin Kumar Jain group, whereas no specific material has been brought on record demonstrating that the amount of Rs.30,00,000/- originated from the coffers of the assessee or that any corresponding cash was paid by the assessee for obtaining the alleged accommodation entries.
14. The documentary evidences furnished by the assessee cannot be discarded merely on the basis of general findings recorded in the case of a third party without bringing on record cogent material establishing a nexus between such adverse material and the particular transactions undertaken by the assessee. Once the assessee has furnished primary evidence relating to the identity and financial capacity of the subscribers and the genuineness of the transactions, the same is required to be rebutted by relevant material relating to the specific transactions.
In the present case, we do not find such rebuttal on record. Rather, the remand proceedings themselves resulted in deletion of Rs.20,00,000/- out of the original addition of Rs.50,00,000/- after verification revealed that no corresponding transactions with two of the alleged entities had actually taken place. This circumstance further demonstrates that the Investigation Wing information could not, by itself, substitute examination of the assessee’s actual books and transactions.
15. Accordingly, respectfully following the ratio of the Coordinate Bench in M/s. Lalwani Estates & Realtors Pvt. Ltd. (supra) and considering the documentary evidence available on record, we are unable to sustain the addition of Rs.30,00,000/- under section 68 of the Act. The addition sustained by the Ld. CIT(A) is, therefore, deleted and the relevant grounds raised by the assessee are allowed.
As regards the legal grounds challenging the validity of reassessment, in view of our finding on merits whereby the impugned addition under section 68 stands deleted, adjudication thereof is rendered academic and the same is therefore left open.
16. In the result, the appeal of the assessee bearing ITA No.4116/Mum/2026 is allowed.
Order pronounced in the open court on 03rd day of September 2026
