Amigo Finstock Private Limited Vs ITO (ITAT Ahmedabad)
Loan Repaid Through Banking Channel Cannot Be Branded as Accommodation Entry Merely on Third-Party Statement: Ahmedabad ITAT
Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal has held that where an assessee establishes that unsecured loans were received and repaid through banking channels during the same year, the transactions cannot be treated as accommodation entries merely on the basis of a general statement recorded from an alleged entry operator, particularly when there is no evidence of cash changing hands.
At the same time, the Tribunal upheld the validity of reopening under Section 147. It held that where the Assessing Officer relied upon information and a statement recorded under Section 131, but not upon any material seized during a third-party search, the Revenue was not necessarily required to invoke Section 153C.
The decision was rendered in Amigo Finstock Private Limited v. ITO, ITA Nos. 1540, 1541 and 1542/Ahd/2026, Assessment Years 2013-14 to 2015-16, order dated 11 September 2026.
Facts relating to Assessment Year 2013-14
The assessee-company filed its return declaring a total income of ₹42,52,820. Its assessment was reopened on the basis of information that it had allegedly obtained accommodation entries in the form of bogus loans aggregating to ₹25,68,794 from:
- Drake Commercial Private Limited; and
- Pushkar Trading & Holding Private Limited.
The information originated from a search conducted in the case of Shri Subhas Chandra Bhartiya, who allegedly admitted that he was engaged in providing accommodation entries.
Notice under Section 148 was issued on 29 April 2020. The assessment was completed under Section 147 read with Section 144, determining the total income at ₹1,10,32,917, including the addition of ₹25,68,794 representing the alleged bogus loans and interest.
Challenge to reopening
The assessee contended that since the information had emerged from a search conducted in the case of a third party, the Revenue could proceed only under Section 153C and not under Section 147.
It was also argued that the reopening was based upon borrowed satisfaction and that the assessment was void because no notice under Section 143(2) had been issued.
The Tribunal rejected these contentions.
It noticed that the reasons recorded by the Assessing Officer referred primarily to the statement of Shri Bhartiya recorded under Section 131. Neither the reasons nor the assessment order referred to or relied upon any seized document or material belonging or relating to the assessee.
Therefore, merely because the information had its origin in a third-party search would not automatically make Section 153C applicable. In the absence of reliance upon seized material, the Assessing Officer was competent to proceed under Section 147.
The Tribunal also found that the Assessing Officer had identified the assessee as a beneficiary, quantified the alleged accommodation entries and recorded his conclusion that income chargeable to tax had escaped assessment. The reopening was therefore not based upon a mechanical reproduction of information or borrowed satisfaction.
Non-issuance of notice under Section 143(2)
The Tribunal noticed that the Section 148 notice required the assessee to file its return within 30 days, but the assessee failed to do so. The return was filed only on 25 February 2022, shortly before the assessment was to become time-barred on 31 March 2022.
Further, the belated return was described as an “original return” and not as a return filed in response to the Section 148 notice.
On these facts, the Tribunal held that the requirement to issue notice under Section 143(2) would arise only when the assessee filed a return in response to Section 148 within the period allowed in the notice. Since that condition was not fulfilled, the objection regarding non-issuance of notice under Section 143(2) was rejected.
Deletion of bogus loan addition
On merits, the Tribunal found that the addition was principally based upon Shri Bhartiya’s statement explaining the general modus operandi of accepting cash from beneficiaries and providing accommodation entries in the form of share capital or unsecured loans.
However, no specific evidence was brought on record to establish that cash had changed hands in the assessee’s case.
The assessee produced confirmations, lenders’ bank statements, income-tax return acknowledgements and ledger accounts. The documents also demonstrated that the loans had been repaid through banking channels during the same financial year.
Relying upon the Gujarat High Court decisions in PCIT v. Ojas Tarmake (P.) Ltd. and PCIT v. Ambe Tradecorp (P.) Ltd., the Tribunal held that the addition could not be sustained where the loan was received and repaid through banking channels and the identity and transactions were reflected in the books and supporting records.
The addition of ₹25,68,794, including the related interest, was accordingly deleted.
Assessment Years 2014-15 and 2015-16
For the subsequent two years, the assessments were reopened on the basis of information arising from a search conducted in the DISHMAN Group.
The assessee had a running account with Dishman Pharmaceuticals and Chemicals Limited. According to the assessee, it had borrowed ₹10 lakh during Assessment Year 2013-14. Interest was paid from year to year after deduction of TDS, and the loan was finally repaid during Assessment Year 2015-16.
The Assessing Officer made additions of ₹1,49,136 for Assessment Year 2014-15 and ₹11,36,119 for Assessment Year 2015-16, without clearly specifying the exact nature of the alleged accommodation entries.
The Tribunal observed that if the loan had actually been taken in Assessment Year 2013-14 and no addition was made in that year, the subsequent payment of interest and repayment of the principal could not ordinarily be treated as unexplained income.
The matter was therefore restored to the jurisdictional Assessing Officer for limited verification. If the ₹10 lakh loan was found to have been received in Assessment Year 2013-14, the interest addition for Assessment Year 2014-15 and the addition relating to repayment of loan and interest in Assessment Year 2015-16 were directed to be deleted.
Author’s comments
The ruling establishes two important propositions. First, information originating from a third-party search does not automatically require proceedings under Section 153C. What is relevant is whether the Assessing Officer relies upon seized material belonging to or pertaining to the assessee. If the reopening rests upon independently received information or a statement recorded under Section 131, proceedings under Section 147 may still be valid.
Secondly, a general admission by an alleged entry operator cannot, by itself, establish that every transaction involving the named concern is bogus. There must be some transaction-specific material connecting the assessee with the alleged cash-for-entry arrangement.
However, the observation that a repaid loan can never be treated as an accommodation entry should be applied cautiously. Repayment alone is not conclusive proof of genuineness, because a sham loan may also be routed and repaid through banking channels. The stronger ratio of the decision is that repayment, read with confirmations, bank statements, tax records and the absence of evidence of cash exchange, materially supports the assessee’s case.
The ruling is particularly useful where the Department accepts the original borrowing in one year but attempts to tax the subsequent interest payment or repayment of principal as an accommodation entry. Unless the original credit itself is shown to be non-genuine, repayment of an accepted liability cannot normally constitute unexplained income in a later year.
Cases Discussed
- PCIT v. Ojas Tarmake (P.) Ltd. — [2023] 156 taxmann.com 75 (Gujarat)
- PCIT v. Ambe Tradecorp (P.) Ltd. — [2022] 145 taxmann.com 27 (Gujarat)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, AHMEDABAD
These three appeals are filed by the Assessee against separate orders of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] all dated 25.02.2026 for the Assessment Years (A.Y.) 2013-14, 2014-15 and 2015-16 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act [hereinafter referred as “the Act”]. As the facts involved in the three appeals are identical, all the matters were heard together and are being disposed of vide this common order for the sake of convenience. We will take the appeal in ITA No. 1540/Ahd/2026 for the A.Y. 2013-14 as the lead case.
ITA No. 1540/Ahd/2026: A.Y. 2013-14
2. The brief facts of the case are that the assessee had filed its return of income for A.Y. 2013-14 on 26.09.2013 declaring total income of Rs. 42,52,820. The case of the assessee was reopened on the basis of information received by the AO that assessee had obtained accommodation entry in the form of bogus loan of Rs. 25,68,794/- from two concerns namely Drake Commercial Pvt. Ltd. and Pushkar Trading & Holding Pvt. Ltd. Accordingly, a notice u/s. 148 of the Act was issued on 29.04.2020. The assessment was completed u/s. 147 r.w.s. 144 of the Act on 24.03.2022 at total income of Rs. 1,10,32,917/- wherein addition of Rs. 25,68,794/- was made on account of bogus loan from the aforesaid two concerns and the interest thereon.
3. Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
4. Now, the is assessee in second appeal before us. The following grounds have been taken in this appeal:
1. The Ld. CIT(A) has erred, both in law and on facts, in confirming the action of AO in assuming jurisdiction under section 147 of the Act.
2. The Ld. CIT(A) has erred, both in law and on facts, in confirming the addition of Rs.25,68,794 made by AO under section 69A of the Act.
3. The Ld. CIT(A) has erred, both in law and on facts, in not appreciating that provisions of section 69A of the Act cannot be pressed into service in the facts of the present case.
4. The Ld. CIT(A) has erred, both in law and on facts, in confirming the action of AO in invoking the provisions of section 115BBE of the Act with respect to addition made under section 69A of the Act.
5. The Ld. CIT(A) has erred, both in law and on facts, in not appreciating that the Assessment Order is void-ab-initio since the same has been passed without issuance of the statutory notice under section 143(2) of the Act.
6. Both, AO & CIT(A), have erred in passing the impugned orders without properly appreciating facts of the case, submissions of the assessee and documentary evidences available on record in the correct perspective. Such an act is in gross violation of the principles of natural justice and hence, the impugned order deserves to be quashed.
7. The Ld. CIT(A) has erred in law and on facts of the case in confirming levy of interest u/s. 234A/B/C/D of the Act.
8. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271(1)(c) of the Act.
9. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271(1)(b) of the Act.
10. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271F of the Act.
11. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
5. Shri Parimalsinh B Parmar, the Ld. AR of the assessee submitted that the case of the assessee was reopened on the basis of search action carried out in the case of one Shri Subhas Chandra Bhartiya on 03.01.2018, wherein he had admitted that he was engaged in the activity of providing accommodation entries. According to the Ld. AR the reopening was based on information gathered during search action carried out in the case of a third party which was not permissible. According to him, the only remedy available with the Revenue, in such circumstances, was to initiate proceeding u/s. 153C of the Act. He further submitted that the reopening was based on borrowed satisfaction and further that no mandatory notice u/s. 143(2) of the Act was issued in the course of reopened proceeding and, therefore, the assessment order was ab initio void. On merits, the Ld. AR submitted that the assessee had brought on record evidences to establish the identity, credit worthiness and genuineness of the loan transactions. He explained that the confirmation, the bank statement of the lender, acknowledgment of their ITRs, ledger accounts etc. were duly brought on record. He further submitted that the amount of loan was also repaid through proper banking channel. Under the circumstances, there cannot be any question of treating the loan as bogus. He submitted that when the Department had accepted the repayment of loan, no addition could have been made on account of bogus cash credit. In this regard, he relied upon the following decisions:
i. CIT v Ayachi Chandrashekhar Narsangji- 221 Taxman 146 (Guj);
ii. PCIT vs Ambe Tradecorp (P.) Ltd. – 145 taxmann.com 27 (Guj);
iii. PCIT v. Ojas Tarmaek P. Ltd. – 156 taxmann.com 75 (Gujarat);
iv. PCIT v Piyush Subodhbhai Jhaveri- Tax Appeal 759 of 2025 (Guj);
v. ACIT v. Mahendrakumar Jayantilal Shah – ITA 1089/Ahd/2025;
vi. Maruti Multichem P. Ltd.v. DCIT – ITA 1644/Ahd/2025;
vii. DCIT v. Hindva Builders – 182 taxmann.com 628 (Ahd);
viii. DCIT v. Piyush Subodhbhai Jhaveri – ITA 1380/Ahd/2019;
ix. Aalaps Tradlink LLP v. ITO – ITA 1754/Ahd/2025
6. Per contra, Shri Amit Pratap Singh, the Ld. SR-DR submitted that the assessee did not make any compliance before the AO and no evidence was brought on record to establish the identity, credit worthiness and genuineness of loan transactions. He further submitted that the evidence for repayment of loan were also not produced before the AO. On the issue of reopening, the Ld. AR submitted that the AO did not rely upon any seized material for reopening the case. He had only referred to the statement of Shri Subhas Chandra Bhartiya recorded u/s. 131 of the Act and, therefore, the case was rightly reopened u/s. 147 of the Act.
7. We have carefully considered the rival submissions and perused the materials on record. So far as reopening of the case is concerned, we do not find any merit in the objections raised by the assessee. From the copy of the reason recorded by the AO, as brought on record in the paper book, it is found that the AO had primarily relied upon the statement of one Shri Subhas Chandra Bhartiya recorded u/s. 131 of the Act to reopen the case. Neither any seized material was referred in the reason recorded by the AO, nor any such evidence has been relied upon in the assessment order. The contention of the Ld. AR that the reopening was founded on borrowed satisfaction is also not found correct. The reasons recorded by the AO do not merely reproduce the information as received but the AO has identified the assessee as a beneficiary, quantified the alleged accommodation entries and recorded his conclusion that income chargeable to tax had escaped assessment. Thus, the AO had applied his mind to the information available with him and had reopened the case u/s. 147 of the Act after recording his satisfaction. As regarding objection of the assessee regarding non-issue of notice u/s. 143(2) of the Act in the course of reopened proceeding, it is found that as per notice u/s. 148 of the Act dated 29.04.2020 the assessee was required to file its return of income within 30 days, which was not complied. When the assessee did not file any return of income within the due date, there cannot be any question of issue of notice u/s. 143(2) of the Act. The AO had issued notice u/s. 142(1) of the Act on 29.09.2020 and thereafter, but no material compliance was made by the assessee in the course of reopened proceeding. The assessee had filed return only on 25.02.2022, when the case was getting barred by limitation on 31.03.2022. As per the acknowledgment brought on record, this return was also not a revised return in response to notice u/s. 148 of the Act but was marked as original return. The question of issue of notice u/s 143(2) of the Act arises only in the case where return u/s 148 is filed within the time as allowed in the notice. As this condition was not fulfilled in the present case, the objection of the assessee is rejected. The ground taken by the assessee against the reopening of the case is dismissed.
8. As regarding merits of the case, the AO had treated the loan transactions of the assessee with Drake Commercial Pvt. Ltd. and Pushkar Trading & Holding Pvt. Ltd. as accommodation entry, only on the basis of statement of one Shri Subhas Chandra Bhartiya. From the extracts of his statement reproduced in the assessment order, it transpires that Shri Subhas Chandra Bhartiya had explained the modus operandi and stated that the cash were received and collected from the beneficiaries and accommodation entries in the form of share capital or unsecured loans were provided. In the present case, no evidence was brought on record that cash had exchanged hands at the time of acceptance of loans. From the confirmation of the accounts brought on record by the assessee it was evident that both the loans were repaid during the current year itself. From the copy of bank statement brought on record it is evident that the entire amount of loan was repaid during the current year itself. Hon’ble Jurisdictional High Court in the case of PCIT Vs. Ojas Tarmake (P.) Ltd. reported in [2023] (supra) held on this issue as follows:
“Where assessee showed unsecured loans received during relevant assessment year and AO made addition on ground that assessee failed to discharge onus of liability as laid down under section 68, since amount of loan received by assessee was returned to loan party during year itself and all transactions were carried out through banking channels, impugned addition was to be deleted.”
9. The Hon’ble Jurisdictional High Court in the case of Ambe Tradecorp (P.) Ltd. (cited supra) held as under:
“Assessee-company claimed to have received certain amount towards share application money from creditor ‘R’ during period from 1-4-2009 to 31-3-2010 and was paid back fully in financial year 2010-11 Assessing Officer opined that explanation was not satisfactory to prove creditworthiness of creditor and invoking provisions of section 68, treated amount as unexplained cash credit and added in total income of assessee Assessee had submitted Pan Card, Ledger Confirmation, his own bank statement and bank statement of ‘R’ to demonstrate that amount was received through banking channel Before Appellate Authority, assessee could establish that ‘R’ had received money from two persons and said factum was fortifiable from bank statement of ‘R’ Whether once books of account and facts reflected therein showed source of fund and identity of party and aspect that books of account also reflected receipt of amount and amount was repaid, it was not open to Assessing Officer to raise doubt about creditworthiness of creditor Held, yes – Whether thus, Tribunal had not erred in deleting addition made under section 68 for funds received from said creditor.”
10. It is thus a settled proposition that if the loan amount was repaid, the same can’t be treated as an accommodation entry. Respectfully following the judicial precedence, we do not find any merit in addition of Rs. 25,68,794/- in respect of bogus loan and interest, on account of accommodation entry, as the entire amount was loan was repaid during the current year itself. The addition made by the AO is, therefore, deleted and the ground taken by the assessee is allowed.
11. In the result, the appeal of the assessee is partly allowed.
ITA No. 1541 and 1542/Ahd/2026: A.Y. 2014-15 and 2015-16
12. The grounds taken by the assessee in these appeals are as under:
1. The Ld. CIT(A) has erred, both in law and on facts, in confirming the action of AO in assuming jurisdiction under section 147 of the Act.
2. The Ld. CIT(A) has erred, both in law and on facts, in confirming the addition of Rs. 1,49,136/- made by AO under section 69A of the Act.
3. The Ld. CIT(A) has erred, both in law and on facts, in not appreciating that provisions of section 69A of the Act cannot be pressed into service in the facts of the present case
4. The Ld. CIT(A) has erred, both in law and on facts, in confirming the action of AO in invoking the provisions of section 115BBE of the Act in relation to addition made u/s 69A of the Act.
5. The Ld. CIT(A) has erred, both in law and on facts, in not appreciating that the Assessment Order is void-ab-initio since the same has been passed without issuance of the statutory notice u/s 143(2) of the Act.
6. Both, AO & CIT(A), have erred in passing the impugned orders without properly appreciating facts of the case, submissions of the assessee and documentary evidences available on record in the correct perspective. Such an act is in gross violation of the principles of natural justice and hence, the impugned order deserves to be quashed.
7. The Ld. CIT(A) has erred in law and on facts of the case in confirming levy of interest u/s. 234A/B/C/D of the Act.
8. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271(1)(c) of the Act.
9. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271(1)(b) of the Act.
10. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271F of the Act.
11. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
1542/Ahd/2026, A.Y. 2015-16
13. The grounds taken in this appeal are as under:
1. The Ld. CIT(A) has erred, both in law and on facts, in confirming the action of AO in assuming jurisdiction under section 147 of the Act.
2. The Ld. CIT(A) has erred, both in law and on facts, in confirming the addition of Rs. 11,36,119/- made by AO under section 69A of the Act.
3. The Ld. CIT(A) has erred, both in law and on facts, in not appreciating that provisions of section 69A of the Act cannot be pressed into service in the facts of the present case,
4. The Ld. CIT(A) has erred, both in law and on facts, in confirming the action of AO in invoking the provisions of section 115BBE of the Act in relation to addition made u/s 69A of the Act.
5. The Ld. CIT(A) has erred, both in law and on facts, in not appreciating that the Assessment Order is void-ab-initio since the same has been passed without issuance of the statutory notice u/s 143(2) of the Act.
6. Both, AO & CIT(A), have erred in passing the impugned orders without properly appreciating facts of the case, submissions of the assessee and documentary evidences available on record in the correct perspective. Such an act is in gross violation of the principles of natural justice and hence, the impugned order deserves to be quashed.
7. The Ld. CIT(A) has erred in law and on facts of the case in confirming levy of interest u/s. 234A/B/C/D of the Act.
8. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271(1)(c) of the Act.
9. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271(1)(b) of the Act.
10. The Ld. CIT(A) has erred in law and on facts of the case in confirming the action of initiation of penalty proceedings under section 271F of the Act.
11. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal
14. These two years were reopened on the basis of information received by the AO pursuant to search carried out in the case of DISHMAN Group. The assessee was having substantial transaction with DISHMAN Pharmaceuticals and Chemicals Limited (hereinafter ‘DPCL’) in the form of running account from financial year 2009-10 till financial year 2019-20 and the total amount of transactions for these years is found reproduced in the assessment order. According to the AO, the assessee has taken accommodation entry of Rs. 1,49,136/- in A.Y. 2014-15 and of Rs. 11,36,119/- in the A.Y. 2015-16 which were added to income in the respective years. Shri Parimalsinh B Parmar, the Ld. AR of the assessee submitted that the assessee had taken loan of Rs. 10,00,000/- from DPCL in A.Y. 2013-14 on which interest was paid on year-to-year basis and TDS was also deducted. He submitted that no addition was made by the AO in respect of loan taken from DPCL in the A.Y. 2013-14. This loan was repaid by the assessee in the A.Y. 2015-16 along with outstanding interest of Rs. 1,35,119/-. The Ld. AR submitted that the AO had made addition for the repayment of loan along with interest in the current year. According to the Ld. AR, when no addition was made in respect of loan taken from DPCL in the A.Y. 2013-14, the AO was not correct in making addition for repayment of loan and interest in the subsequent years.
15. Per contra, Shri Amit Pratap Singh, the Ld. SR-DR supported the order of lower authorities.
16. We have considered rival submissions. The ground taken by the assessee on the issue of reopening in these two years is identical to ITA No. 1540/Ahd/2026 and the decision taken by us in that appeal is applicable to these two years as well. Accordingly, the grounds pertaining to the reopening of the case are dismissed.
17. As regarding merits of the addition, the AO has not specified the nature of accommodation entries which has been added to income in the A.Y. 2014-15 and 2015-16. According to the assessee, the loan of Rs. 10,00,000/- was taken from DPCL in the A.Y. 2013-14 on which interest was paid on year-to-year basis with deduction of TDS and the loan was finally repaid in the A.Y. 2015-16. This fact requires verification. If the loan was indeed taken in the A.Y. 2013-14 and since the AO did not make any addition in that year, the payment of interest thereon in the subsequent years as well as repayment of loan in the A.Y. 2015-16 could not have been disallowed. Accordingly, for the limited purpose of verification of loan of Rs. 10,00,000/- from DPCL, the matter is set aside to the file of Jurisdictional AO. If it is found that this loan was taken in the A.Y. 2013-14, the addition made by the AO in respect of payment of interest in A.Y. 2014-15 and repayment of loan along with interest in 2015-16 should be deleted. The AO is directed to re-adjudicate this matter afresh after allowing an opportunity of being heard to the assessee.
18. In the result, the appeals in ITA No. 1541/Ahd/2026 and 1542/Ahd/2026 for A.Y. 2014-15 and 2015-16 respectively are partly allowed for statistical purpose.
19. In the final result, the appeal in ITA No. 1540/Ahd/2026 is partly allowed whereas the appeals in ITA No. 1541/Ahd/2026 and 1542/Ahd/2026 are partly allowed for statistical purpose.
Order pronounced in the Court on 11/09/2026 at Ahmedabad.
