DCIT Vs Sparkling Soil Private Limited (ITAT Mumbai)
Search May Ignite Suspicion, but Cannot Burn a Documented Fund Trail—ITAT Upholds Deletion of ₹28.50 Crore u/s 68
The controversy
The assessee, Sparkling Soil Private Limited, was engaged in real-estate investment. For AY 2015-16, it had originally declared income of ₹1.40 crore.
During FY 2014-15, the assessee received an aggregate amount of ₹28.50 crore from six companies. These transactions were recorded in its audited books and had also been disclosed during earlier assessment proceedings.
A search u/s 132 was subsequently conducted in October 2021 in the cases of DB Realty, Dynamix Group & related entities. Based upon material found during the search, the assessment was reopened.
The AO concluded that the six creditor companies formed part of a network of nine entities controlled by Mr. Gajanan Patkar and operated through dummy directors. The entire ₹28.50 crore was added as unexplained cash credit u/s 68.
The CIT(A) deleted the addition after examining the complete documentary trail. The Revenue approached the Mumbai ITAT.
AO questioned the creditors’ entire history
The AO’s case did not rest merely upon the immediate transfers made to the assessee. He questioned the very genesis and functioning of the creditor companies.
