DCIT Vs Piyush Subodhbhai Jhaveri (ITAT Ahmedabad)
Conclusion: Where temporary loans received and repaid through banking channels, with identity and creditworthiness of lender proved, the sa,e could not be treated as unexplained cash credits under Section 68. Reliance on third-party statements without cross-examination was invalid.
Held: Assessee was an individual engaged in share broking and securities trading through his proprietary concern M/s. Shri Parshwa Finance, had received temporary loan of ₹1.85 crore from M/s. Prraneta Industries Ltd. (PIL) during A.Y. 2010–11, repaid fully in the same year through banking channels. AO reopened assessment under Section 147, treating the loan as a bogus accommodation entry allegedly routed through Shri Shirish Chandrakant Shah (SCS), and made addition under Section 68. CIT(A) deleted the addition, holding that assessee had discharged the onus under Section 68 by establishing identity, creditworthiness, and genuineness of the lender, PIL—a listed company with audited financials, valid PAN, and sufficient net worth. A similar issue arose in the case of Soham Commodities Pvt. Ltd., which had received ₹1,70,00,000 from the same company. AO made a like addition, which was also deleted by the CIT(A). Revenue contended that M/s. Prraneta Industries Ltd. was allegedly a shell company controlled by SCS, engaged in providing bogus loans and LTCG accommodation entries; the directors of PIL had admitted being dummy directors, and SCS had confessed to managing multiple such companies and CIT(A) ignored search findings and statements recorded from SCS and PIL officials, as well as judicial principles from Sumati Dayal v. CIT and CIT v. Durga Prasad More emphasizing substance over form. Assessee contended that the loan was temporary and fully repaid in the same financial year via account-payee cheques; no cash was involved; Identity and creditworthiness of PIL were proved through audited accounts, PAN, ITRs, MCA records, and bank statements. AO made additions solely on third-party statements (SCS) without cross-examination or independent corroboration, violating natural justice. It was held that CIT(A) had examined all relevant documents — bank statements, loan confirmations, audited accounts, and repayment proofs — and the AO had not disproved any of these. The loan of ₹1.85 crore was received and repaid through banking channels, duly supported by documentary evidence. Revenue failed to show any cash exchange or bogus routing. PIL was a listed company with active status on the MCA portal and had substantial financials in the relevant year. Thus, it could not be classified as a shell or paper entity. Tribunal relied on jurisdictional High Court rulings in PCIT v. Ojas Tarmake (P.) Ltd. (156 taxmann.com 75), PCIT v. Ganesh Plantation Ltd. (134 taxmann.com 149), and Ambe Tradecorp (P.) Ltd. to hold that when loans are received and repaid through banking channels, Section 68 additions are unwarranted. Thus, CIT(A)’s order to be well-reasoned and factually supported, Tribunal upheld deletion of additions in both appeals.
