DCIT-17(1) Vs Parth Constructions (ITAT Mumbai)
Summary: The appeal was filed by the Revenue against the NFAC order dated 11.12.2023 for AY 2013-14, challenging deletion of Rs.1,62,00,000 added under section 68 in respect of unsecured loans from four private companies: Atharv Business Private Limited, Casper Enterprises Private Limited, Duke Business Private Limited and Olive Overseas Pvt Ltd. The Assessing Officer treated the loans as accommodation entries on the basis of an investigation report concerning the Praveen Kumar Jain group.
The assessee furnished loan confirmations, PAN and address details, income-tax return acknowledgements, audited accounts, bank statements, ledger accounts, affidavits of directors, replies to notices under section 133(6), and a retraction statement of Praveen Kumar Jain. The Tribunal examined the lender-wise material and found the entities active with the MCA and financially capable of advancing the loans. It noted that payments were made through account-payee cheques, interest was paid with TDS, and the loans had been repaid with interest. The Tribunal held that the Assessing Officer had not carried out effective verification, had not identified defects or discrepancies in the documentary evidence, and had not established any connection between the lender companies and Praveen Kumar Jain.
It concluded that the assessee had discharged its onus by proving identity, creditworthiness and genuineness through documentary evidence. The Tribunal also considered the Revenue’s reliance on J.K. Global, dated 05.09.2024 and reported in 167 Taxmann.com 15, but held that its facts were materially different and therefore it was not applicable. As no new facts, circumstances or documents were placed by the Revenue to rebut the CIT(A)’s findings, the Tribunal upheld deletion of the Section 68 addition and dismissed the Revenue’s appeal.
Cases Discussed
- J.K. Global Vs Income Tax Officer, dated 05.09.2024, reported in 167 Taxmann.com 15.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the Revenue challenging the impugned order dated 11.12.2023 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2013-14. The following grounds are reproduced below:
“1. “Whether, on the facts and in circumstance of the case and in law, orders of the Ld. CIT(A) erred in deleting the addition of Rs. 1,62,00,000/- made u/s 68 of the Act, relying only on the documentary evidence produced by the assessee while ignoring the key factor that these entities were not traceable at their given addresses and it is well established that the modus operandi of obtaining accommodation entries of unsecured loan had to be considered in the light of surrounding circumstances”.
2. “Whether, on the facts and in circumstance of the case and in law, orders of the Ld. CIT(A) erred in not appreciating the observations made by the Delhi high Court in Nova promoters and Finlease Pvt. Ltd.18 Taxmann.com 217 wherein the court has observed that cases of this type cannot be decided only on the basis of documentary evidences and that there is need to take into account the surrounding circumstances?”
3. The appellant craves leave to amend or alter or add a new ground which may be necessary.”
2. Ground Nos. 1 and 2 raised by the Revenue are interrelated and interconnected, and relates to challenging the order of the Ld. CIT(A) in deleting the additions of Rs. 1,62,00,000/- made under Section 68 of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.
3. We have heard counsel for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue authorities. From the records, we noticed that the additions in this case were made by the AO on the ground that the assessee had received unsecured loans from four private companies, the same are as follows:
- M/s. Atharv Business Private Limited Rs. 15,00,000/=
- M/s. Casper Enterprises Private Limited Rs.60,00,000/=
- M/s. Duke Business Private Limited Rs. 15,00,000/-
- M/s Olive Overseas Pvt Ltd Rs. 72,00,000/-
4. However, on the basis of an investigation report forwarded to the AO, he formed a view that the aforesaid companies were engaged in providing accommodation entries. The AO brought this to the notice of the assessee and directed it to rebut the same and to prove the genuineness and creditworthiness of these parties.
5. In order to rebut the AO’s claim and to prove the genuineness of the loans, the assessee filed confirmations from the said four companies, ledger account copies, their audited financial statements and income tax acknowledgements, related bank statements, and affidavits from the respective officials of the companies declaring that they were not involved in providing accommodation entries. In this manner, the assessee attempted to prove the genuineness of the loans. However, the AO was not satisfied with the contentions put forth by the assessee and thus made the additions. The said additions were challenged by the assessee before the Ld. CIT(A), who deleted them. Aggrieved by the said order, the Revenue is in appeal before us.
6. After meticulously going through the facts of the present case and considering the documents placed on record, we noticed that, in order to substantiate the identity of the lenders, their creditworthiness, and the genuineness of the transactions, the assessee independently placed on record and substantiated the documents of each lender company, the same are tabulated herein below:
4. The appellant has filed the following documents in respect of each of the party in the assessment proceedings.
– Confirmation along with full name and address, PAN of the parties.
– Copy of Acknowledgement of Income Tax Return filed
– Copy of accounts as on 31.03.2013
– Copy of the Bank statements showing the amounts paid by the Said Companies to the appellant.
– Affidavit of a director confirming the loan
– Retraction statement of Praveen Kumar Jain
7. We observed that, in respect of Atharv Business Private Limited, the assessee submitted the relevant documents:
- Loan confirmation giving the details, address, PAN No., Tansacations entered, interest paid and TDS deducted.
- Copy of acknowledgement of the return filed.
- Copy of accounts for the year ended 31/03/2013.
- Copy of Bank Account of the appellant
- Copy of Bank Account of the Atharv Business Private Limited
- Copy of Ledger Account of the Athary Business Private Limited for the year ended 31/03/2013 and upto date of repayment –showing the repayment of the loan
- Affidavit of director of a company confirming the loan
- Reply filed in response to notice u/s 133(6)
8. Upon examining the accounts of the said company, we find that it was in a healthy financial position as on 31.03.2012 and had sufficient funds to advance money to the assessee to earn interest:
9. We also noticed that the assessee company paid interest, and TDS was duly deducted, which has been reflected in the return of income of the lender company. All payments were made through account payee cheques, and bank account details were furnished during the assessment proceedings. It is also pertinent to mention here that the lending company is an active company registered with the MCA, which has been substantiated by an affidavit from its Director confirming the loan and stating that the company had no relation with Praveen Kumar Jain. No search or survey was conducted on the company.
10. A similar position exists with M/s Casper Enterprises Pvt. Ltd., for which the relevant particulars were filed:
11. From the documents, we observed that the company had sufficient funds to advance the loan during the year under consideration:
12. The assessee also furnished details of M/s Duke Business Private Limited:
Particulars of M/s. Duke Business Private Limited
-
- Loan confirmation giving the details, address, PAN No., transactions entered, interest paid and TDS deducted
- Copy of acknowledgment of the return filed
- Copy of accounts for the year ended 31/03/2013
- Copy of Bank Account of the appellant
- Copy of Bank Account of the M/s. Duke Business Private Limited.
- Copy of Ledger Account of the M/s. Duke Business Private Limited for the year ended 31.03.2013.
- Affidavit of director of a company confirming the loan.
- Reply filed in response to notice u/s 133(6)
12.1 We noticed that this company too was in a sound financial position as on 31.03.2013, the details of which are tabulated herein below:
Profit/Loss for the year ended 31.03.2013 before tax – 28,58,323 Share Capital – 45,92,000
Reserves and Surplus – 313,49,447
13. Likewise, details of M/s Olive Overseas Private Limited were furnished:
Details of M/s. Olive Overseas Private Limited
- Loan confirmation giving the details, address, PAN No., transactions entered, interest paid and TDS deducted
- Copy of acknowledgment of the return filed
- Copy of accounts for the year ended 31/03/2013
- Copy of Bank Account of the appellant
- Copy of Bank Account of the M/s. Olive Overseas Private Limited.
- Copy of Ledger Account of the M/s. Olive Overseas Private Limited for the year ended 31.03.2013 and upto repayment of loan – showing the repayment of the loan.
- Affidavit of director of a company confirming the loan.
- Reply filed in response to notice u/s 133(6)
13.1 And its financial position was also satisfactory, the same is tabulated herein below:
Profit/Loss for the year ended 31.03.2013 before tax – 52,68,569 Share Capital – 1,96,37,000
Reserves and Surplus – 1,37,16,034
Share application money pending allotment – 2,15,00,000
14. After evaluating the entire record, we find that all the above companies are active entities registered with the MCA and possessed sufficient financial capacity to advance loans to the assessee. The assessee submitted all relevant documents, as noted by the Ld. CIT(A). On the contrary, the AO made additions solely based on information relating to Praveen Kumar Jain, who later retracted his statement given before the search party. Therefore, the AO ought not to have relied on such retracted statements and made additions without proper verification.
15. It is important to mention here that the AO, under the Income Tax Act, performs dual functions—as an investigator and an adjudicator. However, in the present case, the AO failed to conduct effective verification and did not point out any defects or discrepancies in the documents furnished by the assessee, nor establish any connection between the lender companies and the alleged Praveen Kumar Jain.
16. In our view, the assessee has successfully discharged its onus under the Act by proving the identity of the lender companies, their creditworthiness, and the genuineness of the transactions through documentary evidence. Further, we noticed that the entire loan has already been repaid to the lender companies along with interest, which shows that the assessee did not derive any undue benefit from the unsecured loans.
17. We have also considered the decision relied upon by the Ld. DR in J.K. Global vs. Income Tax Officer (2024) 167 taxmann.com 15, however, the facts of that case are materially different and not applicable to the present case. On the other hand, the decisions relied upon by the Ld. CIT(A) are applicable.
18. Therefore, considering the totality of facts and circumstances, and also keeping in view that the loans have been repaid with interest, we find that the order passed by the Ld. CIT(A) is legally sustainable and does not call for any interference.
19. Even otherwise, no new facts or circumstances or documents have been placed on records by Ld. DR in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A), therefore, we see no reasons to interfere with or to deviate from the findings so recorded by Ld. CIT(A), hence we dismiss the grounds raised by the Revenue and uphold the order of Ld. CIT(A) deleting the additions.
20. In the result, the appeal filed by the Revenue stands dismissed with no order as to cost.
Order pronounced in the open court on 21.04.2026.
