DCIT Vs Brightstar Syntex Private Limited (ITAT Mumbai)
SECTION 68: AN INVESTIGATION REPORT MAY RAISE SUSPICION, BUT CANNOT REPAY THE AO’S DUTY TO PROVE THE LOAN BOGUS
₹4.84 crore loans linked to Praveen Kumar Jain Group
The assessments were reopened on the basis of information received from the Investigation Wing following search proceedings in the case of Shri Praveen Kumar Jain & associated entities.
According to the Investigation Wing, entities controlled or operated by the group were engaged in providing accommodation entries. The assessee was identified as one of the beneficiaries of unsecured loan entries.
For AY 2012-13, the assessee received aggregate loans of ₹3,93,50,000 from eight companies, including Alka Diamond Industries Ltd., Nakshatra Business Pvt. Ltd., Olive Overseas Pvt. Ltd., Duke Business Pvt. Ltd., Atharv Business Pvt. Ltd., Kush Hindustan Entertainment Ltd., Sumukh Commercial Pvt. Ltd. & Triangular Infocom Ltd.
The assessee also paid interest of ₹19,25,186 on those borrowings.
For AY 2013-14, the AO similarly treated unsecured loans of ₹90 lakh as unexplained.
AO treats group allegation as transaction proof
The AO relied principally upon the investigation findings, material contained in a pen drive seized during the search, alleged broker ledgers & the association of the lender companies with the Praveen Kumar Jain Group.
Since the assessee could not physically produce the lenders for examination, the AO concluded that the loans represented accommodation entries. He accordingly made additions u/s 68 & disallowed the related interest expenditure.
The CIT(A), however, deleted the additions after finding that the assessee had established the lenders’ identity, creditworthiness & genuineness of the transactions.
Corporate lenders came with documentary identities
The assessee had furnished loan confirmations, bank statements of the lender companies, acknowledgements of their income-tax returns, audited financial statements & affidavits of their directors.
The lenders were identifiable corporate entities. The loans were received through regular banking channels, appeared in the respective books & bank accounts and were subsequently repaid.
The assessee contended that the Investigation Wing’s general findings did not establish that its particular loan transactions were accommodation entries or that the money originated from the assessee itself.
The ITAT found that the Revenue had not demonstrated that any of the documents produced were false, fabricated or unreliable.
A beneficiary list is a lead—not a final verdict
The Tribunal accepted that search material indicating a network of accommodation-entry providers was relevant & could legitimately trigger further enquiry.
However, the mere appearance of the assessee’s or lender’s name in an investigation report, pen-drive data or beneficiary list could not conclusively establish that every transaction involving that person was bogus.
To sustain an addition u/s 68, the Revenue had to establish a clear & direct nexus between the search material and the specific loans credited in the assessee’s books.
The AO brought no independent evidence showing that the funds received by the assessee were its own undisclosed money routed back through the lenders. Nor did he explain how the confirmations, financial statements, bank records or affidavits failed to establish the credits.
General findings against a group cannot replace transaction-specific verification in the borrower’s assessment.
Non-production of lenders was not conclusive
The Revenue argued that the assessee’s failure to produce the lenders personally justified the additions.
The ITAT disagreed. Physical production is not the sole means of proving a loan. The assessee had furnished the corporate lenders’ addresses, PANs, confirmations, financial statements, bank records & director affidavits.
When the parties were identifiable corporate entities & the transactions moved through banking channels, their non-production could not automatically convert the loans into accommodation entries.
The Revenue did not show that summons were returned unserved, that the companies did not exist or that their documentary records were fabricated. Mere non-production, without rebutting the material already furnished, was insufficient.
Identical lenders had survived scrutiny elsewhere
The Tribunal placed significant reliance upon Parth Constructions, ITA No. 536/Mum/2024, dated 21.04.2026.
In that case, Atharv Business Pvt. Ltd., Duke Business Pvt. Ltd. & Olive Overseas Pvt. Ltd.—three lenders involved in the present appeal—had been examined. The Coordinate Bench found that they were active companies registered with the MCA & possessed sufficient financial capacity to advance loans.
The ITAT also referred to Green Valley Homes Developers Pvt. Ltd., ITA No. 57/Mum/2021, dated 22.05.2025. That decision concerned entities associated with the same Praveen Kumar Jain Group. Three lenders—Atharv Business Pvt. Ltd., Nakshatra Business Pvt. Ltd. & Alka Diamond Industries Ltd.—were identical to those in the present case, and their transactions were accepted.
The Revenue produced no additional adverse evidence distinguishing the assessee’s dealings with these very entities.
Its reliance upon JK Global [167 taxmann.com 15] did not help because every section 68 dispute must be determined on its own facts & evidence. The Revenue failed to demonstrate factual identity with that adverse decision.
Interest follows the fate of the principal
For AY 2012-13, once the addition of ₹3.94 crore relating to the loans was held unsustainable, the consequential disallowance of ₹19.25 lakh interest also lost its foundation.
The interest had been disallowed only because the underlying borrowings were treated as bogus. Once the loans were accepted on the evidence available, the corresponding interest could not be disallowed on the same rejected premise.
Decision
The ITAT held that the assessee had discharged its initial onus u/s 68 through substantial contemporaneous evidence.
The Revenue’s investigation material created suspicion but did not establish that the specific loans were accommodation entries or represented the assessee’s own undisclosed funds.
For AY 2012-13, deletion of the ₹3,93,50,000 addition u/s 68 & ₹19,25,186 interest disallowance was upheld. For AY 2013-14, deletion of the ₹90 lakh addition u/s 68 was also sustained.
Cases Discussed
- Parth Constructions, ITA No. 536/Mum/2024, dated 21.04.2026
- Green Valley Homes Developers Private Limited, ITA No. 57/Mum/2021, dated 22.05.2025
- JK Global, dated 05.09.2024, reported in 167 Taxmann.com 15
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
These appeals filed by the Revenue are directed against the respective orders of the learned Commissioner of Income-tax (Appeals) [“Ld. CIT(A)”] for Assessment Years 2012-13 and 2013-14. Since the issues involved in both the appeals are interconnected and arise out of similar facts, the same were heard together and are being disposed of by this consolidated order.
2. The Revenue, in the Assessment Year 2012-13, has challenged the deletion of addition of Rs.3,93,50,000/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961 (“the Act”), on account of unsecured loans received by the assessee, as well as deletion of disallowance of interest of Rs.19,25,186/- claimed by the assessee on such loans. For Assessment Year 2013-14, the Revenue has challenged the deletion of addition of Rs.90,00,000/- made under section 68 of the Act on account of unsecured loans. The assessments in both the years were reopened on the basis of information received from the Investigation Wing pursuant to search and investigation conducted in the case of Shri Praveen Kumar Jain and persons/entities associated with him. According to the Assessing Officer, the investigation had revealed that certain entities controlled or operated by the Praveen Kumar Jain group were engaged in providing accommodation entries and that the assessee had obtained unsecured loans from such entities.
3. In Assessment Year 2012-13, the assessee had received aggregate unsecured loans of Rs.3,93,50,000/- from eight entities, namely M/s Alka Diamond Industries Ltd., M/s Nakshtra Business Pvt. Ltd., M/s Olive Overseas Pvt. Ltd., M/s Duke Business Pvt. Ltd., M/s Atharv Business Pvt. Ltd., M/s Kush Hindustan Entertainment Ltd., M/s Sumukh Commercial Pvt. Ltd. and M/s Triangular Infocom Ltd. The assessee had also paid interest on the said borrowings. The Assessing Officer, relying upon the investigation material and the alleged connection of the lenders with the Praveen Kumar Jain group, treated the loans as accommodation entries and made the addition under section 68 and consequently disallowed the interest expenditure of Rs.19,25,186/-. For Assessment Year 2013-14 also, the Assessing Officer made an addition of Rs.90,00,000/- under section 68 on similar reasoning.
4. Before the learned CIT(A), the assessee submitted that the loan transactions were genuine and that it had furnished loan confirmations, relevant bank statements of the lender companies, income-tax return acknowledgements, audited financial statements and affidavits of the directors of the lender companies. It was also submitted that the loans were received through banking channels. The assessee further submitted that the lender companies were identifiable corporate entities and that the material relied upon by the Assessing Officer did not establish that the particular transactions entered into by the assessee were accommodation entries.
5. The learned CIT(A), after considering the material available on record, accepted the explanation of the assessee and held that the assessee had discharged the onus cast upon it in respect of the identity of the lenders, genuineness of the transactions and creditworthiness of the lenders. The learned CIT(A), therefore, deleted the addition of Rs.3,93,50,000/- for Assessment Year 2012-13 and also deleted the consequential disallowance of interest of Rs.19,25,186/-. On similar facts, the learned CIT(A) deleted the addition of Rs.90,00,000/- for Assessment Year 2013-14. The Revenue is aggrieved by the said findings and is in appeal before us.
6. During the course of hearing, the learned Departmental Representative (“ld.DR”) submitted that the search action in the case of Shri Praveen Kumar Jain had resulted in unearthing a network of accommodation-entry providers and that a list of beneficiaries, including the assessee, had also been obtained. It was submitted that the pen drive seized during the course of search contained ledger accounts of brokers through whom accommodation entries were allegedly arranged and that the assessee had failed to produce the concerned parties for examination. The ld.DR accordingly submitted that the surrounding circumstances and the investigation material clearly established that the unsecured loans were accommodation entries and, therefore, the learned CIT(A) was not justified in deleting the additions. The ld.DR also placed reliance upon the SMC decision of the coordinate Bench in the case of JK Global dated 05.09.2024,reported in 167 Taxmann.com 15.
7. Per contra, the learned Authorised Representative (“ld.AR”) supported the orders of the learned CIT(A) and submitted that the assessee had placed on record substantial documentary evidence in respect of each lender and the corresponding transactions. It was submitted that the lender companies were identifiable corporate entities, the transactions were reflected in their respective bank accounts and books of account, and the assessee had received the amounts through banking channels and subsequently repaid the loans. The ld.AR further submitted that similar lender entities had been examined by coordinate Benches of the Tribunal in other cases and the transactions had been accepted as genuine. In this regard, reliance was placed upon the decision of the coordinate Bench in the case of Parth Constructions in ITA No.536/Mum/2024 dated 21.04.2026, wherein, in respect of similar parties, namely Atharv Business Pvt. Ltd., Casper Enterprises Pvt. Ltd., Duke Business Pvt. Ltd. and Olive Overseas Pvt. Ltd., the Tribunal had noted that the concerned companies were active entities registered with the MCA and possessed sufficient financial capacity to advance loans. The ld.AR also relied upon similar decision of the coordinate Bench of the Mumbai Tribunal in the case of Green Valley Homes Developers Private Limited, ITA No. 57/Mum/2021, dated 22.05.2025.
8. We have considered the rival submissions and perused the material available on record. We find that the entire basis of the additions made by the Assessing Officer is the information emanating from the investigation conducted in the case of Shri Praveen Kumar Jain and the alleged association of the lender companies with the said group. There is no dispute that the search and investigation in the case of Shri Praveen Kumar Jain resulted in information regarding accommodation-entry providers. However, the fact that a particular person or group was allegedly involved in providing accommodation entries cannot, by itself, lead to an automatic conclusion that every transaction undertaken by an assessee with an entity allegedly connected with such group is necessarily an accommodation entry. In the present case, the assessee had placed before the Assessing Officer documentary material in respect of the lenders and the transactions. The material included loan confirmations, bank statements, income-tax return acknowledgements, audited financial statements and affidavits of the directors of the lender companies. The learned CIT(A), after examining the material, recorded a finding that the assessee had discharged its onus in respect of the identity, genuineness and creditworthiness of the lenders. Before us, the Revenue has not brought any specific material to demonstrate that the documents furnished by the assessee were false or fabricated or that the amounts received by the assessee had in fact originated from the assessee itself or represented its own undisclosed money. The investigation material relied upon by the Assessing Officer may create a suspicion regarding the nature of the transactions, but the same, without further corroboration relating to the assessee’s specific transactions, cannot by itself justify the addition under section 68.
9. We also take note of the submission of the ld.DR that the pen drive seized during the search contained ledger accounts of brokers through whom accommodation entries were allegedly obtained and that the assessee was included in the list of beneficiaries. However, even assuming that such material was available with the Department, what is relevant for sustaining the addition in the hands of the assessee is whether the Revenue has established a clear and direct nexus between the material found during the search and the specific loan transactions recorded in the books of the assessee. The mere appearance of the name of the assessee or the lender in an investigation report or beneficiary list cannot, in isolation, conclusively establish that the particular credit appearing in the assessee’s books is unexplained. The assessment order, as reflected from the material before us, proceeds primarily on the general findings of the Investigation Wing and the alleged connection of the lender entities with Shri Praveen Kumar Jain and his group. We do not find that the Assessing Officer has brought any independent material on record which conclusively establishes that the particular amounts received by the assessee were accommodation entries. The assessee, on the other hand, furnished contemporaneous documentary evidence concerning the lenders and the transactions. Therefore, the documentary evidence furnished by the assessee could not have been rejected merely by referring to the general findings of the investigation without demonstrating, in relation to the assessee’s individual transactions, how such evidence was incorrect or incapable of establishing the nature of the credits.
10. The contention of the ld.DR that the assessee failed to produce the parties for examination also does not, in the facts of the present case, by itself justify the additions. The assessee had furnished the details and documentary evidence of the lender companies. The assessee had also placed on record confirmations and other relevant documents in respect of the lenders. The fact that the lenders were not physically produced before the Assessing Officer cannot automatically lead to the conclusion that the transactions were accommodation entries, particularly when the lenders were identifiable corporate entities and the transactions were undertaken through banking channels. The Revenue has not demonstrated that the documentary evidence furnished by the assessee was false or fabricated or that any adverse material was specifically brought to the notice of the assessee and thereafter satisfactorily established against it. In these circumstances, the mere non-production of the lenders cannot be treated as conclusive proof that the transactions were accommodation entries.
11. We have also considered the reliance placed by the ld.DR on the decision of the coordinate Bench in the case of JK Global dated 05.09.2024, reported in 167 Taxmann.com 15. We have no quarrel with the proposition that the facts and material arising from an investigation into accommodation-entry providers have to be duly considered. However, the facts and evidences in each case have to be examined in their own context. In the present case, the learned CIT(A) has examined the documentary evidence furnished by the assessee and has recorded a finding in its favour. The Revenue has not demonstrated before us any material which would establish that the facts of the present case are identical in all material respects to those considered in JK Global so as to warrant reversal of the finding recorded by the learned CIT(A).
12. On the other hand, the ld.AR has relied upon the decision of the coordinate Bench in the case of Parth Constructions, ITA No. 536/Mum/2024 dated 21.04.2026, wherein the Tribunal considered transactions relating to four entities, namely Atharv Business Pvt. Ltd., Casper Enterprises Pvt. Ltd., Duke Business Pvt. Ltd. and Olive Overseas Pvt. Ltd., which were stated to be controlled by Shri Praveen Kumar Jain. It is pertinent to note that, out of the aforesaid four entities, three entities, namely Atharv Business Pvt. Ltd., Duke Business Pvt. Ltd. and Olive Overseas Pvt. Ltd., are exactly the same entities from whom the assessee in the present case had received unsecured loans. Thus, three out of the four lender entities considered by the coordinate Bench in Parth Constructions are identical to the lender entities involved in the present case and also form part of the same group of entities allegedly controlled by Shri Praveen Kumar Jain. The coordinate Bench, after examining the relevant material, noted that the concerned companies were active entities registered with the MCA and possessed sufficient financial capacity to advance loans. In view of the fact that the very same entities have been considered by the coordinate Bench in Parth Constructions and the transactions therein were examined on the basis of the material available on record, the said decision assumes considerable relevance in the present case. The Revenue has not brought any material on record to demonstrate that the transactions of the assessee with these identical entities were distinguishable on facts or that any additional adverse material was available in the present case which would warrant a different conclusion.
13. During the course of hearing, the ld.AR also relied upon the decision of the coordinate Bench of the Mumbai Tribunal in the case of Green Valley Homes Developers Private Limited, ITA No. 57/Mum/2021, dated 22.05.2025. In the said case, the Tribunal considered the issue relating to accommodation entries allegedly received by the assessee from six concerns. It is pertinent to note that all the six concerns referred to in the said decision were concerns belonging to or associated with Shri Praveen Kumar Jain, who is also the main person in the investigation relied upon by the Revenue in the present case. More importantly, out of the said six concerns, three concerns, namely, Atharv Business Pvt. Ltd., Nakshatra Business Pvt. Ltd. and Alka Diamond Industries Ltd., are exactly the same entities from whom the assessee in the present case had received unsecured loans. Thus, the identity of the parties involved in the two cases is not merely similar but, to the aforesaid extent, is identical. Despite the fact that the very same entities were alleged to be accommodation-entry providers belonging to Shri Praveen Kumar Jain group, the coordinate Bench, after examining the relevant facts and material, accepted the transactions in the case of Green Valley Homes Developers Private Limited as genuine. The Tribunal also took note of the fact that the Assessing Officer had not undertaken any independent verification of the transactions or issued notices to the concerned parties to ascertain the genuineness thereof.
14. In Assessment Year 2012-13, the addition of Rs.3,93,50,000/- has thus been made on the premise that the unsecured loans received from the eight lender companies represented accommodation entries. We find that the assessee had furnished confirmations, bank statements, income-tax return acknowledgements, audited financial statements and other relevant documentary evidence concerning the lender companies. The transactions were carried out through banking channels and the assessee had also paid interest on the borrowings. The Revenue has not been able to establish by bringing any cogent material on record that the amounts received by the assessee were not genuine loans but represented its own undisclosed money routed through the alleged accommodation-entry providers. In the absence of such material, the finding of the learned CIT(A) that the assessee had discharged the onus in respect of the credits does not call for interference. We accordingly uphold the deletion of the addition of Rs.3,93,50,000/- made under section 68 of the Act.
15. Once the addition in respect of the unsecured loans is held to be unsustainable, the consequential disallowance of interest of Rs.19,25,186/- also cannot survive. The Assessing Officer had disallowed the interest expenditure on the premise that the underlying unsecured loans were not genuine. Since we have upheld the finding that the addition relating to the underlying unsecured loans is not sustainable on the material available on record, the very basis on which the interest expenditure was disallowed ceases to exist. We therefore uphold the order of the learned CIT(A) deleting the disallowance of interest of Rs.19,25,186/-.
16. Coming to Assessment Year 2013-14, the Revenue has challenged the deletion of addition of Rs.90,00,000/- made under section 68 on similar facts and on the basis of the investigation relating to the Praveen Kumar Jain group. Since the factual foundation of the addition and the reasoning adopted by the Assessing Officer are materially similar to those considered by us for Assessment Year 2012-13, our findings recorded hereinabove apply with equal force to this year also. The Revenue has not brought before us any independent or additional material which would establish that the specific loan transaction of Rs.90,00,000/- represented an accommodation entry. The learned CIT(A), after considering the material furnished by the assessee, has deleted the addition. In the absence of any cogent material to demonstrate that the finding of the learned CIT(A) is erroneous, we find no reason to interfere with the same. The addition of Rs.90,00,000/- made under section 68 for Assessment Year 2013-14 is accordingly deleted.
17. In view of the foregoing discussion and having regard to the totality of the facts and material placed before us, we are of the considered view that the Revenue has not been able to establish that the unsecured loans received by the assessee in the relevant assessment years were accommodation entries so as to warrant their treatment as unexplained cash credits under section 68 of the Act. The learned CIT(A) has examined the material placed before him and has arrived at a reasoned conclusion, and we find no infirmity in the impugned orders warranting interference. Accordingly, the order of the learned CIT(A) for Assessment Year 2012-13 deleting the addition of Rs.3,93,50,000/- under section 68 and the consequential disallowance of interest of Rs.19,25,186/- is upheld, and the order of the learned CIT(A) for Assessment Year 2013-14 deleting the addition of Rs.90,00,000/- under section 68 is also upheld. Consequently, the grounds raised by the Revenue in both the appeals are dismissed.
18. In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 08.09.2026.
